Fair and Equitable Treatment Standard

The fair and equitable treatment (FET) standard protects foreign investors against certain forms of unfair conduct by the host state. It is an investment-treaty obligation whose precise content depends on the treaty wording and its interpretation, rather than a general guarantee that an investment will remain profitable or regulations will never change.

What the standard generally requires

Although formulations differ, FET commonly concerns basic fairness in the state's treatment of protected investments.

• Protection against denial of justice requires that investors are not subjected to seriously deficient judicial treatment; an unfavourable court decision alone does not establish a breach.
• Respect for due process concerns fundamental procedural fairness in state decision-making affecting the investment.
• Protection against arbitrariness and abusive conduct addresses measures lacking a rational justification and conduct such as coercion or harassment.
• Some interpretations protect investors' legitimate expectations arising from sufficiently specific state representations, assessed alongside the circumstances and the state's regulatory powers.

Why treaty wording matters

There is no single, universally applicable formulation of FET. The applicable treaty determines the obligation that an investor must establish has been breached.

• Some treaties link FET to the customary international law minimum standard for the treatment of aliens, rather than creating an unrestricted fairness obligation.
• Other treaties formulate FET as an autonomous treaty standard, while some expressly identify the conduct that constitutes a breach.
• FET is distinct from national treatment and most-favoured-nation treatment: a claim need not depend on showing that a domestic investor or an investor from another country received better treatment.

Regulatory space and India's approach

FET does not generally freeze the legal framework. Changes to taxation, environmental rules or other public-interest regulation must be assessed against the applicable treaty, not treated automatically as violations.

• The central balance is between investor protection and the state's right to regulate; legitimate expectations do not ordinarily guarantee an unchanged regulatory environment.
• India's Model Bilateral Investment Treaty, 2015 avoids an open-ended FET clause and instead identifies treatment violating customary international law through denial of justice, fundamental breach of due process, targeted discrimination on manifestly unjustified grounds, or manifestly abusive treatment.
• The Indian model is a negotiating template; the wording of the treaty actually applicable to a dispute remains decisive.