The ‘Minimum Standard of Treatment’ in International Investment Law: The Story of the Emergence, the Decline and the Recent Resurrection of a Concept

Abstract

The ‘minimum standard of treatment’ (MST) provides an apposite case study of a transformation of an international legal concept: its emergence, its subsequent decline and finally its recent ‘resurrection’. The concept emerged in the early twentieth century as a basic threshold of treatment meant to be imposed on all States and afforded to all foreign investors, notwithstanding the level of treatment already offered by States to their own nationals. By the end of the Second World War, it was well-established as a rule of custom. In the 1960s and 1970s, newly independent States began to challenge the existence of any such MST. While the standard ultimately survived these events, both developing and developed States perceived it as ineffective in providing basic legal protection to foreign investors doing business abroad. It is in this historical context that States began frenetically signing bilateral treaties for the promotion and protection of investments (BITs) that provided clearer rules on investment protection. The vast majority of BITs do not contain any reference to the MST. Instead, they include clauses providing for a standard of ‘fair and equitable treatment’ (FET), which many tribunals have interpreted as providing investors with more extensive rights than the MST. However, while States had initially begun using the FET standard instead of the MST, they have subsequently turned back to the MST to limit investors’ rights under FET clauses. The resurrection of the MST has been an important tool through which States have been trying to regain control of investor-State arbitration.