The Dialectic of "Fair and Equitable Treatment" and "Sustainable Development" in International Investment Arbitration Procedure

Document Type : Research Paper

Authors

1 Assistant Prof., Department of International Trade Law, Faculty of Law, Shahid Beheshti University, Tehran, Iran

2 . PhD student in Oil and Gas Law, Department of International Trade Law, Faculty of Law, Shahid Beheshti University, Tehran, Iran

Abstract

Introduction
Today, fair and equitable treatment has become the most frequently referenced concept in investment disputes, as it is a standard that is very closely related to practical issues. Indeed, many international disputes have been based on violations of the fair and equitable treatment standard. The studies on the effects of investment liberalization have intensified with the rapid growth of the international investment regime, with concerns that the investment protection regime may undermine the sovereign right of the host state to regulate in the public interest, including environmental protection and economic growth.
To structure this research, first, the patterns and methods of standard analysis of fair and equitable treatment in the legal and economic relations of actors in the field of international investment are analyzed; then the evolution of the identification and paradigm of the function and conceptualization of sustainable development is evaluated, and through these topics, the commonalities and overlaps between "fair and equitable treatment" and "sustainable development" will be examined and evaluated. Finally, in light of the achievements of the studies conducted, the relative weight of sustainable development in international investment law will be analyzed. To this end, we analyzed the relevant legal foundations with a library approach and a case study tool, and analyzed investment arbitration decisions related to sustainable development concerns and what was in line with the assessment of this issue.
 
Results and discussion
In this study, carefully considering the fact that sustainable development in its environmental and economic dimensions are two sides of the same coin, it was proven that the claims filed by investors against the government are mainly related to the sectors that are directly related to the sustainable development of the host countries. In investment arbitration, fair and equitable treatment includes a commitment to justice in accordance with the principle of fair hearing, the absence of discrimination and unilateral and arbitrary decisions, compliance with good faith, proportionality, consistency and transparency in performance towards foreign investors, as well as consideration of their legitimate expectations. The precise list of sub-clauses of the fair and equitable treatment standard may vary from case to case. However, despite these differences, its components are somewhat consistent and integrated across cases. Therefore, the evolution of foreign investment arbitration law also shows that the fair and equitable treatment standard has become the main tool for foreign investors to bring claims against host countries. Therefore, analyzing how the “fair and equitable treatment standard” and “sustainable development” interact with each other plays a fundamental role in the conceptual foundation of this standard. This research sought to find an answer to the question of how the analytical paradigm of arbitral tribunals regarding the interaction of the fair and equitable treatment standard and sustainable development is formulated and applied, and to what extent sustainable development can be considered as a tool for interpreting fair and equitable treatment in investment arbitration practice. In other words, to what extent this standard is compatible with the ideas of sustainable development.

Conclusions
There is a growing consensus in the current legal order that investor-state disputes can involve broader issues that cover public interest issues. For example, where governments seek to implement environmental policies, they should consider that these policies are in the public interest and should be considered as a justifying factor. For a legal system that examines and assesses issues related to the national and international aspects of foreign investment to be effective and legitimate, it cannot operate in isolation from other areas of international law. Investment tribunals should not operate in isolation from other principles of international law. The breadth and flexibility of the conceptual structure of the fair and equitable treatment standard appear to provide ample opportunity for a comprehensive approach to balancing the interests of investors and host countries.

Keywords

References

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Journal of Legal Studies
Volume 18, Issue 3 - Serial Number 58
October 2026
Pages 105-140

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