INVESTOR-STATE DISPUTE SETTLEMENT ON THE FAIR AND EQUITABLE TREATMENT STANDARD AND LESSONS FOR VIETNAM

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MINISTRY OF EDUCATION AND TRAINING
FOREIGN TRADE UNIVERSITY
MASTER THESIS
INVESTOR-STATE DISPUTE SETTLEMENT
ON THE FAIR AND EQUITABLE TREATMENT STANDARD
AND LESSONS FOR VIETNAM
Major: International Economics
Specialization: International Trade Policy and Law
Code: 8310106
Full name: Truong Thi Kim Xuyen
Supervisor: Dr. Vo Sy Manh
Hanoi - 2019

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Table of Contents
STATEMENT OF AUTHORSHIP ........................................................................V
ACKNOWLEDGEMENTS...................................................................................VI
ABBREVIATIONS .............................................................................................. VII
LIST OF FIGURES ...............................................................................................IX
SUMMARY OF THESIS RESEARCH RESULTS..............................................X
ABSTRACT............................................................................................................XI
INTRODUCTION................................................................................................ XII
1. BACKGROUND OF THE STUDY................................................................ XII
2. LITERATURE REVIEW............................................................................ XIV
3. OBJECTS AND SCOPE OF THE STUDY ............................................... XIX
4. OBJECTIVES OF THE STUDY..................................................................XX
5. METHODOLOGY OF THE STUDY ........................................................ XXI
6. EXPECTED CONTRIBUTION OF THE THESIS.................................. XXI
7. STRUCTURE OF THE THESIS................................................................ XXI
CHAPTER 1 AN OVERVIEW OF THE INVESTOR-STATE DISPUTE
SETTLEMENT AND THE FAIR AND EQUITABLE TREATMENT
STANDARD...............................................................................................................1
1.1 AN OVERVIEW OF INVESTOR-STATE DISPUTE SETTLEMENT...1
1.1.1 DEFINITION OF INVESTOR-STATE DISPUTE SETTLEMENT 1
1.1.2 THE SPECIFIC FEATURES OF INVESTOR-STATE DISPUTE SETTLEMENT 2
1.2 AN OVERVIEW OF FAIR AND EQUITABLE TREATMENT ...............6
1.2.1 THE LITERAL MEANING OF FAIR AND EQUITABLETREATMENT 6
1.2.2 SPECIFIC FEATURES OF FAIR AND EQUITABLE TREATMENT 9
SUMMARY .............................................................................................................11
CHAPTER 2 REGULATION AND APPLICATION OF THE FAIR AND
EQUITABLE TREATMENT ................................................................................12
2.1 REGULATION OF FAIR AND EQUITABLE TREATMENT IN
INTERNATIONAL INVESTMENT AGREEMENTS.......................................12
2.1.1 NO FAIR AND EQUITABLE TREATMENT STANDARD 14
2.1.2 FAIR AND EQUITABLE TREATMENT AS AN UNQUALIFIED STANDARD 14
2.1.2.1 Stand-alone Fair and Equitable Treatment Standard 14

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2.1.2.2 Fair and Equitable Treatment combined with other standards 15
2.1.2.3 FET standard with an open-ended list of State obligations 20
2.1.3 FAIR AND EQUITABLE TREATMENT AS A QUALIFIED STANDARD 21
2.1.3.1 Fair and Equitable Treatment with references to Minimum Standard
of Treatment 21
2.1.3.2 Fair and Equitable Treatment with references to international law 22
2.1.3.3 Fair and Equitable Treatment with references to international law 22
2.1.3.4 Fair and Equitable Treatment with “exhaustive list” of State
obligations 23
2.2 APPLICATION OF FAIR AND EQUITABLE TREATMENT BY
ARBITRAL TRIBUNALS .....................................................................................25
2.2.1 AN OVERVIEW OF FAIR AND EQUITABLE TREATMENT IN ARBITRAL
TRIBUNALS 25
2.2.2 INTERPRETATION OF FAIR AND EQUITABLE TREATMENT STANDARD BY
ARBITRAL TRIBUNALS 26
2.2.2.1 Interpretation of “No Fair and Equitable Treatment Clause” 26
2.2.2.2 Interpretation of Unqualified Fair and Equitable Treatment 28
2.2.2.3 Interpretation of the Qualified Fair and Equitable Treatment 35
2.3 FAIR AND EQUITABLE TREATMENT CASES OF VIETNAM.........38
2.3.1 MICHAEL LEE MCKENZIE V. THE SOCIALIST REPUBLIC OF VIETNAM 39
2.3.2 DIALASIE SAS V. THE SOCIALIST REPUBLIC OF VIETNAM 40
2.3.3 RECOFI V. THE SOCIALIST REPUBLIC OF VIETNAM 42
2.3.4 TRINH VINH BINH V. THE SOCIALIST REPUBLIC OF VIETNAM 45
SUMMARY .............................................................................................................48
CHAPTER 3 INVESTOR-STATE DISPUTE SETTLEMENT ON THE FAIR
AND EQUITABLE TREATMENT ON THE PERSPECTIVE OF THE HOST
STATE AND LESSONS FOR VIETNAM GOVERNMENT ............................50
3.1 THE REFORM OF THE FAIR AND EQUITABLE TREATMENT IN
INTERNATIONAL INVESTMENT AGREEMENTS.......................................50
3.1.1 OPTIONS FOR REFORM OF THE FAIR AND EQUITABLE TREATMENT
CLAUSE 51
3.1.1.1 The FET standard with reference to the minimum standard of
treatment under customary international law 51
3.1.1.2 The Fair and Equitable Treatment clause with an open-ended list of
obligations 53
3.1.1.3 The Fair and Equitable Treatment clause with an “exhaustive list” of
obligations 54

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3.1.1.4 Omitting the FET clause 56
3.1.2 OTHER PROVISIONS LINKING TO FAIR AND EQUITABLE TREATMENT
CLAUSE 57
3.1.2.1 Exception Provision 58
3.1.2.2 Most-Favoured Nation Treatment Provision 59
3.2 LESSONS FOR VIETNAM GOVERNMENT IN RESOLUTION OF
INVESTOR-STATE DISPUTES ON THE FAIR AND EQUITABLE
TREATMENT.........................................................................................................62
3.2.1 THE CIRCUMSTANCES OF VIETNAM IN THE FAIR AND EQUITABLE
TREATMENT CLAIMS 62
3.2.2 THE INVESTOR’S OBLIGATIONS IN THE FAIR AND EQUITABLE
TREATMENT CLAIMS 64
3.3 LESSONS FOR VIETNAM GOVERNMENT IN PREVENTION OF
INVESTOR-STATE DISPUTES ON THE FAIR AND EQUITABLE
TREATMENT.........................................................................................................66
SUMMARY .............................................................................................................68
CONCLUSION........................................................................................................70
BIBLIOGRAPHY ...................................................................................................73
APPENDIX: LIST OF FORMULATIONS OF FET CLAUSES IN
INTERNATIONAL INVESTMENT AGREEMENTS OF VIETNAM ............82
A. LIST OF FORMULATIONS OF FET CLAUSES IN BILATERAL
INVESTMENT TREATIES OF VIETNAM 82
B. LIST OF FORMULATIONS OF FET CLAUSES IN TREATIES WITH
INVESTMENT PROVISIONS OF VIETNAM 86

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STATEMENT OF AUTHORSHIP
I, Truong Thi Kim Xuyen hereby declare, in fulfilment of the requirements of the
Foreign Trade University that the thesis is my original work under the supervision
of Dr. Vo Sy Manh.

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ACKNOWLEDGEMENTS
Firstly, I would like to express my gratitude to my supervisor Dr. Vo Sy Manh who
gives me guidance, support and encouragement to complete this thesis.
Secondly, I am also grateful to the Foreign Trade University for providing a
wonderful environment for whole my period time of study.
Finally, a special thanks goes to Dr. Cao Thi Hong Vinh for all her prompt and
enthusiastic responses and support during my course.

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ABBREVIATIONS
AANZFTA ASEAN-Australia-New Zealand Free Trade Agreement
ACIA ASEAN Comprehensive Investment Agreement
ASEAN Association of Southeast Asian Nations
BIT
CBDR
CIL
Bilateral Investment Treaty
Common but Differentiated Responsibility
Customary International Law
COMESA
CPTPP
DPI
Common Market for Eastern and Southern Africa
Comprehensive and Progressive Agreement for
Trans-Pacific Partnership
Department of Planning and Investment
ECJ European Court of Justice
ECT Energy Charter Treaty
FCN Friendship, Commerce and Navigation
FDI Foreign Direct Investment
FET Fair and Equitable Treatment
FPS Full Protection and Security
FTA Free Trade Agreement
GATT General Agreement on Trade and Tariffs
ICJ International Court of Justice
ICSID International Center for Settlement of
Investment Disputes
IIA International Investment Agreement
IMS
IPA
International Minimum Standard
Investment Protection Agreement

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ISDS Investor-State Dispute Settlement
LCIA London Court of International Arbitratio
MFN Most-Favoured Nation Treatment
MPI Ministry of Planning and Investment
MST Minimum Standard of Treatment
NAFTA North American Free Trade Agreement
NT National Treatment
OECD
PCA
Organization for Economic Cooperation and Development
Permanent Court of Arbitration
SCC Stockholm Chamber of Commerce
SFC South Fork Company
SFT Swiss Federal Tribunal
SPC Supreme People’s Court
TIP Treaty with Investment Provision
UNCITRAL United Nations Commission on International Trade Law
UNCTAD United Nations Conference on Trade and Development
VIAC Vietnam International Arbitration Center
WTO World Trade Organization

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LIST OF FIGURES
1 Figure 1.1
Known ISDS cases filed by arbitral rules, from
1987 to 31 July 2017 (Per cent)
4
2 Figure 2.1
Number and share of BITs with unqualified,
qualified and no FET clause, signed between 1959
and 2016
13

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SUMMARY OF THESIS RESEARCH RESULTS
Being an attractive investment destination with a huge number of international
investment agreements (IIAs) signed with other member states, apart from the
economic benefits achieved, Vietnam has to face more legal risks arising from the
claims of foreign investors on the ground of the IIAs, and one of the most concern is
the breach of FET clause. The study provides the legal risks arising from the
unqualified FET clauses in most IIAs of Vietnam. To have such conclusion, the
research firstly examines the formulations of the FET in IIAs and then make a
comparison between the thresholds of investors’ protection regarding to these
formulations.
The study also examines the investor-state dispute settlement (ISDS) cases on the
FET claims, specifically four cases in which Vietnam government was a respondent
and the provides the elements that Vietnam government should take them into
account when being sued by the foreign investors on the ground of the FET
standard.
The thesis also goes further by analyzing the reform of FET clauses in new-
generation IIAs which is one of the most important goals in World Investment
Forum in 2018. As a result, the study then argues the advantages and disadvantage
of each formulation of FET so that Vietnam government can easily make a
comparison and consideration between these formulations of FET when it comes to
negotiating and signing new IIAs.
Last but not least, the study provides the Vietnamese authorities lessons and
recommendations for better practice in prevention the disputes with foreign
investors regarding to FET claims as well.

