ICSID Review, Vol. 32, No. 2 (2017), pp. 287–303
doi:10.1093/icsidreview/six002 Published Advance Access April 21, 2017
ARTICLE
The History of Fair and Equitable
Treatment before the Second World War
Andrew C. Blandford1
Abstract—This article traces the history of the concept of fair and equitable treatment
(FET) in international law before the Second World War. Based on extensive historical
research, it concludes that FET developed in two basic stages prior to its codification
in post-war treaties. In the first stage, early arbitration treaties required tribunals to
base their decisions on what were then called ‘the general principles of justice and
equity.’ In the second stage, Elihu Root and his colleagues derived a minimum
standard for the treatment of aliens from these general principles of justice and equity.
The United States thus referred to the minimum standard as ‘just and equitable
treatment’ (or the equivalent ‘fair and equitable treatment’) for many years before the
Second World War—long before ‘the minimum standard’ became the dominant term
used to refer to the international standard for the treatment of aliens. In short, the
original meaning of FET was (what is known today as) the minimum standard.
I. INTRODUCTION
Fair and equitable treatment (FET) provisions appear in most of the bilateral
investment treaties (BITs) in force today, yet surprisingly little has been written
about the origins of FET. Leading commentators often trace the history of FET to
treaty negotiations that followed the Second World War.2
Post-war treaties were
indeed the first to combine the four words ‘fair and equitable treatment’—or their
equivalent, ‘just and equitable treatment’3
—in provisions relating to investment
1
JD, Harvard Law School, Cambridge, Massachusetts (2010); Sidley Austin LLP, Washington, DC (2011–17).
Email: ablandford@post.harvard.edu. The author thanks Stanimir A Alexandrov, Jose´ E Alvarez, Benedict Kingsbury,
James Mendenhall, Judge Stephen M Schwebel, and SI Strong for their helpful comments.
2
See eg Rudolf Dolzer and Christoph Schreuer, Principles of International Investment Law (OUP 2008) 119–20;
Andrew Newcombe and Lluı´s Paradell, Law and Practice of Investment Treaties (Wolters Kluwer 2009) 255–6; Todd
Weiler, The Interpretation of International Investment Law (Martinus Nijhoff 2013) 183; Meg Kinnear, ‘The Continuing
Development of the Fair and Equitable Treatment Standard’ in Andrea Bjorklund, Ian Laird, Sergey Ripinsky (eds),
Investment Treaty Law: Current Issues, vol 3 (British Institute of International and Comparative Law 2009) 207, 210;
Stephen Vasciannie, ‘Fair and Equitable Treatment Standard’ (1999) 70 BYBIL 99, 107–8; Catherine Yannaca-Small,
Fair and Equitable Treatment Standard in International Law (2004) OECD Working Paper on International Investment
No 2004/3, 3–4; Ioana Tudor, The Fair and Equitable Treatment Standard in International Foreign Investment Law (OUP
2008) 15–20; Jeswald Salacuse, The Law of Investment Treaties (OUP 2010) 218; J Christopher Thomas, ‘Reflections
on Article 1105 of NAFTA: History, State Practice and the Influence of Commentators’ (2002) 17 ICSID Rev—FILJ
21, 39–40; Mondev International Ltd v United States, ICSID Case No ARB(AF)99/2, Award (11 October 2002)
para 123.
3
It is well recognized that ‘fair and equitable treatment’ (FET) is equivalent to ‘just and equitable treatment’. See
eg Suez, Sociedad General de Aguas de Barcelona SA and Vivendi Universal SA v Argentine Republic, ICSID Case No
ARB/03/19, Decision on Liability (30 July 2010) para 183. The French and Spanish language versions of today’s
ß The Author 2017. Published by Oxford University Press on behalf of ICSID. All rights reserved.
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protection.4
However, the historical origins of FET can be traced back centuries.
This article focuses on the history of FET before the Second World War in order
to identify the term’s original meaning.
The history of FET is important because it informs an ongoing debate about the
meaning of FET provisions in investment treaties. In today’s investment treaty
arbitrations, respondent States often argue that FET provisions reference the
minimum standard for the treatment of aliens under customary international law,
which has remained essentially the same since the Neer v Mexico Award of 1926.5
Investors, however, tend to argue that FET is not limited to the minimum standard
(which, in any event, has evolved since 1926) and that arbitrators must instead give
effect to the plain meaning of the treaty terms ‘fair’ and ‘equitable’—for example, by
awarding investors compensation for violations of their legitimate expectations.
This article finds historical support for aspects of both sides of the debate.
