Source: https://jusmundi.com/en/document/wiki/en-full-protection-and-security-fps
Timestamp: 2020-05-31 08:14:59
Document Index: 753581296

Matched Legal Cases: ['Art. 4', 'Art. 2', 'Art. 5', 'Art. 2', 'Art. 3', 'Art. 2', 'Art. 2', 'Art. 3', 'Art. 3', 'Art. 2', 'Art. 6', 'Art. 2', 'Art. 4', 'Art. 4', 'Art. 3', 'Art. 3', 'Art. 4', 'Art. 2', 'Art. 1', 'Art. 1', 'Art. 8', 'Art. 2', 'Art. 2', 'Art. 2', 'Art. 3']

Mr Arne Fuchs
Global co-chair of the International Arbitration and Dispute Resolution Group - McDermott Will & Emery Rechtsanwälte Steuerberater LLP
The full protection and security standard (“FPS Standard”) creates an obligation for the host State to protect investors and investments against actions of private parties, e.g. in the course of civil unrest, as well as actions of the host State, its organs or agents. It is complementary to the State’s monopoly over the use of physical force and the prohibition of vigilante justice. It is general consensus that the FPS Standard creates a due-diligence obligation for the host State, not strict liability. (See Section V below). It is likewise generally accepted that the standard covers physical protection and security of the investor and covered investments. (See Section IV below). Whether the FPS Standard also extends to “commercial” or “legal” protection and security is disputed.
II. Treaty practice
The FPS Standard is included in the overwhelming majority of investment treaties. The specific wordings differ. Some treaties refer to “full”1, others to “full and complete”,2 “(most) constant”3 or “continuous”4 protection and security. “Protection” and “security” are sometimes inverted,5 “security” omitted.6 In arbitral practice, “these semantic variations do not change tribunals’ interpretations of the standard.”7
German Model BIT (2008), Art. 4(1); United Kingdom Model BIT (2008), Art. 2(2); U.S. Model BIT (2012), Art. 5(1); Mexico-Spain BIT (2006), Art. IV(1); Lithuania-Ukraine BIT (1994), Art. 2(2); Cuba-Lebanon BIT (1995), Art. 3(1); Pakistan-UAE BIT (1995), Art. 2(1); Hungary-Slovakia BIT (1993), Art. 2(2); Finland-Thailand BIT (1994), Art. 3(2); Denmark-Turkey BIT (1990), Art. 3(1); Hong Kong, China SAR-Korea, Republic of BIT (1997), Art. 2(2); Turkmenistan-United Arab Emirates BIT (1998), Article 2(2); Romania – United Arab Emirates (1993), Article 2(2).
French Model BIT (2006), Art. 6(1); Oman-Pakistan BIT (1997), Article 5.1; Algeria–Jordan BIT (1996), Article 5(1); Benin-China BIT (2004), Article 2(2); China-Uganda BIT (2004), Article 2(2); Finland-United Arab Emirates BIT (1996), Article 5(1); Oman-Turkey (2007), Article 3.
Germany-China BIT, 1 December 2003, entered into force 11 November 2005, Art. 2(2); Swiss-Serbia BIT, 7 December 2005, entered into force 20 July 2007, Art. 4; Algeria-Italy BIT (1991), Art. 4(1); Belarus–Slovenia BIT (2006), Article 2(3); Poland-Thailand BIT (1992), Article 2(5); Finland–Panama (BIT) (2009), Article 2(2); Montenegro-Switzerland BIT (2005), Article 4; Argentina–Morocco BIT (1996), Article 3(3); BLEU-Venezuela BIT (1998), Article 3(2); Finland-Mauritius BIT (2007) Article 2(2); China-Spain BIT (2005), Article 2(2); Treaty of Friendship, Commerce and Navigation between the United States of America and Nicaragua (1956), Article III; Argentina – United Kingdom BIT (1990), Article 2(2); Austria-Mexico BIT (1998) Article 3(1); Japan–Russian Federation BIT (1998) Article 3(3); Lithuania–Slovenia BIT (1998), Article 2(2); Peru–Thailand BIT (1991), Article 3(2).
BLEU – Philippines BIT (1998), Article III(2); BLEU- Malta BIT (1987), Article 3(2); BLEU-Egypt BIT, 28 February 1999, entered into force 24 May 2002, Art. 3(2); BLEU-United Arab Emirate BIT (2004), Article 3(2); BLEU – Gautemala BIT (2005), Article 3(1).