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ABSTRACT
Fair and equitable treatment (FET) as an international investment treatment
standard, has been incorporated in most international investment agreements.
According to UNCTAD’s IIA Mapping database, which includes over 2500 mapped
BITs (UNCTAD 2016), there are only 117 BITs with no FET clauses out of 2538
BITs signed between 1959 and 2016. The standard, however, as interpreted by
investor-state arbitration tribunals, is an ambiguous, imprecise and unclear
obligation that turns it into a “catch-all” provision. FET is therefore frequently
invoked by investors in investor – state arbitration that the awards sometimes cost
for billions of dollars.
For these reasons, it is time for the government to pay more attention to this
standard, especially developing country as Vietnam. As a small contribution, the
thesis attemps to find the best approach for Vietnam government when it comes to
sign a new IIA in order to balance the interest between the state and foreign
invertors as well as analyzing the legal problems that Vietnam government should
handle to minimize the violation of FET clause. Moreover, the thesis desires to give
some recommendations for Vietnam government when it comes to be a respondent
with a claim on the FET clause during the hearing of investment arbitral tribunal.

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INTRODUCTION
1. Background of the study
According to United Nations Conference on Trade and Development (UNCTAD)
(UNCTAD 2018) as of 2018, Vietnam has signed about 65 Bilateral Investment
Treaties and 26 Treaties with Investment Provisions (hereinafter collectively
referred to as the International Investment Agreements- IIAs). It should be noted
that in most of the IIAs that Vietnam has signed such as the ASEAN
Comprehensive Investment Agreement (ACIA), the Comprehensive and
Progressive Agreement for Trans-Pacific Partnership (CPTPP), the Agreement on
Investment among the Governments of the Hong Kong Special Administrative
Region of the People’s Republic of China and the Member States of the Association
of Southeast Asian Nations, Korea- Vietnam Bilateral Investment Agreement and
France - Vietnam Bilateral Investment Agreement or others like the EU-Vietnam
Free Trade Agreement and the Regional Comprehensive Economic Partnership that
Vietnam has been negotiating and shall sign as a member in the near future, they all
include the standard of fair and equitable treatment (FET).
Being an attractive investment destination with a huge amount of IIAs signed with
other member states, apart from the economic benefits achieved, Vietnam has to
face more legal risks arising from the claims of foreign investors on the ground of
the IIAs, and one of the most concern is the breach of FET clause since this
standard is commonly regulated in unqualified way (which shall be discussed
further in Chapter II). In practice, Vietnam’s law, particularly foreign investment
law, treats foreign investors fairly and equitably; however, in practice State
authorities, when applying the law, have not fully accorded such treatment in
administrative and court proceedings (Tuan 2016, p.288). As a result, the
government of Vietnam could be sued in the international arbitral tribunals where
the awards can cost billions of dollars (as in the case between Occidental Petroleum

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Corporation and Occidental Exploration and Production Company v. The Republic
of

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Ecuador, ICSID Case No. ARB/06/11, in 2012, the arbitration award is roundly
equal to 1.77 billion USD).
Because of the increase of ISDS in both scale and severity, specially the ISDS on
FET clauses, the author attemps to find the best approach for Vietnam government
when it comes to negotiation of a new IIA in order to balance the interests between
the state and foreign invertors as well as analyzing the legal problems that Vietnam
government should handle to minimize the violation of FET clause. Moreover,
regarding to the ISDS, the author would like to give some lessons for Vietnam
government when being sued before the arbitral tribunals in a dispute related to the
FET clause.
2. Literature review
Due to the fact that FET is controversial topic in international investment law, there
are a large number of foreign authors and scholars writing about this topic. In
general, the FET standard can be analyzed from the historical background to the
definition1
as well as the arbitral practice on the FET claim2
while the others
1
See more in: (1) Abhijit P.G. Pandya, Interpretations and Coherence of the Fair and Equitable Treatment Standard in
Investment Treaty Arbitration, Ph.D thesis in Law, London School of Economics, London in 2011; (2) D. Hauksdóttir,
The Fair and Equitable Treatment Standard in International Investment Treaties, Master thesis in Law, Reykjavík
University, Reykjavík in 2015; (3) Deng Ting Ting, The impact of the Fair and Equitable Treatment Standard on State
Sovereignty, Ph.D thesis in Juridical Science, City University of Hong Kong, Hong Kong in 2012; (4) Julien Fouret, The
notion of Fair and Equitable treatment, Master thesis in Law, McGill University, Montreal in 2003; (5) J. Roman
Picherack, The Expanding Scope of the Fair and Equitable Treatment Standard: Have Recent Tribunals Gone Too Far?,
Journal of World Investment & Trade, Vol. 9, Issue 4, 2008.
2
See more in (1) Fulvio Maria Palombino, Fair and Equitable Treatment and the Fabric of General Principles, T.M.C.
Asser Press, The Hague and Springer-Verlag, Berlin Heidelberg, 2018; (2) Ioana Tudor, The Fair and Equitable
Treatment Standard in the International Law of Foreign Investment, Oxford University Press, 2007; (3) Roland Klager,
Fair and Equitable Treatment in International Investment Law, Cambridge University Press, 2011; (4) Marc Jacob &
Stephan Schill, Fair and Equitable Treatment: Content, Practice, Method, ACIL Research Paper 2017-20, 2017; (5)
OECD, Fair and Equitable Treatment Standard in International Investment Law, 2004; (6) Rudoff Dolzer, Fair and
Equitable Treatment: A Key Standard in Investment Treaties, The International Lawyer Vol. 39, 2005; (7) Thomas J.
Westcott, Recent Practice on Fair and Equitable Treatment, The Journal of World Investment & Trade, Vol. 8, Issue 3,
2007; (8) UNCTAD, Fair and Equitable Treatment: UNCTAD Series on Issues in International Investment Agreement II
– A Sequel, 2012.

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address the balance of the rights between the investors and the host states.3
More
specifically, there are so many studies focusing on the formulations of the FET
standard.
According to one of the earliest studies about the FET of the OECD in 2004 (OECD
2004), there are three main formulations of the FET, which are:
 FET is linked to the international minimum standard required by customary
international law;
 FET is linked to the international law including all sources;
 FET is an independent self-contained treaty standard.
The sequent study of UNCTAD in Bilateral Investment Treaties 1995‐2006: Trends
in Investment Rulemaking (UNCTAD 2007, pp.30‐33) grouped FET into seven
formulations:
 Treaties that grant investments fair and equitable treatment without making
any reference to international law or to any other criteria to determine the content of
the standard.
 Treaties that state that investments will receive fair and equitable treatment
no less favourable than accorded to its own investors or to investors of any third
State.
 Treaties that couple the fair and equitable treatment standard with an
obligation to abstain from impairing the investment through unreasonable or
discriminatory measures.
3
As in (1) Rumana Islam, The Fair and Equitable Treatment (FET) Standard in International Investment Arbitration:
Developing Countries in Context, Springer, Singapore, 2018; (2) Gaukrodger D., “Addressing the balance of interests in
investment treaties: The limitation of fair and equitable treatment provisions to the minimum standard of treatment under
customary international law”, OECD Working Papers on International Investment 2017, OECD Publishing, Paris, 2017;
(3) Graham Mayeda, Playing Fair: The Meaning of Fair and Equitable Treatment in Bilateral Investment Treaties,
Journal of World Trade, Vol. 41, No. 2, 2007; (4) Srilal M. Perera, Equity-Based Decision-Making and the Fair and
Equitable Treatment Standard: Lessons from the Argentine Investment Disputes – Part I & Part II, The Journal of World
Investment & Trade Vol. 13, Issue 3, 2012; (5) Om Krishna Shrestha, A Host State Regulatory Right in Fair and
Equitable Treatment (FET) in Bilateral Investment Treaties (BITs), Master thesis in Law, University of Lapland,
Rovaniemi in 2016.

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 Treaties that require investments to be granted “fair and equitable treatment
in accordance with the principles of international law”.
 Treaties that similarly require fair and equitable treatment in accordance with
the principles of international law, but that in addition expressly identify some
requirements of the standard. These specific inclusions may broaden the scope of
the standard.
 Treaties that make the fair and equitable treatment standard contingent on the
domestic legislation of the host country.
 Finally, some recent BITs and free trade agreements provide a more
precisely defined scope of the fair and equitable treatment standard. They oblige the
contracting parties to accord covered investments treatment in accordance with the
minimum standard of treatment under customary international law. Some also make
it express that fair and equitable treatment is part of the minimum standard and does
not create additional substantive rights.
In a survey of I.Tuona, she classified FET into five formulations (I.Tuona 2008,
p.22):
 In the first one, the standard appears alone;
 In the second one, together with the FET, there is a reference to international
law;
 In the third one, besides the reference to the FET standard, the States give
examples of concrete acts that amount, in their view, to a breach of the FET
standard and of international law,
 In the fourth one the standard is referred to jointly with the notions of
arbitrariness and discrimination and
 In the fifth one, the standard appears next to the “full protection and
security” clause.
According to other study of UNCTAD (UNCTAD 2012): The most important and
widespread approaches to the FET standard in treaty practice are the following:
 No FET obligation;