On the one hand, the historical evidence reveals a clear link between FET and the
minimum standard. Early twentieth-century scholars frequently explained that
‘[t]he international [minimum] standard is compounded of general principles
recognized by the domestic law of practically every civilized country’.6
Today,
these principles are known as ‘the general principles of law recognized by civilized
nations’,7
but, when the minimum standard first emerged, they were often called
‘the general principles of justice and equity’.8
The term ‘just and equitable
treatment’ referred to treatment in accordance with the general principles of
justice and equity—and, thus, treatment in accordance with the minimum
standard.9
As early as the 1920s and 1930s (before ‘the minimum standard’
became a common term of art), the United States petitioned other States to
provide compensation for injuries to US nationals as a matter of ‘just and
equitable treatment’ (which it also called ‘fair and equitable treatment’).
On the other hand, there is little historical evidence that FET and the minimum
standard were limited to customary international law.10
The two most often cited
investment treaties express FET as ‘traitement juste et e´quitable’ and ‘tratamiento justo y equitativo’, respectively. See eg
Agreement between the Republic of France and the Republic of Peru on the Reciprocal Promotion and Protection of
Investments (signed 6 October 1993, entered into force 30 May 1996) art 3.
4
See eg Havana Charter for an International Trade Organization (opened for signature 24 March 1948, did not
enter into force) art 11 (Havana Charter).
5
LFH Neer and Pauline Neer (USA) v Mexico (15 October 1926), reprinted in UNRIAA, vol IV, 60.
6
Edwin M Borchard, ‘The ‘‘Minimum Standard’’ of the Treatment of Aliens’ (1940) 38 Michigan L Rev 445,
458. See also Andreas Roth, The Minimum Standard of International Law Applied to Aliens (Sijthoff 1949) 87, 120;
Alwyn V Freeman, The International Responsibility of States for Denial of Justice (Longmans, Green and Company 1938)
522–3.
7
Statute of the International Court of Justice (opened for signature 26 July 1945, entered into force 24 October
1945) art 38(1)(c) (ICJ Statute).
8
See eg Convention Relative to the Creation of an International Prize Court (opened for signature 18 October
1907, did not enter into force) art 7 (Prize Court Convention); Note from US Secretary of State Henry L Stimson to
US Consul in Geneva (1 February 1933), reprinted in (1933) 2 FRUS 895; Mexico City Bombardment Claims (Great
Britain) v Mexico (1930), reprinted in UNRIAA, vol v, 76, 83 (Dissenting opinion of Sir John Percival); Charles G
Fenwick, ‘The Progress of International Law during the Past Forty Years’ (1951) 79 Recueil des Cours 5, 58; Bin
Cheng, General Principles of Law as Applied by International Courts and Tribunals (2nd edn, CUP 2006) 7; Neptune Case
(30 June 1797) (opinion of Christopher Gore), reprinted in John Bassett Moore, International Adjudications Ancient
and Modern, vol 4 (1931) 372, 421; ‘James Kent’ (1889) 3 Chicago L Times 333, 340.
9
See eg Fenwick (n 8) 44 (stating that ‘[t]he international [minimum] standard’ consisted of what ‘the civilized
world has come to accept as just and equitable’).
10
This article uses the term ‘customary international law’ to refer to a rule established by direct reference to State
practice and opinio juris. However, customary international law often ‘reflects principles analogous to those found in
the major legal systems of the world, and historically may derive from them’. Am L Ins, Restatement (Third) of the
Foreign Relations Law of the United States (1987) s 102, comment l.
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historical sources of the minimum standard are a 1910 speech by former US
Secretary of State Elihu Root11
and the Neer Award of 1926. As this article will show,
both Root and the Neer Award derived the minimum standard from the general
principles recognized by civilized nations—not from customary international law.
Based on the historical evidence, this article concludes that FET developed in
two basic stages before the Second World War. The next section of this article
describes the first stage, in which early arbitration treaties and publicists invoked
‘the general principles of justice and equity’ to establish the limits of sovereign
power. The following section of the article describes the second stage, in which the
United States derived the minimum standard from the general principles of justice
and equity. The United States thus referred to the minimum standard as ‘just and
equitable treatment’ for decades before the Second World War, and it used the
same FET terminology when it proposed post-war treaties relating to the
protection of foreign investments. In short, FET originally denoted what is
known today as the minimum standard, and this standard was based on the
general principles rather than on customary international law.
II. THE GENERAL PRINCIPLES OF JUSTICE AND
EQUITY
Eighteenth-century publicists and treaty drafters consistently invoked the general
principles of justice and equity to establish the limits of sovereign power under
natural law. In this natural law sense, justice and equity were synonymous.12
According to Emer de Vattel, for example, a sovereign ‘may dispense with his own
observance of [the laws] whenever natural justice and equity will permit him’.13
Vattel stated that justice and equity did not permit a sovereign to take property
without compensation or to inflict ‘terrible punishments’ on prisoners.14
Many
other classical authorities similarly described natural law, and, thus, the law of
nations, in terms of justice and equity.15
For this reason, Lord Mansfield
concluded in 1753—in a passage later endorsed by Vattel,16
Montesquieu,17
Carlos Calvo,18
and Root19
—that the law of nations was ‘founded upon Justice
[and] Equity’.20
11
Elihu Root, ‘The Basis for Protection to Citizens Residing Abroad’ (1910) 4 AJIL 517, 528.