Netherlands-Czech BIT, 29 April 1991, entered into force 1 October 1992, Art. 3(2); Greece-Hungary (1989), Article 3(2); Malta-Tusinia BIT (2000), Article 2(2); Finland and Lithuania BIT (1992) Article 4(1); Czech Republic-Guatemala BIT (2003), Article 2(2), Jordan-Lithuania BIT (2002), Article 3(1); Egypt- Nigeria BIT (2000), Article 2(3); Lithuania-Venezuela, Bolivarian Republic of BIT (1995), Article 3(1); Cyprus – Egypt BIT (1998), Article 3(2); Cyprus-Hungary BIT (1989) Article 3(2); Mexico – Netherlands BIT (1998), Article 3(1).
Lithuania-Norway BIT, 16 June 1992, entered into force 20 December 1992, Art. III; Latvia – Norway BIT (1992), Article III; Norway-Poland BIT (1990), Article 3.
Parkerings-Copmagniet AS v. Republic of Lithuania, ICSID Case No. ARB/05/8, Award, 11 September 2007, para. 354; Frontier Petroleum Services Ltd. V. Czech Republic, PCA Case No. 2008-09, Final Award, 12 November 2010, para. 260.
The FPS Standard finds first mention in eighteenth century European scholarship8 and treaties.9 An early codification of the underlying principle can be found in Article 76 of the Introduction to the General Law for the Prussian States of 1794.10 It became more common in nineteenth century treaties on friendship, commerce and navigation11 and continued to be included in such treaties after World War II,12 in the Abs-Shawcross Convention13 as well as in the 1967 Draft OECD Convention.14 The FPS Standard was featured prominently in the first ever ICSID case under a BIT, AAPL v. Sri Lanka.15
Treaty of Amity and Commerce between the United States and Kingdom of Prussia, 10 September 1785, Art. XVIII; Treaty of Amity, Commerce and Navigation between His Britannic Majesty and the United States of America, 19 November 1794, Arts. II, XIV.
Allgemeines Landrecht für die Preußischen Staaten, 1 June 1794, Introduction, para. 74.
The Treaty of Amity, Commerce and Navigation between Italy and Venezuela, 19 June 1861, Art. 4; Treaty of Friendship, Commerce and Navigation Between Argentina and the United States, 27 July 1853, Art. 2.
Treaty of Friendship, Commerce and Navigation Between The United States of America and The Italian Republic, 26 July 1949, Art. V(1); Newcombe, A. and Paradell, L., Law and Practice of Investment Treaties: Standards of Treatment, 2009, p. 307.
Abs, Herman and Hartley Shawcross, Draft Convention on Investments Abroad, 1960, Art. 1, sentence 2.
Draft Convention on the Protection of Foreign Property, Council of the Organisation for Economic Cooperation and Development (OECD), 1967, Art. 1(a).
Asian Agricultural Products Ltd. (AAPL) v. Republic of Sri Lanka, ICSID Case No. ARB/87/3, Award, 27 June 1990, paras. 45-53.
IV. Extent of treatment owed
A. Physical protection and security of the investor or its investment
Historically, the obligation extends to the physical protection and security of the investor or covered investments.16 This scope remains undisputed to date. Some (more recent) treaties explicitly restrict the FPS Standard to “physical” protection and security.17
Saluka Investments B.V. v. The Czech Republic, PCA Case No. 2001-04, Partial Award, 17 March 2006, para. 483; Joseph Houben v. Republic of Burundi, ICSID Case No. ARB/13/7, Award, 12 January 2016, para. 157.
Comprehensive Economic and Trade Agreement between Canada and the European Union, signed 30 October 2016, Art. 8.10.(5); EU-Singapore Investment Protection Agreement, signed 19 October 2018, Art. 2.4.(5); EU-Vietnam Investment Protection Agreement, signed on 30 June 2019, Art. 2.5.(5).
B. Extension to “commercial” and “legal” protection and security
A few treaties include language which specifically identifies that “legal” protection and security is part of the obligation,18 as recognized by some tribunals.19 Most treaties, however, do not qualify what specific kind of protection and security is owed. In such cases, tribunals have interpreted the respective clauses differently. Some tribunals have maintained that the FPS Standard protects “more specifically the physical integrity of an investment against interference by use of force.”20 Proponents of such a restrictive interpretation of the FPS Standard (limited to “physical” security only) mainly refer to its historic origin and the need to provide a meaningful distinction from the FET Standard such as to confer effets utiles upon both standards.21
Other tribunals have held that even an “unqualified” FPS clause creates an obligation of the host state to provide “commercial” and/or “legal” protection and security, in particular access to an effective judicial recourse against impairments of the investor and/or covered investment.22 These tribunals relied heavily on the ordinary meaning of the adjective “full”, the FPS Standard’s contextual (and historical) proximity to the fair and equitable treatment standard (“FET Standard”) and the fact that the ICJ in its ELSI judgment23 analysed the FPS Standard in the context of domestic proceedings before Italian courts, i.e. in an inherently “legal” context.