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 FET without any reference to international law or any further criteria
(referred to as unqualified, autonomous or self-standing FET standard)
 FET linked to international law;
 FET linked to the minimum standard of treatment of aliens under customary
international law;
 FET with additional substantive content (denial of justice,
unreasonable/discriminatory measures, breach of other treaty obligations,
accounting for the level of development).
Moreover, in a book of Roland (R.Kläger 2011), the FET was categorized as three
main type in IIAs. The first one is “no reference to fair and equitable treatment”, the
second one is “hortatory references to fair and equitable treatment” and last one is
“legally binding references to fair and equitable treatment.” In “legally binding
references to fair and equitable treatment”, there are five different formulations can
be found as follow:
 Fair and equitable treatment in combination with other standards;
 Fair and equitable treatment combined with a reference to general
international law;
 Fair and equitable treatment combined with a reference to customary
international law;
 Fair and equitable treatment contingent on domestic law.
Also about FET, Rumana Islam has other idea by listing FET into three main types
namely: FET minus, simple FET and FET plus (Islam 2014).
 FET minus - which refers to those treaties where treaty framers have
connected the definition of the standard to other concepts that define, and appear to
limit its scope. The FET standard then simply means the standard which
international law or customary international law guarantees for aliens (Islam 2014,
p.62) or [t]his appears to be a clear way of limiting the scope of the FET. The denial
of justice in administrative or legal proceedings is clearly narrowing the obligation.
The FET clause then only relates to judicial or quasi-judicial processes. Clauses like
this therefore can potentially provide much clearer limits to the scope of the FET

xviii
than invocation of international law or customary international law (Islam 2014,
p.77).4
 Simple FET where the FET clause is formulated without any reference to
international law, customary international law, or any other limitation.5
The second
category of treaties stipulate FET without any reference to international law,
customary international law, or any other limitation, thereby implying that FET in
these treaties is an unqualified, autonomous, and separate standard.
 FET plus – which refers to treaties which combine the FET standard with an
additional substantive obligation, such as full protection and security, prohibition of
denial of justice, prohibition of arbitrary or discriminatory measures, obligations of
MFN, or guarantee of protection and security. The notions of arbitrariness,
unreasonableness, and discrimination are understood as inherent to the FET
standard. Therefore, it appears that such clauses give further substance to the
otherwise general wording of the standard.6
In Vietnam, there are some studies examining the FET clause as follow:
 Hanoi Law University, Textbook on International Investment Law, Youth
Publishing House, 2017; (2) Trinh Thi Hai Yen, Textbook on International
Investment Law, National Political Publishing House, 2017.
 Nguyen Phuong Dung, The Fair and Equitable Treatment Standard in
Investor-State Arbitration in Vietnam, International Arbitration Asia, 2016.
 Nguyen Quoc Tri, The principles of investor treatment in Comprehensive
and Progressive Agreement for Trans-Pacific Partnership, Journal of Democracy
and Law, 2018.
 Nguyen Thu Huong, Investment policy under the Vietnam-EU Free Trade
Agreement (EVFTA), Institute of State and Law, 2018.
4
The FET standard then simply means the standard which international law or customary international law guarantees for
aliens. (p.62) Or [t]his appears to be a clear way of limiting the scope of the FET. The denial of justice in administrative
or legal proceedings is clearly narrowing the obligation. The FET clause then only relates to judicial or quasi-judicial
processes. Clauses like this therefore can potentially provide much clearer limits to the scope of the FET than invocation
of international law or customary international law (R.Islam 2014, p.77).
5
The second category of treaties stipulate FET without any reference to international law, customary international law, or
any other limitation, thereby implying that FET in these treaties is an unqualified, autonomous, and separate standard.
6
Fair and Equitable Treatment, UNCTAD Series on Issues in International Investment Agreements Vol. II (n 42) 31.

xix
However, it should be noted that in most of those studies, FET standard is merely
analyzed as a principle among other principles of investment law.
It also can be found the Ph.D thesis related to FET as follows: Nguyen Van Tuan,
The Protection of the Fair and Equitable Treatment Standard under International
Investment Law: A Case Study of Vietnam, Ph.D thesis in Philosophy, La Trobe
University, Victoria in 2016. According to Dr. Nguyen Van Tuan (Tuan 2016), FET
in IIAs can be classified as two main types: no FET Standard in IIAs and FET
Standard in IIAs. The second type includes six main formulations:
 FET in Preambles
 FET as an Unqualified Clause
 FET with Reference to International Law
 FET Linked to the Minimum Standard of Treatment under Customary
International Law
 FET Linked to Full Protection and Security
 FET Linked with Other Investment Standards
In comparison with other studies, my thesis has followed different approach by
broadly grouping IIAs into three categories as follow: the IIAs with no FET clause,
the IIAs with unqualified FET clause and the IIAs with qualified FET clause. In
every category, I will clearly state the main language utilized in the IIAs and
illustrate how it is interpreted by the arbitral tribunals in practice. Moreover, by
carefully analyzing the negative and positive effects of each type, I will suggest the
superior formulation of each category in the perspective of Vietnam government
when it comes to draft new IIAs. In my opinion, it is quite a crucial issue since it
has also linked to the sustainable development and the reform of new generation
IIAs; however, in Vietnam it has not received adequate attention.
3. Objects and Scope of the study

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The thesis aims to provide the understanding of FET through its historical
background. The thesis also describes the regulation of FET in IIAs as well as its
application in arbitral tribunal.
The study focuses on the formulations of FET in the IIAs in which Vietnam is a
member, in some cases, specific IIAs such as the North American Free Trade
Agreement (NAFTA) or the new generation of the IIAs shall be invoked to analyze
the new approach of FET in the reform IIAs regarding to FET clauses. The thesis
does not aim to analyze the relation between the FET standard and other standards
since this issue has been carefully studied 7
but merely expressing how these
standards could be regulated together in treaties practice. Moreover, merely the
ISDS cases of Vietnam regarding to FET claims shall be carefully studied in the
thesis.
The thesis has been conducted from September 2018 to February 2019. However,
the data and information have been collected in various periods of time, not merely
in 2018 and 2019 (for instance, the survey conducted in 2008 by Tudor or the
mapping of BITs carried out in 2016 by UNCTAD.)
4. Objectives of the study
Through the analysis, the study figures out the reasonable way to regulate the FET
standard so that the Vietnam government can limit the disputes at the very
beginning by setting a threshold of investors’s protection. In addition, according to
the elements that investors frequently utilize to claim the states for the breach of
FET clause, the author consumes the features of Vietnamese law, domestic court as
well as administrative proceedings should improve to ensure fair and equitable
treatment for investors and their invesments in the territory of Vietnam.
In particular, the study also attempts to highlight some lessons learned from other
countries during the hearing of arbitral tribunal so that Vietnam government can
7
See more R.Islam, Interplay between Fair and Equitable Treatment (FET) Standard and other Investment Protection
Standards Bangladesh Journal of Law, Vol. 14 Nos. 1&2, pp. 117-142, 2014; and Roland Klager, Fair and Equitable
Treatment in International Investment Law, Cambridge University Press, 2011.

xxi
consider these lessons in case being sued by foreign investors on the ground of FET
clauses.
5. Methodology of the study
To carry out the study, the author combines the method of synthesizing information
and using the statistics to compare, analyze and clarify the problems. Moreover, the
author also incorporates investment dispute cases to clarify theoretical issues.
To be more specific, in Chapter 1, the thesis uses legal analysis to examine
provisions regarding to investor-state dispute settlement and the FET clauses in
international investment.
In chapter 2, cases will be examined to interpret the meaning of the FET standard in
practice. Moreover, the thesis also analyze investor-state cases in which Vietnam
has been a respondent.
Last but not least, in chapter 3, by comparing the advantages and disadvantages
between different formulations of the FET standard, the thesis suggests the lists of
FET clauses that can be used to negotiate in the future international investment
agreements.
6. Expected contribution of the thesis
The thesis could become one of reference sources for further research of the FET
standard in Vietnam. In particular, Vietnamese authorities can use the information
and recommendations in the thesis for having superior practice when tackling the
disputes with foreign investors, specially the disputes related to the FET clause.
7. Structure of the thesis
Chapter 1 An overview of Investor - State Dispute Settlement and Fair and
Equitable Treatment

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This chapter aims to provide the overview of Investor-State Dispute Settlement
(ISDS) mechanism and specifically, the ISDS in Vietnam before analyzing the
historical background of FET and its literal meaning.
Chapter 2 Regulation and Application on Fair and Equitable Treatment
Standard
The formulations regulated in international investment law that can be broadly
categorized into three groups: (1) No FET clauses; (2) unqualified FET clauses and;
(3) qualified FET clauses. This chapter then analyzes how these formulations have
been defined by arbitral tribunals.
After analyzing the FET clauses in treaty practice, the thesis then attempts to
express the arbitral practice of FET claims in general and then carefully examining
the ISDS cases of Vietnam related to FET claims. There are five cases in total: (1)
Trinh Vinh Binh and Binh Chau Joint Stock Company v. The Socialist Republic of
Vietnam (in 2004); (2) Michael L. McKenzie v. The Socialist Republic of Vietnam
(in 2010); (3) DialAsie SAS v. The Socialist Republic of Vietnam (in 2011); (4)
RECOFI v. The Socialist Republic of Vietnam (in 2013) and (5) Trinh Vinh Binh v.
The Socialist Republic of Vietnam (in 2014).8
Chapter 3 Investor-State Dispute Settlement on the Fair and Equitable
Treatment on the perspective of the host state and lessons for Vietnam
government
In the last Chapter, the author makes a comparison between different formulations
of FET clauses in order to figure out the best approach for the Vietnam government
when drafting the FET clauses in the IIAs and then the author goes further by
suggest the suitable model of every formulation of FET clause. Apart from these
FET clauses that have direct effects on the decisions of the arbitral tribunals in
investor-state disputes on the FET claims, there are other provisions such as “MFN
provision” and “Exception provision” that may impact these decisions as well. For
this reason, the thesis takes these provisions into account and analyzes them in
detail in order to determine its impact on the ISDS awards. Moreover, the thesis
8
In this thesis, the author has examined the two cases of Trinh Vinh Binh together so that the facts appear to be more
coherent.

xxiii
also provides the model of these provisions in case the government desires to
consider these provisions.
At this end, the thesis analyzes the elements that may affect the ISDS awards in
favour of the states in arbitral practice. These elements are the circumstances of the
host state and the investor’s obligations within the FET standard that the
government should consider to protect its own legal rights and benefits when being
sued by the investors.
Last but not least, the thesis then comes to conclusion that the government should
remain good governance and should not act without a lawful basis for its conducts
in order to provide the transparent investment environment for the investors. That is
the best way to prevent the investor-state disputes on the FET claims.