12
See eg William Blackstone, Commentaries on the Law of England in Four Books (1753) bk III, 429 (stating that
‘equity is synonymous with justice’).
13
Emer de Vattel, Les Droits des Gens (1758) bk I, s 49.
14
ibid bk I, ss 171, 244.
15
See eg Samuel von Pufendorf, Of the Law of Nature and Nations, edited by Jean Barbeyrac (1729) bk VIII, ch 5, s
7 (stating that, under ‘natural Equity’, the state must provide compensation for expropriation); ibid bk VII, ch 4, s 11
(stating that government must preserve life, liberty, and property through ‘Laws of Publick Justice and Equity’
(quoting John Locke, Letter Concerning Toleration (1689)).
16
See Vattel (n 13) bk II, s 84.
17
See Henry S Maine, International Law (1890) 204 (stating that Lord Mansfield’s report was ‘praised by two great
foreign authorities of the time—Vattel and Montesquieu’).
18
See Carlos Calvo, Le Droit International Theoretique et Practique vol III (5th edn, 1896) s 874.
19
See eg Elihu Root, ‘The Outlook for International Law’ (1915) 9 ASIL Proceedings 1, 3 (referring to
‘Mansfield’s familiar description of international law as ‘‘founded upon justice, equity, convenience, the reason of the
thing, and confirmed by long usage’’’).
20
William Murray and others, Report of the English Law Officers (18 January 1753), reprinted in Ernest Satow, The
Silesian Loan and Frederick the Great (Clarendon 1915) 82. See also James Kent, Commentaries on American Law
(1832) vol I, 17 (stating that Grotius placed international law on its ‘true foundations of equity and justice’).
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A. Early Arbitration Treaties Codified the General Principles of Justice and Equity
Treaties of the classical era often invoked justice and equity when prohibiting the
arbitrary seizure of persons or property.21
For example, the United States and
Great Britain signed the first modern arbitration treaty in 1794 (the Jay Treaty).22
Article VII of the Jay Treaty stated that if US nationals could not obtain
compensation for expropriations by the British ‘in the ordinary course of Justice’
in British courts, then a joint Commission would award them compensation
‘according to . . . Justice[,] Equity and the Laws of Nations’.23
The Commission upheld a so-called ‘fair and equitable claim’ in the Betsey case
of 1796, which was its first opportunity to interpret the Jay Treaty’s justice and
equity provision.24
The US Claimant alleged that the British had taken his ship
and cargo without compensation.25
The British commissioners claimed a lack of
jurisdiction because the Claimant had received a hearing ‘in the ordinary course of
Justice’ in Britain but failed to prove an entitlement to compensation.26
The US
commissioners disagreed with their British colleagues but allowed Lord Chancellor
Loughborough to mediate the jurisdictional dispute.27
Loughborough opined that
the domestic judgment had ‘settled [the title of] the property’, yet, ‘there might
exist a fair and equitable claim upon the King’s treasury, under [Article VII], for
complete compensation for the losses sustained by such condemnation’.28
The
Commission adopted Loughborough’s opinion and awarded the Claimant compensation
for the property taken based on the Treaty’s justice and equity
provision.29
In the Neptune case of 1797, another US Claimant received compensation for
the expropriation of a ship by the British. According to a majority of the
Commission, ‘full and complete compensation’ was the standard of compensation
for expropriation that was ‘conformable to justice, equity, and the law of
nations’.30
In other words, this was the standard required by ‘[t]he law of nations
as derived from the general principles of justice and equity’.31
For centuries thereafter, the general principles of justice and equity were a
fixture of arbitration treaties. As former US State Department attorney William
Dennis wrote in 1912, ‘[f]rom Jay’s Treaty of 1794, . . . the words ‘‘justice and
equity,’’ . . . have been repeatedly used in arbitration treaties . . . as defining the
principles which should guide arbitral courts’.32
Justice and equity were ‘as old as
international arbitration’.33
In Dennis’ view, the drafters of arbitration treaties had
done well in selecting the term ‘justice and equity’, which was ‘already defined as
21
See eg Treaty of Peace between England and Sweden (signed 11 April 1654) art V (stating that—except when
‘agreeable to justice and equity’—‘all men . . . their ships, and all merchandize and goods . . . of either of the
[contracting parties] . . . shall not be put or detained under arrest’).
22
Hersch Lauterpacht, ‘The Grotian Tradition in International Law’ (1946) 23 BYBIL 1, 15.
23
Treaty of Amity, Commerce and Navigation between Great Britain and the United States (signed 19 November
1794, entered into force 28 October 1795) art VII.