Germany-Argentina BIT (1991), Article 4.1; Netherlands-Romania BIT (1994), Article 3.1; Ukraine-Russia BIT (1998), Art. 2(2); Belgium-Burundi BIT (1989), Art. 3(2).
Siemens A.G. v. The Argentine Republic, ICSID Case No. ARB/02/8, Award, 17 January 2007, para. 302; Sergei Paushok et al. v. Government of Mongolia, Award on Jurisdiction and Liability, 28 April 2011, para. 326; OAO “Tatneft” v. Ukraine, PCA Case No. 2008-8, Award, 29 July 2014, para. 425; Joseph Houben v. Republic of Burundi, ICSID Case No. ARB/13/7, Award, 12 January 2016, para. 160.
Saluka Investments B.V. v. The Czech Republic, PCA Case No. 2001-04, Partial Award, 17 March 2006, para. 483.
BG Group Plc. v. The Republic of Argentina, Final Award, 24 December 2007, para. 324; Rumeli Telekom A.S. and Telsim Mobil Telekomunikasyon Hizmetleri A.S. v. Republic of Kazakhstan, ICSID Case No. ARB/05/16, Award, 29 July 2008, para. 668; Suez, Sociedad General de Aguas de Barcelona, S.A. and Vivendi Universal, S.A. (formerly Aguas Argentinas, S.A., Suez, Sociedad General de Aguas de Barcelona, S.A. and Vivendi Universal, S.A.) v. Argentine Republic (II), ICSID Case No. ARB/03/19, Decision on Liability, 30 July 2010, para. 179; Gold Reserve Inc. v. Bolivarian Republic of Venezuela, ICSID Case No. ARB(AF)/09/1, Award, 22 September 2014, para. 623; OperaFund Eco-Invest SICAV PLC and Schwab Holding AG v. Kingdom of Spain, ICSID Case No. ARB/15/36, Award, 6 September 2019, para. 576.
Ronald S. Lauder v. Czech Republic, Award, 3 September 2001, para. 314; CME Czech Republic B.V. v. The Czech Republic, Partial Award, 13 September 2001, para. 613; Azurix Corp. v. The Argentine Republic (I), ICSID Case No. ARB/01/12, Award, 14 July 2006, para. 408; National Grid PLC v. The Argentine Republic, Award, 3 November 2008, para. 187; Biwater Gauff (Tanzania) Limited v. United Republic of Tanzania, ICSID Case No. ARB/05/22, Award, 24 July 2008, para. 729; Frontier Petroleum Services Ltd. v. The Czech Republic, PCA Case No. 2008-09, Final Award, 12 November 2010 para. 273; Teinver S.A. et al. v. Argentina Republic, ICSID Case No. ARB/09/01, Award, 21 July 2017, para. 905; Krederi Ltd. v. Ukraine, ICSID Case No. ARB/14/17, Award, 2 July 2018, para. 652; Anglo American PLC v. Bolivarian Republic of Venezuela, ICSID Case No. ARB(AF)/14/1, Award, 18 January 2019, para. 482; Global Telecom Holding S.A.E. v. Canada, ICSID Case No. ARB/16/16, Award, 27 March 2020, paras. 664-665.
Elettronica Sicula S.p.A. (ELSI) (U.S.A. v. Italian Republic), Judgment, 20 July 1989, para. 109.
It is virtually undisputed that the FPS Standard does not impose strict liability on the host State but a due-diligence obligation.24 This is critical where the injury at issue was caused by actions which are not directly attributable to the State itself. In this context, “due diligence” means that the host State is not required “to prevent each and every injury” but must exercise reasonable care and take reasonable actions within its power to prevent injury of the investor.25 This inquiry is highly fact specific and depends on the circumstances of each case. In general, the host State must take all measures to prevent the injury which are possible under the specific circumstances and with due regard to its capacities. In some cases, tribunals held that the due diligence obligation was breached;26 in others, tribunals found that the State has acted with the necessary diligence.27 Recently, a number of tribunals had to conduct this inquiry in the context of a situation where the State faced general instability.28 Tribunals have been particularly critical of the “lower” due-diligence standard in the context of legal protection and security claims.29
Elettronica Sicula S.p.A. (ELSI) (U.S.A. v. Italian Republic), Judgment, 20 July 1989, p. 15, para. 108; Asian Agricultural Products Ltd. (AAPL) v. Republic of Sri Lanka, ICSID Case No. ARB/87/3, Final Award, 27 June 1990, para. 50; Sambiaggio Case, Opinion of Umpire Ralston, 1 January 1903, p. 521; Noble Ventures, Inc. v. Romania, ICSID Case No. ARB/01/11, Award, 12 October 2005, para. 164.
Sergei Paushok, CJSC Golden East Company and CJSC Vostokneftegaz Company v. The Government of Mongolia, Award on Jurisdiction and Liability, 28 April 2011, para. 325.