1
Chapter 1 AN OVERVIEW OF THE INVESTOR-STATE DISPUTE
SETTLEMENT AND THE FAIR AND EQUITABLE TREATMENT
STANDARD
This chapter aims to provide the overview of Investor-State Dispute Settlement
(ISDS) mechanism and its special features that turns it into controversial topic
worldwide. This chapter also examines the historical background of FET before
analyzing the literal meaning of FET, and the main features of FET. The
determination of FET’s literal meaning is an essential prerequisite for analysis of
how the standard is protected under investor-state arbitration.
1.1An overview of Investor-State Dispute Settlement
1.1.1 Definition of Investor-State Dispute Settlement
According to UNCTAD, in 2017, countries concluded 18 new international
investment agreements (IIAs): 9 bilateral investment treaties (BITs) and 9 treaties
with investment provisions (TIPs) [that] brought the size of the IIA universe to
3,322 agreements (2,946 BITs and 376 TIPs), of which 2,638 were in force at year-
end (UNCTAD 2018a, p.2). The defining feature of IIAs is that of investor-state
arbitration, or investor-state dispute settlement (ISDS)9
, where investors can legally
challenge a wide range of State measures, including laws, regulations, safeguards
and administrative decisions in economic sectors or the decisions of domestic courts
(Muchhala 2018).
Date back to the history, the States started to include ISDS in their investment
treaties in the late 1960s and early 1970s; by the 1990s this treaty element had
become standard (UNCTAD 2014, p.23) because of the disadvantages in regards to
9
According to WIR13 (UNCTAD: WIR13 2013): “The ISDS mechanism was designed to depoliticize investment
disputes and create a forum that would offer investors a fair hearing before an independent, neutral and qualified tribunal.
It was seen as a mechanism for rendering final and enforceable decisions through a swift, cheap and flexible process,
over which disputing parties would have considerable control. Given that investor complaints relate to the conduct of
sovereign States, taking these disputes out of the domestic sphere of the State concerned provides aggrieved investors
with an important guarantee that their claims will be adjudicated in an independent and impartial manner.”

2
diplomatic protection10
and the use of domestic courts11
in settlement of the disputes
between the investors and the host states.
ISDS can be seen as one of many innovations that have emerged from specific
policy and legal contexts and that have endowed international law with a rich array
of international judicial bodies, quasi-judicial procedures, implementation control
mechanisms and other dispute settlement bodies (Gaukrodger, Gordon, p.7). ISDS
also serves as a neutral forum that would offer investors the possibility of a fair
hearing before a tribunal unencumbered by domestic political considerations and
able to focus on the legal issues in the dispute (UNCTAD 2014, p.13).
1.1.2 The specific features of Investor-State Dispute Settlement
ISDS serves as a procedural enforcement mechanism for the core substantive
provisions of the treaty (UNCTAD 2014, p.20). Firstly, the ISDS provides the de-
politicized forum for resolving disputes where any foreign investors could bring a
claim against host states. Secondly, international arbitration was expected to offer
the neutrality and independence of a qualified arbitrators. The institutional set-up of
ISDS draws heavily on that of commercial arbitration (e.g. ad hoc, party appointed
arbitration panels, emphasis on speed and finality of findings) (Gaukrodger, Gordon
2012, p.8). Thirdly, the advance consent to this form of adjudication, given by
States in IIAs, solved the problem of sovereign immunity (UNCATD 2012, p.24).
Finally, regarding to enforcement, the arbitral awards are readily enforceable in
most jurisdictions under international treaties (UNCTAD 2014, p.13).
10
There are certain requirements for diplomatic protection to be granted to an investor such as: (i) The investor has to be
a national of the state granting diplomatic protection; (ii) the investor must also exhaust all local remedies in the host state
prior diplomatic protection being granted; (iii) It is totally up to the discretion of investor’s home state’s government to
decide whether diplomatic protection will be granted to the investor or not.
11
From the investor’s perspective, the domestic courts are not desirable that the domestic courts can be impartial and
biased in favour of the state. Even if the court would decide in favour of the investor the executive branch of the host
government might ignore the court’s decision.

3
In fact, there are so many routes that investors can choose to resolve conflicts with
the host states such as conciliation, mediation or through domestic courts but in fact,
investors prefer to choose arbitral tribunals to settle the disputes because this forum
has significant advantages in comparison with the others.12
In addition, international
dispute resolution is not dominated by one or a few institutional models embodying
agreed standards of good practice’; instead various institutional designs have
emerged, reflecting the specificities of the related subject matters, political
considerations and historical circumstances (Gaukrodger, Gordon 2012, p.8). As of
31 July 2017, the total number of known treaty-based ISDS arbitrations has reached
817 in which the International Centre for Settlement of Investment Disputes
(ICSID) has been the most popular forum, followed by the United Nation
Commission on International Trade Law (UNCITRAL). Other disputes have been
resolved in the International Chamber of Commerce, the Stockholm Chamber of
Commerce or the London Court of International Arbitration. Moreover, some
regional ISDS forums have also established such as the China International
Economic and Trade Arbitration Commission set up in 1956, Cairo Regional Center
for International Commercial Arbitration established in 1979 or Investment Court
System (ICS)13
in Europe.
12
Dispute settlement through negotiation and conciliation is not preferred because conciliation results depend on the
willingness of the parties and there is no legal mechanism to ensure the implementation of the conciliation agreements.
Regarding to domestic regime, the arbitration it is greater neutral as compared to a national court.
13
Canada and Vietnam have agreed on a standing investment court and appellate tribunal system for dispute settlement in
its Comprehensive Economic and Trade Agreement (CETA) and EVFTA simultaneously.

4
Figure 1.1. Known ISDS cases filed by arbitral rules, from 1987 to 31 July 2017
(Per cent)
Source: UNCTAD, ISDS Nagivator
Note: Excluding five cases on which such information was not available.
In practice, the actual functioning of ISDS under IIAs has led to concerns about
systemic deficiencies in the regime since [m]ost disputes in ISDS are not mere
commercial disputes, but involve issues of public policy as measures challenged by
investors increasingly involve matters such as environmental protection, public
health, or other issues of public governance (UNCTAD 2014, p.13). In addition, the
financial damages paid by States to investors have included millions of dollars for
the breach of investment treaties, as interpreted by private arbitrators. On average,
successful claimants were awarded about 40 per cent of the amounts they claimed.
In cases decided in favour of the investor, the average amount claimed was 1.3
billion USD and the median 118 million USD. The highest in the history of
investment treaty arbitration was the combined 114 billion USD claimed and 50
billion USD awarded in three cases related to the Yukos company (brought by
Hulley Enterprises, Veteran Petroleum and Yukos Universal against the Russian
Federation). Excluding these values from the calculations above, the average

5
amount claimed falls to 454 million USD and the amount awarded to 125 million
USD, i.e. about 28 per cent of the amount claimed (UNCTAD 2018b, p.5).
Apart from the monetary compensation, arbitrators can even order injunctive relief
on governments, which mandate what actions the State is allowed to take or not
(Johnson, Sachs 2015, p.2).14
That to say, the decision of arbitral tribunals is likely
to affect the sovereignty of the states to some extent, especially in case they cannot
afford the compensation. It gives the possibility to the tribunal to focus on the needs
and perspectives of the investor and a possible underestimation of the need to
balance those claims against the host country’s sovereign rights and duties to
regulate in the public interest (UNCTAD 2012, p.105). Merely in 2017, at least 65
new ISDS cases were initiated pursuant to IIAs (UNCTAD 2017, p.1) with [a]bout
80 per cent of the new cases were brought under BIT and the majority of the
invoked treaties date back to the 1980s and 1990s (UNCTAD 2018b, p.3). This
points to the importance of addressing the stock of “old-generation” treaties,
identified by UNCTAD as a priority area for Phase 2 of IIA Reform (UNCTAD,
2017a)15
to reduce the disputes arising from those IIAs. The new ISDS cases in
2017 were initiated against 48 countries (UNCTAD 2018b, p.2) included Vietnam.
As in previous years, the majority of new cases were brought against developing
countries and transition economies (UNCTAD 2017, p.2).
Indeed, after examining the investment legal system of Vietnam, the UNCTAD
concluded that from the Law on Foreign Investment in 1987 to the laws on
enterprises and investment enacted in 2015, Viet Nam has evolved towards modern,
non-discriminatory legislation, closer to the level of the most advanced economies
across Southeast Asia (OECD 2018a, p.116). Actually, not only providing a
domestic legal system for protecting the investment of foreign investors, as of now,
Vietnam has been becoming an “active Member” of a huge amount of IIAs. Since
14
See more Perenco v. Ecuador, ICSID Case No. ARB/08/6, Decision on Provisional Measures, May 8, 2009; Chevron
v. Ecuador, PCA Case No. 2009-23, Order for Interim Measures, February 9, 2011.
15
Chapter III of WIR18 outlines recent developments in countries’ efforts to modernize “old-generation” treaties.

6
the first BIT between Vietnam and Italy was signed in 1990 (came in force in 1994),
as of 2018, Vietnam has signed about 91 IIAs included 65 Bilateral Investment
Treaties and 26 Treaties with Investment Provisions (UNCTAD 2018). The OECD
research shows that around 96% of the global IIA stock provides access to ISDS
(Pohl et al. 2012) and Vietnam is not an exception, with most of Vietnamese IIAs of
contain ISDS provisions. That provides more forums for investors to protect their
investments in Vietnam and turns Vietnam into an attractive destination for foreign
investors. However, its side effects are likely significant since it may raise the
numbers of the disputes between foreign investors and Vietnam government.
1.2 An Overview of Fair and Equitable Treatment
1.2.1 The literal meaning of Fair and Equitable Treatment
The FET was a standard being found for the first time in the Havana Charter which
aimed for the establishment of International Trade Organization (ITO) in 1948.16
The article 11(2)(a)(i) of the Havana Charter stated that:
“The Organization may, in such collaboration with other inter-governmental
organizations as may be appropriate:
(a) make recommendations for and promote bilateral or multilateral agreements on
measures designed.
(i) to assure just and equitable treatment for the enterprise, skills, capital, arts and
technology brought from one Member country to another;”
Eventually, the Havana Charter had never entered into force but it did not put an
end to the requirement of FET standard. Instead, the Economic Agreement of
Bogotá which adopted through the Ninth International Conference of American
16
However, according to Martins Paparinskis, the first treaties including “justice and equity” requirements appear in the
late seventeenth-century in some British treaties relating specifically to administration of justice (M.Paparinskis 2013,
p.21). For example, in the Peace and Commerce between Great Britain and Denmark which stated: “Both parties shall
cause justice and equity to be administered to the subjects and people of each other, according to the laws and statutes of
either country, speedily, and without long and unnecessary formalities of law and expenses, in all causes and
controversies, as well now depending, as which hereafter arise”.