24
Betsey Case (1796), reprinted in (1796) 1 Moore Intl Arb 326; see also (1796) 3 Moore Intl Arb 3160.
25
See Betsey Case (1796), reprinted in (1796) 3 Moore Intl Arb 3161.
26
Betsey Case (1796), reprinted in (1796) 1 Moore Intl Arb 324–5.
27
See ibid 324–8. Loughborough had advised the British during the negotiation of the treaty. ibid 328, n 1.
28
ibid 326 (emphasis added).
29
See ibid 328; Betsey Case (1796), reprinted in (1796) 3 Moore Intl Arb 3208.
30
Neptune Case (n 8) 421. See also ibid 372.
31
ibid 421 (emphasis added).
32
William Dennis, ‘The Arbitration Treaties and the Senate Amendments’ (1912) 6 AJIL 614, 617.
33
ibid 616–7.
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to essentials . . . and yet capable of further definition as occasion arises to meet the
needs of an expanding future’.34
In 1903, for example, a number of very similar bilateral treaties established
commissions to decide claims against Venezuela according to ‘justice’ and ‘absolute
equity’.35
Arbitrators understood the ‘justice’ and ‘equity’ language in Venezuela’s
treaties to ‘require . . . [them] to apply equitably to the various cases submitted
the well-established principles of justice’.36
The arbitrators applied such wellestablished
principles to require Venezuela to provide compensation for expropriation
and other arbitrary acts.37
In the Turnbull case, for instance, the US-Venezuela
Commission found that Venezuela had annulled a concession contract by executive
order: ‘[W]hich annulment, according to the general principles of equity, accepted
by the laws of almost all the civilized nations, could not be executed by one of the
parties, but had to be pronounced by the proper judge.’38
B. The General Principles of Justice and Equity Became Known as ‘the General
Principles of Law Recognized by Civilized Nations’ in the Early Twentieth Century
At the beginning of the twentieth century, it was debatable whether the general
principles of justice and equity were binding in the absence of a treaty containing a
‘justice and equity’ provision. Calvo argued in 1896 that diplomatic protection was
34
ibid 620. According to Dennis, ‘very rarely . . . has any serious difficulty been found in the meaning of the words
‘‘justice and equity.’’’ ibid 617–18. Whenever ‘the suggestion was made that the words ‘‘justice and equity’’ were very
broad and that they gave the court unrestricted liberty of decision,’ prior tribunals had ‘negatived this suggestion.’
ibid. See eg Mather and Glover v Mexico (19 July 1871) quoted in Robert R Wilson, The International Standard in
Treaties of the United States (Harvard University Press 1953) (Francis Lieber holding that the US-Mexico Claims
Commission was bound by ‘the principles of justice and equity, progressively acknowledged by the jurisprudence of
our whole race’).
35
See eg Protocol of Agreement between United States and Venezuela (signed 17 February 1903, entered into
force 17 February 1903) art 1. Remarkably, Venezuela’s representative who negotiated and signed Venezuela’s
arbitration treaties in 1903 was Herbert Bowen, the US minister to Venezuela. See eg ‘Latest Protocol Signed: United
States and Venezuela Agree as to Unsettled Claims’ New York Times (18 February 1903). The United States thus had
unique insight into the Venezuelan treaties’ travaux pre´paratoires. According to the United States, the phrase ‘absolute
equity’ was intended to leave no doubt that ‘equity’ referred to ‘the broad principles of justice’. Orinoco Steamship Co
(USA) v Venezuela, Plaidoiries des Etats-Unis d’Ame´rique (25 October 1910) 110–1, reprinted in UNRIAA, vol XI,
227. The United States further explained that the treaty drafters ‘gave the word [equity] the general meaning of
Roman law: equity administered by the praetor peregrinus, according to the jus gentium, or common law of the Roman
world’. ibid 119. The United States quoted the following explanation from John Austin:
Taken in its primary sense, equity, or aequity, is synonymous with universality. In which primary sense it was
applied to the jus gentium of the earlier Roman Law, because the jus gentium of the earlier Roman law was
aequum, or common. . . . The jus gentium to which it was applied being distinguished by comparative fairness,
equity came to denote (in a secondary sense) impartiality.
John Austin, Lectures on Jurisprudence, vol 2 (Murray 1863) 274; see also 273 (criticizing the ‘improper extension
of [equity’s] meaning, to some system of law, or to some principle of direct or judicial legislation, which the speaker or
writer, for any reason, praises or commends’); Rudolph Sohm, The Institutes of Roman Law, translated by James Ledlie
(1892) 41, 44 (explaining that the praetor peregrinus was ‘a special judge for foreigners’ who applied jus gentium—ie, ‘a
general law for the civilized world’ based on principles that were ‘common to all nations, because [they] rest[ed] on
the nature of things and the general sense of equity which obtains among all men’).