Asian Agricultural Products Ltd. (AAPL) v. Republic of Sri Lanka, ICSID Case No. ARB/87/3, Final Award, 27 June 1990, para. 85(B); American Manufacturing & Trading, Inc. v. Republic of Zaire, ICSID Case No. ARB/93/1, Award, 21 February 1997, para. 6.05; Wena Hotels Limited v. Arab Republic of Egypt, ICSID Case No. ARB/98/4, Award, 8 December 2000, para. 84; Waguih Eli George Siag & Clorinda Vecchi v. Arab Republic of Egypt, ICSID Case No. ARB/05/15, Award, 1 June 2009, para. 448; Goetz et al. v. Republic of Burundi II, ICSID Case No. ARB/01/2, Award, 21 June 2012, para. 209; OAO Tatneft v. Ukraine, PCA Case No. 20008-8, Award, 29 July 2014, para 428; Pezold et al. v. Republic of Zimbabwe, ICSID Case No. ARB 10/15, Award, 28 July 2015, para. 597; MNSS B.V. et al. v. Montenegro, ICSID Case No. ARB(AF)/12/8, Award, 4 May 2016, para. 356; Ampal-American Israel Corporation et al. v. Arab Republic of Egypt, ICSID Case No. ARB/12/11, Decision on Liability and Heads of Loss, 21 February 2017, para. 290.
Elettronica Sicula S.p.A. (ELSI) (U.S.A. v. Italian Republic), Judgment, 20 July 1989, para. 108; Eureko B.V. v. Republic of Poland, Partial Award, 19 August 2005, para. 236; Parkerings-Compagniet AS v. Republic of Lithuania, ICSID Case No. ARB/05/8, Award, 11 September 2007, paras. 356 and 357; Pantechniki S.A. Contractors & Engineers (Greece) v. Republic of Albania, ICSID Case No. ARB/07/21, Award, 30 July 2009, para. 82; GEA Group Aktiengesellschaft v. Ukraine, ICSID Case No. ARB/08/16, Award, 31 March 2011, para. 267; Toto Costruzioni Generali S.p.A. v. Republic of Lebanon, ICSID Case No. ARB/07/12, Award, 7 June 2012, para. 230; Vannessa Ventures Ltd v. Bolivarian Republic of Venezuela, ICSID Case No. ARB(AF)/04/6, Award, 16 January 2013, para. 223; Tecnicas Medioambientales Tecmed S.A. v. United Mexican States, Award, ICSID Case No. ARB (AF)/00/2, Award, 29 May 2003, para. 177; Tulip Real Estate Investment and Development Netherlands B.V. v. Republic of Turkey, ICSID Case No. ARB/11/28, Award, 10 March 2014, para. 431; Mamidoil Jetoil Greek Petroleum Products Societe Anonyme S.A. v. Republic of Albania, ICSID Case No. ARB/11/24, Award, 30 March 2015, para. 822; Peter A. Allard v. The Government of Barbados, PCA Case No. 2012-06, Award, 27 June 2016, para. 249; South American Silver Limited (Bermuda) v. Plurinational State of Bolivia, PCA Case No. 2013-15, Award, 30 August 2018, para. 698.
Pantechniki S.A. Contractors & Engineers v. Republic of Albania, ICSID Case No. ARB/07/21, Award, 30 July 2009, para. 71-84; Ampal-American Israel Corp., EGI-Fund (08-10) Investors LLC, EGI-Series Investments LLC, BSS-EMG Investors LLC and David Fischer v. Arab Republic of Egypt, ICSID Case No. ARB/12/11, Decision on Liability and Heads of Loss, 21 February 2017, para. 283-291; Cengiz İnşaat Sanayi ve Ticaret A.S v. Libya, ICC Case No. 21537/ZF/AYZ, Award, 7 November 2018, para. 376-377.
Pantechniki S.A. Contractors & Engineers (Greece) v. Republic of Albania, ICSID Case No. ARB/07/21, Award, 30 July 2009, para. 77; Lauder v. Czech Republic, Award, 3 September 2001, para. 314.
Alexandrov, S.A., The Evolution of the Full Protection and Security Standard, in Kinnear, M. et al. (eds.), Building International Investment Law: The First 50 Years of ICSID, 2015, Chapter 23.
Moss, G.C., Full Protection and Security, in Reinisch, A. (ed.), Standards of Investment Protection, 2008, Chapter 6.
McLachlan, C., Shore, L. and Weininger, M., International Investment Arbitration, Second ed., 2018, paras. 7.240-7.266.
Schreuer, C., Full Protection and Security, Journal of International Dispute Settlement, 2010, pp. 1-17.
Zeitler, H.E., Full Protection and Security, in Schill, S.W. (ed.), International Investment Law and Comparative Public Law, 2010, Chapter 6.