7
States at Bogotá, Colombia in May, 1948 successfully remained equitable treatment
for foreign investment and nationals of member countries in its Article 22:
“Foreign capital shall receive equitable treatment. The States therefore agree not to
take unjustified, unreasonable or discriminatory measures that would impair the
legally acquired rights or interests of nationals of other countries in the enterprises,
capital, skills, arts or technology they have supplied.” Unluckily, as the Havana
Charter, the Economic Agreement of Bogotá failed to be effective. The FET clause
then once again was found in Article 1 of the Abs-Shawcross Draft Convention on
International Abroad that stated: “Each Party shall at all times ensure fair and
equitable treatment to the property of the nationals of the other Parties. Such
property shall be accorded the most constant protection and security within the
territories of the other Parties and the management, use, and enjoyment thereof shall
not in any way be impaired by unreasonable or discriminatory measures.”
Moreover, the OECD Draft Convention on the Protection of Foreign Property in
196317
and the other Draft in 196718
also included fair and equitable treatment
obligations of the host state. It is fair to say that [w]hile failing on their own terms,
the attempts at multilateral treaty-making were important in disseminating the
concept of fair and equitable treatment that could be taken up in bilateral treaty-
making (Paparinskis 2013, p.90). Indeed, the FET clause seems to be more
successful in the zone of bilateral treaties as in some Treaties of Friendship,
Commerce and Navigation between the United States and other countries (such as
the Republic of Korea, China or the Republic of Costa Rica). For example, in
Article XVII (2) of the Treaty of Friendship, Commerce and Navigation between
the United States of America and the Republic of Korea, there was the FET clause
regulated as follow: “Each Party shall accord to the nationals, companies and
commerce of the other Party fair and equitable treatment, as compared with that
accorded to the nationals, companies and commerce of any third country....”
17
Article 1 (a) of the OECD Draft Convention on the Protection of Foreign Property in 1963: “Each Party shall at all
times ensure fair and equitable treatment to the property of the nationals of the other Parties. It shall accord within its
territory the most constant protection and security to such property and shall not in any way impair the management,
maintenance, use, enjoyment or disposal thereof by unreasonable or discriminatory measures.”
18
The formulation of FET in 1967 OECD Draft Convention on the Protection of Foreign Property was similar to the
1963 OECD Draft Convention.

8
On the bilateral investment treaties level, the first group of BITs that mentioned the
FET were those concluded by European States (including Germany and
Switzerland) in the early 1960s (Vandevelde 2010, p.196). Since then the FET has
gradually become a popular clause regulated in BITs. So far, almost all of the BITs
include the requirement of FET obligations. According to UNCTAD’s IIA Mapping
database, which includes over 2500 mapped BITs (UNCTAD 2016), there are only
117 BITs with no FET clauses out of 2538 BITs signed between 1959 and 2016.
According to the other survey taken by Ioana Tudor, out of the 365 BITs studied for
this work, only nineteen belong to this category 19
(Tudor 2008, p.23). The
multilateral experience is equally varied: NAFTA) (authoritatively interpreted away
by the NAFTA Free Trade Commission20
), the the Energy Charter Treaty (ECT)
provides for fair and equitable treatment in parallel to other customary and treaty
rules and the recent ASEAN Comprehensive Investment Agreement limits fair and
equitable treatment to denial of justice (Paparinskis 2013, p.94).
This section merely attempts to figure out the meaning of FET through its own
words since the first step in the examination of a FET claim is to take a close and
careful look to the FET clause of the respective instrument and to its wording
(Tudor 2008, p.145). Since the use of the word “just” instead of “fair” probably will
not have a profound effect on the interpretation of the FET clause in an IIA (Dolzer,
Schreuer 2012), the FET is sometimes illustrated as “just and equitable treatment”
in some IIAs and can be translated in other languages as “traitement juste et
équitable”21
in French or “tratamiento justo y equitativo”22
in Spanish, “trattamento
giusto ed equo”23
in Italian and “gerecht und billig behandeln”24
in German or in
Vietnamese as “Đối xử công bằng và thoả đáng”.25
19
“[T]his category” means the BITs with no FET clauses.
20
In July 2001, the three NAFTA Parties, through the Free Trade Commission adopted the Notes of Interpretation of
Certain Chapter 11 Provisions (“Joint Interpretation”).
21
See more in Article 3 of the Vietnam – France BIT.
22
See more in Article 3 of the Vietnam - Argentina BIT.
23
See more in Article 2 of the Italy – Lithuania BIT.
24
See more in Article 2 of the Vietnam – Germany BIT.
25
See more in Article 2 of the Vietnam - Mongolia BIT.

9
Date back to the history, the word “equitableness” derives from the Latin “aequus”
meaning equal division (Tudor 2008, p.128). The Oxford Dictionary defines “fair”
as in accordance with rules and standards; legitimate, or just or appropriate in the
circumstances. According to other famous dictionaries as Cambridge Dictionary
and Black’s Law Dictionary, fairness is defined as “the quality of treating people
equally or in a way that is right or reasonable” or “equitable” means just, consistent
with principles of justice and right and “fair” means impartial, just, equitable and
free from bias or prejudice. The Concise Oxford English Dictionary also have its
own definition by stating that the terms “fair and equitable” mean “just,” “even-
handed,” “unbiased,” “legitimate”.
To conclude, the meaning of equity that may apply to investment law is that of
equitableness and the characteristic that it may have transmitted to FET is that of
giving to each party to an arbitration what is due (Tudor 2008, p.128). Moreover, in
the context of investment, equitable treatment implies that each one of the interested
parties receives what it should legitimately possess (Tudor 2008, p.128). However,
any such definition is, of course, unable to clarify the legal essence of a norm like
fair and equitable treatment, since both notions are described by synonymous
wording that is as vague as the terms “fair” and “equitable” themselves (Kläger
2011, p.41). It is therefore unlikely to define the clear obligations of States required
by the FET clause merely by the common understanding of its own words.
1.2.2 Specific features of Fair and Equitable Treatment
While almost all countries include obligations relating to fair and equitable
treatment in most of their BITs, the approaches to the relationship with other treaty
or customary rules varies greatly between different States, different treaties, and
different times (Henkin 1979, p.47). In fact, there has been no consensus between
writers, arbitrators and judges on what would constitute a fair and equitable
treatment.

10
Firstly, with regard to the wording of most FET provisions, many tribunals have
interpreted them broadly to include a variety of specific requirements including a
State’s obligation to act consistently, transparently, reasonably, without ambiguity,
arbitrariness or discrimination, in an even- handed manner, to ensure due process in
decision-making and respect investors’ legitimate expectations, but in some cases,
they can also link FET standard to international minimum standard.
Secondly, regarding to threshold of liability plays a crucial role in determination of
breach of FET clause. The threshold for qualifying conduct by the State towards
one investor, protected by one type of standard can be different from the finding of
a violation with respect to another investor of a different nationality (UNCTAD
2012, p13).
For example, in cases the IIAs link the FET obligation to the international minimum
standard the State’s conduct needs to be egregious or outrageous in accordance with
the Neer case, in other cases, arbitral tribunals applying unqualified FET clauses
have not limited themselves to the most serious breaches and have found violations
of the FET standard where they considered the State’s conduct in question to be
simply unfair towards the claimant (UNCTAD 2012, p.13).
Because of such special features, in international investment law, as an effort to
define the meaning of FET, the contracting parties have increasingly made
references FET to other standards or substantive obligations of the states instead of
regulating FET alone as in some old-version IIAs. Regarding to meaning of FET,
Schill once stated that: “Fair and equitable treatment does not have a consolidated
and conventional core meaning as such nor is there a definition of the standard that
can be applied easily. So far it is only settled that fair and equitable treatment
constitutes a standard that is independent from national legal order and is not
limited to restricting bad faith conduct of host States. Apart from this very minimal
concept, however, its exact normative content is contested, hardly substantiated by
State practice, and impossible to narrow down by traditional means of interpretative

11
syllogism” (Schill 2009, p.263).
Summary
ISDS can be seen as one of many innovations that have emerged from specific
policy and legal contexts and that have endowed international law with a rich array
of international judicial bodies, quasi-judicial procedures, implementation control
mechanisms and other dispute settlement bodies ISDS also serves as a neutral
forum that would offer investors the possibility of a fair hearing before a tribunal
unencumbered by domestic political considerations and able to focus on the legal
issues in the dispute (UNCTAD 2014, p.13). As of 31 July 2018, the total number
of known treaty-based ISDS arbitrations has reached 904, and merely in 2017, at
least 65 new ISDS cases were initiated pursuant to IIAs (UNCTAD 2017, p.1) with
[a]bout 80 per cent of the new cases were brought under BIT and the majority of the
invoked treaties date back to the 1980s and 1990s (UNCTAD 2018b, p.3) in which
not only procedural protection under ISDS mechanism but also substantive standard
protection as the FET standard.
The FET standard was found for the first time in the Havana Charter, then it appears
in most international investment agreements. However, it is unlikely to define the
clear obligations of States required by the FET clause merely by the common
understanding of its own words.

12
Chapter 2 REGULATION AND APPLICATION OF THE FAIR AND
EQUITABLE TREATMENT
The FET appears to be a simple provision. However, in treaty practice, the FET
standard varies from one treaty to the others. Hence, in first section of this chapter,
the formulations of FET clauses in international investment agreements will be
outlined. It is then to list all possible constitutive elements of the FET standard, they
could be the protection of legitimate expectations, transparency, access to justice
and/or due process, protection from arbitrariness and/or discrimination, acting in
good faith and freedom from harassment and coercion which are determined under
investor-state arbitration. Finally, the cases regarding to FET claim shall be
examined. Moreover, there are five of nine cases that had a claim on the fair and
equitable treatment (FET) clauses in which Vietnam government was the
respondent. Since the awards are not public, the information of these cases is merely
found in the newspapers, the articles and other award. Finally, five of nine cases
(FET) clauses related to FET clause in which Vietnam government was the
respondent will be examined.
2.1Regulation of Fair and Equitable Treatment in International Investment
Agreements
As M.Jacob and S.W. Schill (Jacob, Schill 2017, p.6) rightly said: “the main textual
fault line separates eponymous or synonymous FET prescription from a
combination of the treaty standard with an explicit reference to (customary)
international law (clarified as qualified FET) or can further be drafted or construed
as a floor (“no less favourable than”) or a ceiling (“not (...) beyond that which is
required by”) to demanded treatment (clarified as unqualified FET). Such a
supplementary “outside” link could arguably either add to, or detract from, the
autonomous demands placed on the host State, inversely strengthening or
weakening investment protection, depending on one’s take on the external
comparator (Jacob, Schill 2017, p.6). In this study, on the basis of the scope given

13
to the standard and the analytical approach used to determine its content (UNCTAD
2016): the IIAs shall be broadly classified into three categories: IIAs with no FET
clauses, IIAs with unqualified FET clause and IIAs with qualified FET clause.
In fact, the BITs have accounted for approximately 90 per cent of the IIAs so far
(UNCTAD 2018a, p.2); therefore, it is reasonable to treat the study of the FET
standard in the BITs as those in the IIAs.
Figure 2.1 Number and share of BITs with unqualified, qualified26
and no FET
clause, signed between 1959 and 2016
Source: UNCTAD 2015 (World Investment Report -WIR15)
According to this figure, there are about 1991 BITs with unqualified FET clauses in
2538 BITs signed between 1959 and 2016 but qualified FET clauses have been on
the rise in new generation BITs, in line with UNCTAD’s Roadmap for IIA Reform
(UNCTAD 2015). More specifically, the percentage of BITs with qualified FET
clauses has increased significantly from 14% in the 1959-2000 period to 19% in the
2001-2010 period and continually reach to 46% in the 2011-2016 period (UNCTAD
26
“Qualified” FET clauses refer to both clauses containing reference to the minimum standard of treatment/customary
international law and containing lists of treatments that constitute breaches of FET.