36
Sambiaggio (Italy) v Venezuela (1903), reprinted in UNRIAA, vol X, 499, 524.
37
See eg Rudloff (United States) v Venezuela (1903), reprinted in UNRIAA, vol IX, 244, 258 (holding Venezuela
liable for ‘[t]he seizure of Rudloff’s books and correspondence[,] the imprisonment of his manager, the interference
with his workmen, and other hostile acts,’ which were ‘wrongful, arbitrary, and unjust’).
38
Turnbull, Manoa Co (Ltd), and Orinoco Co (Ltd) (USA) v Venezuela (1903), reprinted in UNRIAA, vol IX, 261,
303. See also El Triunfo Co (USA) v Republic of Salvador (1902), reprinted in UNRIAA, vol XV, 467, 477–8: ‘[B]y the
rule of natural justice obtaining universally throughout the world wherever a legal system exists, the obligation of
parties to a contract to appeal for judicial relief is reciprocal’; Mexico City Bombardment Claims (n 8) 83 [stating that it
was the tribunal’s ‘duty to apply general principles of justice and equity’—eg, the ‘principle which is almost
universally . . . admitted that, in general, both the existence and the terms of the contract must be established by a
written document signed by the parties . . . [which] is the common practice of civilized mankind’ (emphasis added)].
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only permitted in response to a denial of ‘justice’ (in the narrow sense relating to
the justice system) because natural ‘equity’ was non-binding unless ‘enshrined in
treaty terms’.39
By the 1920s, however, there emerged a consensus that the general
principles were binding wherever they could be shown to be generally recognized
by the so-called ‘civilized’ nations.
Root and his fellow drafters of the Statute of the Permanent Court of
International Justice (PCIJ Statute) agreed in 1920 that the Permanent Court of
International Justice (PCIJ) would apply only those ‘general principles of law [that
were] recognized by civilized nations’.40
The travaux pre´paratoires of the PCIJ
Statute confirm that the drafters equated the ‘general principles of law recognized
by civilized nations’ with the general principles of justice and equity. According to
the president of the drafting committee, Baron E´ douard Descamps, international
law must be interpreted ‘according to objective justice—I should say equity, if I
did not fear that a misunderstanding might occur, owing to the various meanings
put upon the word’.41
President Descamps proposed to ‘insert amongst the
principles to be followed by the judge . . . objective justice, at any rate in so far as it
has twofold confirmation of the concurrent teachings of jurisconsults of authority
and of the public conscience of civilised nations’.42
According to Bin Cheng,
Descamps’ proposal was ‘quite in line’ with other proposals for the PCIJ to apply
the ‘general principles of justice and equity’.43
Root generally agreed with Descamps’ proposal, but he stated that it might be
misinterpreted as allowing the PCIJ to apply ‘what it deems to be the conscience of
civilised peoples’.44
Therefore, Root proposed the text that became Article 38(3)
of the PCIJ Statute, which required the PCIJ to apply ‘the general principles of
law recognised by civilised nations’.45
Root explained that the PCIJ could apply
any ‘principle of law [that] was universally recognised’.46
In contrast, Root stated
that it was ‘inconceivable that a Government would agree to allow itself to be
arraigned before a Court which bases its sentences on its subjective conceptions of
the principles of justice’.47
Thus, Root and his fellow drafters of the PCIJ Statute
39
Calvo (n 18) s 1299 [citing Vattel (n 13) bk II, s 26]. Calvo distinguished between ‘perfect duties and imperfect
duties, the former constituting a strict obligation, absolute and imperative, . . . the latter simple rules of equity[,] of
convenience and of courtesy (comitas gentium).’ ibid s 1261. The first category of binding ‘perfect duties’ included the
host state’s duty to provide ‘justice’, and the second category of non-binding ‘imperfect duties’ included ‘those that
derive from relations that are voluntary . . . or that arise as precepts of . . . equity . . . that natural law teaches’. ibid. See
also Vattel (n 13) Preliminaires, s 17: ‘The perfect obligation is that which gives to the opposite party the right of
compulsion; the imperfect only gives him the right to ask’; ibid bk II, s 10 (defining ‘equity’ itself as ‘acting
conformably to the imperfect right of another,’ and stating that when states ‘offend against equity . . . no injury is done;
injury or injustice being a trespass against the perfect right of another’).
40
Statute of the Permanent Court of International Justice (opened for signature 16 December 1920, entered into
force 20 August 1921) art 38(3). See also ICJ Statute (n 7) art 38(1)(c).
41
Proce`s-verbaux of the Proceedings of the Committee (Van Langenhuysen Brothers 1920) 324 (Proce`s-verbaux).
42
ibid 324–5. Descamps’ proposed text would have required the Permanent Court of International Justice (PCIJ)
to apply (in addition to treaty and customary international law) ‘the rules of international law as recognized by the
legal conscience of civilised nations.’ ibid 306. As Vattel had written, nations were ‘in conscience bound to pay regard
to equity’. Vattel (n 13) bk II, s 159.