14
2016).
2.1.1 No Fair and Equitable Treatment Standard
In treaty practice, there are some IIAs with no reference to FET standard such as the
Albania-Croatia BIT, the Australia-Singapore FTA, the India-Singapore
Comprehensive Economic Cooperation Agreement, the New Zealand-Singapore
FTA, the New Zealand-Thailand Closer Economic Partnership Agreement, the
Croatia-Ukraine BIT and Bangladesh–Uzbekistan BIT or some others referring to
FET in the preamble such as in the Turkey–United Arab Emirates BIT27
or the
Azerbaijan–Estonia BIT. In such cases, the language can be found as: “[B]oth
states have been: [a]greeing that fair and equitable treatment of investments is
desirable in order to maintain a stable framework for investments and maximum
effective utilization of economic resources, and...”28
In theory, when two contracting parties decide to omit the FET clauses that means
they do not desire to provide FET protections for counterpart investors.
Consequently, they should have been free from the FET obligations or at least they
can minimize the obligations of FET in case the FET clauses are just mentioned in
the preamble of IIAs. However, in arbitral practice, sometimes the FET standard
could be read into the treaty by way of the MFN clause (UNCTAD 2012, p.19), it
means the investors could import FET standard from the IIA including FET
standard between the host state and the third-party through MFN clause.
2.1.2 Fair and Equitable Treatment as an unqualified standard
2.1.2.1Stand-alone Fair and Equitable Treatment Standard
This kind of formulation can find in Article 3(2) of the Vietnam – Australia BIT
which simply stated: “A Contracting Party shall ensure fair and equitable treatment
in its own territory to investments” or in Article IV(1) of the Vietnam- Chile BIT:
27
The preamble of the Turkey–United Arab Emirates BIT regulated that both states have been: “Agreeing that fair and
equitable treatment of investments is desirable in order to maintain a stable framework for investments and maximum
effective utilization of economic resources, and...”
28
The preamble of the Azerbaijan–Estonia BIT.

15
“Each Contracting Party shall guarantee a fair and equitable treatment in its
territory to investments made by investors of the other Contracting Party and shall
ensure that the exercise of the right thus recognized shall not be hindered in
practice.”
Since this formulation does not give any explanation of the meaning of FET clause,
when it comes to the dispute, the arbitral tribunals have open-ended power to define
the meaning behind it. There is no predictability and stability relating to decisions
of investment tribunals about this formulation of FET as they are various from case
to case.
2.1.2.2Fair and Equitable Treatment combined with other standards
The FET standard can stand alone in some IIAs as listed above, but in most cases,
FET usually is combined with the full protection and security (FPS) standard or
with other non-discrimination clauses like NT and MFN, or FET is put together
with the restriction on expropriation and while the writing might not be similar, the
idea behind them seems to be the same. The formulation of these clauses and the
combination of the standards indicate that the scope of the different standards is
overlapping at least to some extent.
a) Fair and Equitable Treatment combined with Full Protection and Security
FET and FPS clauses are usually regulated together in so many BITs between
Vietnam and other countries, namely Philippines, Indonesia, Singapore, China,
South Korea, Denmark, Sweden, Finland, Hungary, Poland, Latvia, Cuba, Laos,
Tajikistan, Mongolia, United Kingdom, Japan, Kuwait, Venezuela, Arab Emirates,
Uruguay, Estonia, Sri Lanka, Kazakhstan...
The language in these BITs appear to be not much different as in Article 2(2) of the
Vietnam-Lao BIT: “Investments of investors of either Contracting Party shall at all
times be accorded fair and equitable treatment and shall enjoy full protection and
security in the territory of the other Contracting Party.”
There are two different opinions about the relationship between the FPS and the

16
FET: (1) the two standards are almost equivalent29
; (2) the two standards are
separate.30
As Schreuer has argued that as a matter of interpretation, it appears unconvincing to
assume that the two standards, listed separately in the same document have the
same meaning (Schreuer 2008, p.4); it is therefore more sensible to treat the FET
standard and FPS standard differently.
b) Fair and Equitable Treatment combined with National Treatment
The FET and national treatment (NT) are quite distinct from each other because
[w]hile NT obligations are dependent on the treatment accorded to domestic
investments, fair and equitable treatment provisions try to ensure a basic level of
protection irrespective of the host state’s law.31
National treatment mainly deals
with discrimination measures based on nationality while the FET standard deals
with non-discriminatory measures based on the foreign investor’s gender, race or
religious belief and the host state’s conduct to terminate or frustrate the investment
(Kläger 2011, p.285). It means that that FET obligations can be violated even if
foreign investors are treated as nationals of the host state and the breach of national
treatment can be found even the investors are treated in the fair and equitable
manner.
It can be found this formulation in Article 4(2) of the Switzerland - Chile BIT that
stated: “Each Contracting Party shall ensure fair and equitable treatment within its
territory of the investments of the investors of the other Contracting Party. This
treatment shall not be less favourable than that granted by each Contracting Party
to investments made within its territory by its own investors..., or than that granted
by each Contracting Party to the investments made within its territory by investors
of the most favoured nation, if this latter treatment is more favourable.”
c) Fair and Equitable Treatment combined with Most-Favoured Nation
29
In Wena Hotels vs. Egypt case (Wena Hotels Ltd. vs. Arab Republic of Egypt, Award, 8 December 2000), the Tribunal
held that the seizure of the claimant’s two hotels was in violation of full protection and security standard as Egypt had
failed to discharge its duty of vigilance and due diligence in protecting the hotels. However, it should be noted that the
duty of vigilance and due diligence is also the requirement of the FET obligation.
30
In Azurix Corp vs. Argentina case (Azurix Corp vs. The Argentina Republic, Award, 14 July 2006) the Tribunal stated
that the protection and security standard went beyond protection against physical violence and extended to the obligation
to provide a secure investment environment. This meant that the respondent had breached both standards−FET and
protection and security simultaneously.
31
UnitedParcelServiceofAmericaInc.v.Canada at para.80.

17
Treatment
Most-Favoured Nation Treatment (MFN) and FET standard are independent
provisions that may coexist in a bilateral investment agreement and deal with a
separate investment issue that protects against different forms of discriminatory
treatment (Kläger 2011, p.285). Once this State enters into another treaty which
grants FET, then the most-favoured-nation clause automatically extends FET even
to beneficiaries under the first treaty (Tudor 2008, p.189). For instance, Article 3 (1)
of the BIT Vietnam- Hungary stated that “Each Contracting Party shall in its
territory accord investments and returns of investors of the other Contracting Party
treatment which is fair and equitable and not less favourable than that which it
accords to investments and returns of investors of any third State”. Similarly, in the
Vietnam- Mongolia BIT also regulated FET and MFN in one article that was Article
3(1): “Investments made by investors of either Contracting Party in the territory of
the other Contracting Party shall receive treatment which is fair and equitable, and
not less favourable than that accorded to investments made by investors of any third
State.”
d) Fair and Equitable Treatment combined with Expropriation
According to one study of UNCTAD (UNCTAD 2017, p.1), the FET is the most
popular standard utilized by the investors to claim the host states in arbitral
practice.32
The two standards deem to be different standards33
however they are
sometimes regulated together in an article. Take the Vietnam – Thailand BIT as an
example, the Article 6(1)(a) of this treaty stated that: “In any case where
32
Claimants alleged breaches of fair and equitable treatment (FET) in about 80 per cent of ISDS cases for which such
information was available, followed by indirect expropriation with 75 per cent.
33
The tribunal of PSEG vs. Turkey case (PSEG Global Inc and others vs. Turkey Award, 19 January 2007, Para 238)
clearly stated about the difference between direct expropriation and FET: “The standard of fair and equitable treatment
has acquired prominence in investment arbitration as a consequence of the fact that other standards traditionally provided
by international law might not in the circumstances of each case be entirely appropriate. This is particularly the case
when the facts of the dispute do not clearly support the claim for direct expropriation, but when there notwithstanding
events that need to be assessed under a different standard to provide redress in the event that the rights of the investors
have been breached.” Moreover, the tribunal in Sempra vs. Argentine case (Sempra Energy International vs. Argentine
Republic Award, September 28, 2007, Para 301) explained about the difference between indirect expropriation and FET
standard: “It must also be kept in mind that on occasion the line separating the breach of the fair and equitable treatment
standard from an indirect expropriation can be very thin, particularly if the breach of the former standard is massive and
long-lasting. In case of doubt, however, judicial prudence and deference to state functions are better served by opting for
a determination in the light of fair and equitable treatment standard. This also explains why the compensation granted to
redress the wrong done might not be too different on either side of the line.”

18
investments of investors of one Contracting Party are subject, directly or indirectly,
to any measure of expropriation, the investors concerned shall be accorded in the
territory of the other Contracting Party fair and equitable treatment in relation to
any such measure...” The similar language of this formulation can be found in the
Vietnam- Philippines BIT and the Vietnam- Indonesia BIT.
In some other cases, FET and the protection against expropriation can also linked in
case of compensation provided for expropriation expressly refers to “equity.” For
example, in Article 6(2) of the Chilean Model BIT provides that: “...where the
market value of property compensation cannot be readily ascertained,
compensation may be determined in accordance with “generally recognized
equitable principles of valuation”, taking certain factors into account.”
To conclude, the FET and protection against expropriation while are no doubt
clearly separate standards are still connected [since] in practice, in an investment
treaty if both the FET and the particular provision on expropriation are incorporated
it is likely that reference will be made primarily if not exclusively to the later (Islam
2014, pp.138-9).
e) Other formulations
It appears to be impossible to list all the formulations of FET in the IIAs worldwide
since they vary from one treaty to the others. The study just attempts to group some
popular formulations. The next type of FET, hence, is the FET clause that set the
floor of protection of covered investment by requirements of customary
international law or international law. The FET obligation of host state in this case
cannot lower than that floor and seems to give arbitral tribunals more room of
interpretation; therefore, it deems to be the unqualified FET. Take the Vietnam –
US FTA as an example, Article 3(1) of this Agreement stated that: “Each Party
shall at all times accord to covered investments fair and equitable treatment and
full protection and security, and shall in no case accord treatment less favorable
than that required by applicable rules of customary international law.”
Otherwise, in so many BITs of the United States with other countries, FET clauses
were set a floor by international law obligation such as in United States- Argentina

19
BIT34
, United States- Ecuador BIT35
or in Bahrain- United States BIT36
.
Moreover, in other groups of investment treaties, the contracting parties frequently
combine the fair and equitable treatment standard with a duty not to impair the
investment by unreasonable or discriminatory treatment (Kläger 2011, p.17). For
instance, in Article 3(1) of the Vietnam - Netherlands BIT: “Each Contracting
Party shall ensure fair and equitable treatment of the investments of nationals of the
other Contracting Party and shall not impair, by unreasonable or discriminatory
measures, the operation, management, maintenance, use, enjoyment or disposal
thereof by those nationals” or in Article 2(2) of the Lebanon–Hungary BIT 37
as
well as in Article 3 (1) of the Vietnam-Denmark BIT.38
Apart from that, it is
possible to find the combination between some of those formulations in just one
BIT. For example, in Vietnam- Thailand BIT, both Article 139
and Article 6(1)(a)40
of this BIT regulated about the FET clauses.
In practice, because of the undefined nature, the FET standard (drafted in
unqualified way), has turned into an all-encompassing provision that investors have
used to challenge any type of governmental conduct that they deem unfair.
34
Article 2(a) of the United States- Argentina BIT stated that: “Investment shall at all times be accorded fair and
equitable treatment, shall enjoy full protection and security and shall in no case be accorded treatment less than that
required by international law.”
35
Article 3(a) of the United States- Ecuador BIT as follow: “Investment shall at all times be accorded fair and equitable
treatment, shall enjoy full protection and security and shall in no case be accorded treatment less than that required by
international law.”
36
Article 2(3)(a) of the Bahrain- United States BIT as follow: “Each Party shall at all times accord to covered
investments fair and equitable treatment and full protection and security, and shall in no case accord treatment less
favorable than that required by international law.”
37
Article 2(2) of the Lebanon–Hungary BIT: “Investments and returns of investors of either contracting party shall at all
times be accorded fair and equitable treatment and shall enjoy full protection and security in the territory of the other
contracting party....”
38
Article 3 (1) of the Vietnam-Denmark BIT regulated that “Investments of investors of either Contracting Party shall at
all times be accorded fair and equitable treatment and shall enjoy full protection and security in the territory of the other
Contracting Party....”
39
Article 1 of the Vietnam – Thailand BIT:
(a) Investments of nationals or companies of one Contracting Party in the territory of the other Contracting Party, and the
returns therefrom, shall receive treatment which is fair and equitable and not less favourable than that accorded in respect
of the investments and returns of the nationals and companies of any third State.
(b) Each Contracting Party shall in its territory accord to nationals or companies of the other Contracting Party as regards
the management, use, enjoyment or disposal of their investments, treatment which is fair and equitable, in conformity
with the principles of international law and not less favourable than that which it accords to the nationals and companies
of any third State.
40
Article 6(1)(a) of the Vietnam – Thailand BIT: “In any case where investments of a national or company of one
Contracting Party are subject, directly or indirectly to any measure of expropriation, the national or company concerned
shall be accorded in the territory of the other Contracting Party fair and equitable treatment in relation to any such
measure...”

20
2.1.2.3FET standard with an open-ended list of State obligations
The formulation may list what the standard includes (e.g. the obligation not to deny
justice) or explain what the standard does not include (e.g. establishing that the FET
standard does not include a stabilization obligation that would prevent the host State
from changing its legislation), or a combination thereof.
Take the draft of the EU-Vietnam Investment Protection Agreement (IPA)41
as an
example, the Article 2(5) of the IPA42
regulated that:
“1. Each Party shall accord fair and equitable treatment and full protection and
security to investors of the other Party and covered investments in accordance with
paragraphs 2 to 7 and Annex 3 (Understanding on the Treatment of Investments).
2. A Party breaches the obligation of fair and equitable treatment referred to in
paragraph 1 where a measure or series of measures constitutes:
(a) a denial of justice in criminal, civil or administrative proceedings;
(b) a fundamental breach of due process in judicial and administrative proceedings;
(c) manifest arbitrariness;
(d) targeted discrimination on manifestly wrongful grounds, such as gender, race or
religious belief;
(e) abusive treatment such as coercion, abuse of power or similar bad faith
conduct; or
(f) a breach of any further elements of the fair and equitable treatment obligation
adopted by the Parties in accordance with paragraph 3.
3. Treatment not listed in paragraph 2 may constitute a breach of fair and
equitable treatment where the Parties have so agreed in accordance with the
procedures provided for in Article 4.3.
4. When applying paragraphs 1 to 3, a dispute settlement body under Chapter 3
41
The European-Vietnam trade agreement/investment protection agreement (IPA) is regarded as “the most ambitious
and comprehensive FTA that the EU has ever concluded with a developing country” and is unquestionably a
“breakthrough of Vietnam – EU trade relations” (Rouse 2015). The investment protection agreement, meanwhile,
includes modern rules on investment protection enforceable through the new Investment Court System and ensures that
the right of the governments on both sides to regulate in the interest of their citizens is preserved. It will replace the
bilateral investment agreements that 21 EU Members States currently have in place with Vietnam (European Comission
2018), at <http://trade.ec.europa.eu/doclib/press/index.cfm?id=1922>, accessed on November 10, 2018.
42
The text of the EU-Vietnam Investment Protection Agreement presented is the text at the end of the negotiation
conducted by the European Commission as of August 2018, at
<http://trade.ec.europa.eu/doclib/press/index.cfm?id=1437>, accessed on November 10, 2018.

21
(Dispute Settlement) may take into account whether a Party made a specific
representation to an investor of the other Party to induce a covered investment that
created a legitimate expectation, and upon which the investor relied in deciding to
make or maintain that investment, but that the Party subsequently frustrated.”
This approach may provide a guidance for arbitral tribunals about what are the
obligations of FET; however, the open-ended list of obligations, by its nature,
leaves open the potential for expansion of the meaning of FET through subsequent
arbitral interpretation (UNCTAD 2018c, p.36). For instance, as in Article 2.5(3) of
the IPA, apart for the measures listed in the Article 2.5(2), other breaches may also
constitute the violation of FET standard. In other words, the obligations of FET
clause are not limited in the scope of the Article 2.5(2) of the IPA. Therefore, it
deems to be an unqualified FET.
2.1.3 Fair and Equitable Treatment as a qualified standard
2.1.3.1Fair and Equitable Treatment with references to Minimum Standard of
Treatment
A FET provision limited to Minimum Standard of Treatment has been famously
known under Article 1105 of the North America Free Trade Agreement (NAFTA).
This Article regulated that:
“1. Each Party shall accord to investments of investors of another Party treatment
in accordance with international law, including fair and equitable treatment and
full protection and security.
1. Without prejudice to paragraph 1 and notwithstanding Article 1108(7)(b),
each Party shall accord to investors of another Party, and to investments of
investors of another Party, non-discriminatory treatment with respect to measures it
adopts or maintains relating to losses suffered by investments in its territory owing
to armed conflict or civil strife...”
It is obvious that this formulation has been interpreted more narrowly than FET
provisions under other treaties and NAFTA governments have had much greater
success than other governments in defending FET claims (UNCTAD 2012, p.61).

22
This approach has been used in a number of major recent treaties in Asia as in
ASEAN-Korea IIA43
, ASEAN-India IIA44
and the ASEAN - Australia and New
Zealand IIA,45
the China-Korea FTA46
, the Singapore-US FTA47
, the Australia-
Korea FTA48
, the Japan-Mongolia EPA49
and the Korea-US FTA50
.
2.1.3.2Fair and Equitable Treatment with references to international law
The construction of FET with reference to international law implies that FET does
not limit FET to being part of customary international law (Islam 2014, p.67). For
example: Article 3(2) of the Croatia-Oman BIT stated that “Investments or returns
of investors of either Contracting Party in the territory of the other Contracting
Party shall be accorded fair and equitable treatment in accordance with
international law and provisions of this Agreement.”
Indeed a tribunal faced with such language may not go beyond what the sources of
international law dictate the scope and meaning of FET to be (UNCTAD 2012,
p.22).
2.1.3.3 Fair and Equitable Treatment with references to international law
The construction of FET with reference to international law implies that FET does
not limit FET to being part of customary international law (Islam 2014, p.67). For
example: Article 3(2) of the Croatia-Oman BIT stated that “Investments or returns
of investors of either Contracting Party in the territory of the other Contracting
Party shall be accorded fair and equitable treatment in accordance with
international law and provisions of this Agreement.”
Indeed, a tribunal faced with such language may not go beyond what the sources of
international law dictate the scope and meaning of FET to be (UNCTAD 2012,
p.22).
43
See more in Art. 5 of the ASEAN-Korea IIA.
44
See more in Art. 7 of the ASEAN-India IIA.
45
See more in Art. 6 of the ASEAN with Australia and New Zealand IIA.
46
See more in Art. 12.5 & Annex A of the China-Korea FTA.
47
See more in Art. 15(5) of the Singapore-US FTA.
48
See more in Art. 14.5 of the Australia-Korea FTA.
49
See more in Art. 10.5 of the Japan-Mongolia EPA.
50
See more in Art. 11(5) & Annex 11-A the Korea-US FTA.