43
Cheng (n 8) 7.
44
Proce`s-verbaux (n 41) 294 (emphasis added). See also Cheng (n 8) 7–15 (explaining that Root’s clarified text was
consistent with Descamps’ original proposal).
45
Proce`s-verbaux (n 41) 344.
46
ibid 309.
47
ibid. Root noted that ‘[i]t had been impossible to establish [an International Prize] Court’ a decade earlier, due
to the uncertain ‘scope of the principles of justice and equity’. ibid. See Prize Court Convention (n 8) art 7 (stating
that the Prize Court would apply international law, but, where ‘no generally recognized rule exists, the court shall give
judgment in accordance with the general principles of justice and equity’); TE Holland, ‘The Hague Conference of
1907’ (1908) 24 L Q Rev 76, 79 (stating that the Convention ‘[c]ontains within itself the seeds of [its] mortality,’
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distinguished between (i) universally recognized principles of justice/equity, which
were binding as law, and (ii) subjective conceptions of justice/equity, which were
non-binding (and which would become associated with ex aequo et bono).48
Shortly thereafter, during negotiations on a proposed US-Japan arbitration
treaty in the 1920s, the United States explained that the treaty term ‘equity’ was
used ‘to describe one branch of jurisprudence recognized by civilized nations as
part of the general principles of objective law’.49
According to the United States,
‘the term ‘‘equity’’ is not to be understood as synonymous with the term ‘‘ex aequo
et bono’’ . . . , [which is] a subjective and variable standard depending upon the
individual conscience of the judge’.50
The decisions of the PCIJ and other tribunals confirmed that the principles of
justice and equity were binding, provided that they were generally recognized by
‘civilized’ nations. For example, Judge Dionisio Anzilotti once advocated a principle
that he called ‘so just, so equitable, so universally recognized, that it must be
applied,’ because it was ‘one of these ‘‘general principles of law recognized by
civilized nations’’ which the Court applies in virtue of Article 38 of its Statute’.51
In 1922, the seminal Norwegian Shipowners v United States Award stated that
expropriation without just compensation was prohibited by ‘the principles of
justice which are common to all civilised nations’—which it also called the ‘general
principles of justice’.52
The US-appointed arbitrator in Norwegian Shipowners,
Chandler Anderson, later explained in a 1927 article:
Extracts from [multiple States’] fundamental laws are collected in an annex hereto, and
in every instance the taking of private property . . . is prohibited unless for public uses and
except upon the payment of adequate compensation. . . . A law so generally accepted as one
of the basic principles in the constitutional organization of civilized states expresses the standard
of right and justice. . . . [T]he same principle has controlled the action of all nations
because it authorized the Prize Court to apply general principles of justice and equity even where ‘no generally
recognized rule exists’). Justice and equity traditionally signified ‘the principles of Roman praetorian law
supplemented by the generally accepted doctrines of the publicists from Grotius to Vattel,’ but under the
Convention’s poorly drafted Article 7, ‘nobody knows in what sense [justice and equity] would be understood or
applied’. ibid. The British convened a conference in 1908–9 in a belated attempt to clarify the generally recognized
principles of prize law. The resulting Declaration of London listed rules that ‘correspond in substance with the
generally recognized principles of international law’. Declaration Concerning the Laws of Maritime War (26 February
1909) Preliminary Provision, reprinted in The Declaration of London (OUP 1919) 112, 114 (Declaration of London). As
the British explained, the rules set out in the Declaration of London represented ‘justice and equity’ and, thus, were in
‘conformity with the true law of nations[,] of which . . . it is an essential feature that it should flow from the recognition
of right and of fair dealing common to all civilized peoples’. Eyre Crowe and others, Report of the British Delegates (1
March 1909), reprinted in Declaration of London, ibid 235, 254–5.
48
See eg Bert Hunt, American and Panamanian General Claims Arbitration (US Government Printing Office 1934)
83 (stating that decisions ex aequo et bono are based on ‘the uncontrolled conscience’ of arbitrators, whereas decisions
according to justice and equity must be ‘in strict accordance with the recognized ‘‘principles’’ of justice and equity’).
49
Memorandum of the US Department of State to the Japanese Embassy (undated), reprinted in (1928) 3 FRUS 146.
50
ibid.
51
Diversion of Water from Meuse (Netherlands v Belgium) [1937] PCIJ Rep Series A/B, No 70, 50 (Dissenting
opinion of Judge Anzilotti).