23
2.1.3.4Fair and Equitable Treatment with “exhaustive list” of State obligations
In this formulation, the replacement of the general FET standard with specific
obligations should rein in arbitrators’ creativity and remove other factors and
criteria that some tribunals have relied upon in order to find a violation of FET
(UNCTAD 2012, p.109), such as obligation not to deny of justice, transparency and
consistency. In this formulation, depending on the contracting parties, the list can be
narrower or broader by adding more obligations or taking out some of the
obligations.
There are some agreements following this formulation such as the Agreement on
Investment of The Framework Agreement on Comprehensive Economic Co-
operation between ASEAN-China51
and the Agreement establishing the ASEAN-
Australia-New Zealand Free Trade Area (AANZFTA ).52
In these agreements, the
FET clauses were limited to the obligation not to denial of justice in legal or
administrative proceedings.
It also could be found the same formulation in Korea -Vietnam BIT53
, but the text
appears quite different comparing with those in AANZFTA as the FET clause of
Vietnam – Korea BIT equals to the obligation not to deny justice in criminal, civil
51
Article 7 of the the Agreement on Investment of The Framework Agreement On Comprehensive Economic Co-
Operation between ASEAN-China regulated as follow:
1. Each Party shall accord to investments of investors of another Party fair and equitable treatment and full protection and
security.
2. For greater certainty:
(a) fair and equitable treatment refers to the obligation of each Party not to deny justice in any legal or administrative
proceedings; and
...
52
The agreement Establishing the ASEAN-Australia-New Zealand Free Trade Area (AANZFTA) goes further by linking
FET to customary international law as well by regulating Article 6:
“1. Each Party shall accord to covered investments fair and equitable treatment and full protection and security.
2. For greater certainty:
(a) fair and equitable treatment requires each Party not to deny justice in any legal or administrative proceedings;
...
(c) the concepts of “fair and equitable treatment” and “full protection and security” do not require treatment in addition
to or beyond that which is required under customary international law, and do not create additional substantive rights.
53
Article 9.5 of the BIT Vietnam-Korea:
1. Each Party shall accord to covered investments fair and equitable treatment and full protection and security in
accordance with customary international law.
2. The concepts of “fair and equitable treatment” and “full protection and security” in this Article do not require treatment
in addition to or beyond that which is required by the applicable rules of customary international law and do not create
additional substantive rights. For greater certainty:
(a) “fair and equitable treatment” includes the obligation not to deny justice in criminal, civil or administrative
adjudicatory proceedings in accordance with the principle of due process; and...

24
or administrative adjudicatory proceedings in accordance with the principle of due
process.
This formulation can be found in the Article 9.6 of the Comprehensive and
Progressive Agreement for Trans-Pacific Partnership54
(CPTPP) as well:
1. Each Party shall accord to covered investments treatment in accordance with
applicable customary international law principles, including fair and equitable
treatment and full protection and security.
2. For greater certainty, paragraph 1 prescribes the customary international law
minimum standard of treatment of aliens as the standard of treatment to be afforded
to covered investments. The concepts of “fair and equitable treatment” and “full
protection and security” do not require treatment in addition to or beyond that
which is required by that standard, and do not create additional substantive rights.
The obligations in paragraph 1 to provide:
(a) “fair and equitable treatment” includes the obligation not to deny justice in
criminal, civil or administrative adjudicatory proceedings in accordance with the
principle of due process embodied in the principal legal systems of the world; and
[...]
4. For greater certainty, the mere fact that a Party takes or fails to take an action
that may be inconsistent with an investor’s expectations does not constitute a
breach of this Article, even if there is loss or damage to the covered investment as a
result.
5. For greater certainty, the mere fact that a subsidy or grant has not been issued,
renewed or maintained, or has been modified or reduced, by a Party, does not
constitute a breach of this Article, even if there is loss or damage to the covered
investment as a result.” 55
54
“The Comprehensive and Progressive Agreement for Trans-Pacific Partnership (CPTPP) is a free trade agreement
between Canada and 10 other countries in the Asia-Pacific region: Australia, Brunei, Chile, Japan, Malaysia, Mexico,
New Zealand, Peru, Singapore and Vietnam. Once fully implemented, the 11 countries will form a trading bloc
representing 495 million consumers and 13.5% of global GDP. On December 30, 2018 the CPTPP entered into force
among the first six countries to ratify the agreement – Canada, Australia, Japan, Mexico, New Zealand, and Singapore –
and provides Canada with preferential access to key markets in Asia and Latin America.” at
<https://international.gc.ca/trade-commerce/trade-agreements-accords-commerciaux/agr-acc/cptpp-
ptpgp/index.aspx?lang=eng>, accessed on January 1, 2019.
55
To add more, according to Annex 9-A Customary International Law: The Parties confirm their shared understanding
that “customary international law” generally and as specifically referenced in Article 9.6 (Minimum Standard of

25
It is obvious that in the CPTPP, the FET standard not only was linked to MST but
also was clearly indicated that FET standard merely includes the obligation not to
deny justice. Moreover, the contracting parties went further by regulating that the
subsidy or grant has not been issued, renewed or maintained, or has been modified
or reduced; or the failure to take an action that may be inconsistent with an
investor’s expectations does not constitute a breach of FET standard.
It is evident that, the clauses like this therefore can potentially provide much clearer
limits to the scope of the FET than invocation of international law or customary
international law; however, the vast majority of the investment treaties do not
contain these kinds of definitional limitations (Islam 2014, p.77). Moreover, it
should bear in mind that the obligation not to denial of justice in administrative or
legal proceedings is clearly narrower in comparison with the obligations required by
the unqualified FET as of the definition of the arbitral tribunals.
2.2 Application of Fair and Equitable Treatment by Arbitral Tribunals
2.2.1 An overview of Fair and Equitable Treatment in Arbitral Tribunals
In treaty practice, as discussed in the previous section, FET with its own long-
standing history, appears as one of the most important and popular protection
standards in the IIAs. However, in arbitral practice, the FET standard had been a
“sleeping beauty” until its first application in the case between American
Manufacturing v. Zaire (Congo) in 1997.56
This date marked the inauguration of a
rich period of debate around FET, continuing today, to such an extent that it is
almost impossible to find a case in which FET is not included in the claimant’s
submissions (even though not always examined by the tribunal) (Tudor 2008, p.15).
Indeed, according to statistics mapped by United Nations Conference on Trade and
Development (UNCTAD) (UNCTAD 2017, p.5), FET has been the most commonly
Treatment) results from a general and consistent practice of States that they follow from a sense of legal obligation. The
customary international law minimum standard of treatment of aliens refers to all customary international law principles
that protect the investments of aliens.
56
American Manufacturing & Trading, Inc. v. Republic of Zaire, ICSID Case No. ARB/93/1.

26
provision invoked by claimants in about 80 per cent of ISDS cases (with 433 cases
with the claims on FET clause57
out of in 522 cases where alleged provisions were
found) (UNCTAD Navigator 2018). As a result, [t]he States became conscious
throughout the years of the importance of the FET standard, especially with the
numerous awards of the arbitral institutions (Tudor 2008, p.33) since there are 113
cases found breach of FET in 177 cases in favour of the investors which take
account about 65 per cent decisions in favour of the investor or decisions in favour
of neither party (liability found but no damages awarded) (UNCTAD 2017, p.5). So
far, there has had at least 558
ISDS cases on the FET claims in which Vietnam
government has been sued.
2.2.2 Interpretation of Fair and Equitable Treatment Standard by Arbitral
Tribunals
In fact, [t]he variations in language and construction of fair and equitable treatment
provisions in IIAs has led to the fact that the scope and content of the standard will
depend on the specific wording of the applicable agreement, as well as its context,
negotiating history and any other indications of the Parties’ intent (OECD 2004,
p.2) and the task of determining the meaning of the FET standard has been
effectively left to ad hoc arbitral tribunals (UNCTAD 2018c, p.35) since it is
unlikely possible to find any precise obligations of the host states requiring by FET
clause simply through its text. In fact, a great deal of time and resources have been
spent on considering the issue whether the concept of “fair and equitable treatment”
only reflects the international minimum standard as contained in the general
principles of law and treaties i.e. customary international law or does it goes beyond
such minimum standard including other sources of investment protection
obligations found in treaties or whether the standard is an autonomous self-
contained concept in treaties which do not explicitly link it to international law
(Sadiq 2014, p.230).
2.2.2.1Interpretation of “No Fair and Equitable Treatment Clause”
57
To be more precise, it means fair and equitable treatment/Minimum standard of treatment, including denial of justice
claims.
58
The two cases of Mr. Trinh Vinh Binh shall be analyzed together.

27
In theory, when two contracting parties decide to omit FET clauses, it means they
no more desire to provide FET protections for counterpart investors, so they
completely free from FET obligations or at least they can reduce the obligations of
FET to some extent in case the FET is just mentioned in the preamble of IIAs.
However, in arbitral practice, sometimes the FET standard could be read into the
treaty by way of the MFN clause (UNCTAD 2012, p.19), it means the investors
could import FET standard from the IIA including FET standard between the host
state and the third-party through MFN clause. Tribunals (outside NAFTA) have so
far accepted that an investor faced with a “less- advantageous” FET clause (for
instance, one where the FET is linked to the MST) could invoke the MFN clause
contained in a BIT to obtain the “better” protection offered by a stand- alone FET
clause included in another BIT entered into by the host State (Dumberry 2016, p.2).
For instance, in Bayindir vs. Pakistan case59
on the ground of the Pakistan–Turkey
BIT, which did not have a FET clause in the main text but in the preamble of the
treaty.60
The Tribunal stated that it was “true that the reference to FET in the
preamble together with the absence of a FET clause in the Treaty might suggest
that Turkey and Pakistan intended not to include an FET obligation in the
Treaty.”61
However, the Tribunal then went further and concluded that: “under
these circumstances and for the purposes of assessing jurisdiction, the Tribunal
considers, prima facie, that Pakistan is bound to treat investments of Turkish
nationals ‘‘fairly and equitably.””62
Other ward of ATA Construction63
case also
illustrated the relative importance that a reference to the FET standard in a preamble
may have in the absence of such protection in the main text of the agreement. In
other words, the awards suggest that the importation of a FET obligation is possible
for all BITs entered into by the host State, even those already existing at the time
59
Bayindir Insaat Turizm Ticaret ve Sanayi AS v Islamic Republic of Pakistan, ICSID No ARB/03/29, Decision on
Jurisdiction (14 November 2005) para 227–35.
60
The preamble of Pakistan–Turkey BIT regulated that both parties: “agre[e] that fair and equitable treatment of
investment is desirable in order to maintain a stable framework for investment and maximum effective utilization of
economic resources...”
61
Jurisdiction (14 November 2005), para 153.
62
Jurisdiction (14 November 2005), para 232.
63
ATA Construction, Industrial and Trading Company v. The Hashemite Kingdom of Jordan, ICSID Case No.
ARB/08/2.

INVESTOR-STATE DISPUTE SETTLEMENT ON THE FAIR AND EQUITABLE TREATMENT STANDARD AND LESSONS FOR VIETNAM

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