52
Norwegian Shipowners’ Claims (Norway v USA) (13 October 1922), reprinted in UNRIAA, vol I, 307, 331
(emphasis added). See also Counter Case of the Kingdom of Norway against the United States (22 May 1922) 97 (basing
Norway’s claim on ‘law and equity universally accepted by civilized nations’); Case Concerning Certain German Interests
in Polish Silesia (Merits) [1926] PCIJ Rep Series A, No 7, 21–2 (holding that expropriation without compensation was
contrary to ‘the treatment recognized by the generally accepted principles of international law’); Affaire Goldenberg
(Germany v Romania) (1928), reprinted in UNRIAA, vol II, 901, 909 (holding that ‘the general principles accepted as
international law’ required that expropriations be ‘equitably paid’).
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maintaining at least the minimum standard of justice demanded by the family of
nations. . . . 53
Many other scholars of this era also connected the ‘minimum standard of justice’
(discussed in the next section) to the general principles recognized by civilized
nations. For example, Alwyn Freeman wrote that ‘all questions as to whether a
given State activity conforms to the [minimum standard] must be resolved with
reference to the general principles of law recognized by domestic legal orders’.54
Edwin Borchard agreed that ‘[t]he international standard is compounded of general
principles recognized by the domestic law of practically every civilized country’.55
III. THE MINIMUM STANDARD WAS DERIVED FROM
THE GENERAL PRINCIPLES OF JUSTICE AND EQUITY
In the second stage of FET’s development, which began around the turn of the
twentieth century (and thus overlapped with the first stage), the United States
took the lead in identifying a minimum standard specifically for the treatment of
aliens and their property. However, the term ‘minimum standard’ was rarely used
until many decades later,56
and the standard was not originally based on
customary international law. Instead, the United States derived what we now call
the minimum standard from the general principles of justice and equity—and the
standard therefore came to be called ‘just and equitable treatment’ in the years
leading up to the Second World War.
A. Elihu Root Based the ‘International Standard of Justice’ on the Same General
Principles That the US Constitution Recognized
The minimum standard is often traced to Root’s speech to the American Society
of International Law (ASIL) in 1910 regarding ‘the common standard of justice
obtaining throughout the civilized world’.57
Root did not use the term ‘minimum
standard,’ nor did he invent the term that he did use: the ‘international standard
of justice’.58
Nonetheless, his speech famously set out the standard’s legal basis.
53
Chandler P Anderson, ‘Basis of the Law against Confiscating Foreign-Owned Property’ (1927) 21 AJIL 525, 525
(emphasis added).
54
Freeman (n 6) 522–3. See also Joost Van Hamel, ‘The ‘‘Van Der Lubbe’’ Case and Diplomatic Protection of
Citizens Abroad’ (1934) 19 Iowa L Rev 237, 237–43 (stating that the Nazis’ retroactive application of capital
punishment to a Dutch national violated ‘international equity and justice,’ because retroactive punishment was almost
universally prohibited by civilized nations, and such prohibition ‘had acquired . . . the nature of an internationally
accepted principle of justice’).
55
Borchard (n 6) 458. See also ibid 449 (stating that, ‘before article 38 of the Statute of the [PCIJ] made the
‘‘general principles of law recognized by civilized states’’ a source of common international law, foreign offices and
arbitral tribunals had relied on such general principles to work out a loose minimum [standard]’); Roth (n 6) 87
(stating that ‘[t]he minimum standard is the expression of the common standard of conduct which civilized States
have observed’); Campbell McLachlan, Laurence Shore and Matthew Weiniger, International Investment Arbitration:
Substantive Principles (OUP 2007) paras 7.12–7.15 (stating that the minimum standard is derived from general
principles common to civilized nations); Bin Cheng, ‘Justice and Equity in International Law’ (1955) 8 CLP 185,
187, 189.
56
See Martins Paparinskis, The International Minimum Standard and Fair and Equitable Treatment (2013) 163
(noting that the term ‘minimum standard was not a common term of art’ during this period).
57
Root (n 11) 526. See Paparinskis (n 56) 39; Dolzer and Schreuer (n 2) 12; Newcombe and Paradell (n 2) 12;
Kinnear (n 2) 209–10. See also Roth (n 6) 88 (noting in 1949 that ‘the doctrine of the minimum standard was
novelty 50 years ago’).
58
Root (n 11) 528. The term ‘international standard of justice’ was apparently first used in 1893, outside the
context of diplomatic protection of aliens but within the context of the general principles of justice and equity. In the
Bering Sea Arbitration of 1893, the United States urged the Tribunal to apply ‘the international standard of justice’—
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Root based the standard not on customary international law but, rather, on ‘the
universally accepted principles of justice’ that were recognized in the laws of ‘all
civilized countries’, including in the US Constitution.59
In his speech, Root agreed with Calvo that a host State was only obligated to
give aliens the benefit of ‘the same laws, the same administration, the same
protection, and the same redress for injury which it gives to its own citizens, and
neither more nor less’, but Root added an important caveat: ‘provided the
protection which the country gives to its own citizens conforms to the established
standard of civilization.’60
Root acknowledged that aliens most often claimed that
‘justice has been denied them in the courts’.61
However, he insisted that the
‘international standard of justice’ applied to both substance and procedure—that
is, to both the ‘law and [its] administration’.62
In other words, Root attempted to
expand Calvo’s narrow denial of justice standard into a broader standard of
substantive (as well as procedural) justice. According to Root, all branches of
government were bound by a baseline standard of justice that was ‘of such general
acceptance by all civilized countries’ as to form a part of international law.63
Root subsequently stated that, to determine whether a rule had become a part
of international law, one must ‘have recourse to a vast mass of conflicting
opinion . . . as to what is just, what is equitable . . . with very defective and partial
evidence of acceptance by the civilized nations of opinions one way or another
upon these questions’.64
Despite the evidentiary challenges, Root stated that
civilized nations were ‘a law-making power’ because ‘by their confirmation of a
rule of justice they make it a law of nations’.65
Edwin Borchard, rather than Root, appears to have been the first to use the
phrase ‘minimum standard’ to describe the international standard for the treatment
of aliens in 1913.66
However, Borchard often preferred to use the term ‘international
standard of justice’.67
Like Root, Borchard explained that Calvo’s narrow
ie, ‘that general standard of justice upon which civilized nations are agreed’. Bering Sea Arbitration (1893) 1 Moore
Intl Arb 827. US Supreme Court Justice John Harlan, sitting as an arbitrator, agreed that the Tribunal should look to
‘the principles of justice . . . and equity, as recognized and approved by civilized peoples’ (918, n 1). Around the same
time, European states imposed their own extraterritorial consular jurisdiction (rather than a minimum standard under
international law) based on a similar ‘international test of civilization’. See eg John Westlake, Chapters on the Principles
of International Law (CUP 1894) 141–2 (basing a racist ‘International Test of Civilization’ on the protections to which
all ‘people of European race’ were accustomed, and stating that ‘wherever the native inhabitants can furnish no [such]
government . . . the first necessity is that a government should be furnished’ by the ‘inflow of the white race’); Gerrit W
Gong, The Standard of ‘Civilization’ in International Society (OUP 1984) 15: ‘Because international society of
European countries automatically protected the life, liberty, and property of foreigners, defenders of European
extraterritoriality . . . contended that such mere basic rights were protection which every civilized state automatically
affords’; also stating that the ‘minimum standards’ of civilization ‘corresponded with what ‘‘civilized states’’ regarded
as general principles of law’ (26).
59
Root (n 11) 521, 528.
60
ibid 521 (emphasis added).
61
ibid 526. See also Borchard (n 6) 458.
62
Root (n 11) 527; see also 522–3.
63
ibid 521. See also McLachlan, Shore and Weiniger (n 55) para 7.12 (noting that Root derived the minimum
standard from general principles accepted by civilized nations); paras 7.176–7.178 (stating that FET provisions are
‘expressive of ‘‘general principles of law common to civilized nations’’, within the meaning of Article 38(1)(c) of the
Statute of the [ICJ]’ and, thus, FET ‘is the functional equivalent of the minimum standard of treatment at
international law’).
64
Elihu Root, ‘The Function of Private Codification in International Law’ (1911) 5 ASIL Proc 19, 20 (emphasis
added).
65
ibid 21.
66
Edwin M Borchard, ‘Basic Elements of Diplomatic Protection of Citizens Abroad’ (1913) 7 AJIL 497, 516.
67
ibid 517.
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denial of justice standard had become ‘conditioned upon the premise that the local
civil and criminal law and its administration do not fall below the standard of
civilized justice’.68
Borchard did not dispute Calvo’s argument that ‘a denial of
justice is the fundamental basis of an international claim’.69
In extreme cases,
however, Borchard stated that mere equality before the local courts did not suffice
as ‘justice’ in the absence of a ‘measure of fair treatment conforming to the
international standard of justice’.70
Borchard likened the international standard of
justice to the ‘due process’ standard under the US Constitution71
because the
international standard of justice ‘also with the passage of time added substantive
content to its procedural controls’.72
Like Borchard, Root noted a connection between the international standard and
the constitutional standard of the United States. Root explained that ‘the standard
of justice among nations depends upon the standard established in each individual
nation’.73
He cited the US Constitution as a model of ‘the great principles of
justice’—for example, ‘that private property shall not be taken for public use
without just compensation [and] that a person accused of crime shall be entitled to
be informed of the charge against him and given an opportunity to defend
himself’.74
Root also noted that, ‘in all the States of our American Union[,] there
is a substantial similarity in a series of constitutional provisions . . . expressing
general principles of justice’.75
Many other scholars also recognized the connection
between the international and US standards.76
Indeed, there were striking similarities in the protections provided by the
international and US standards of the early twentieth century. The US standard of
substantive due process—in effect, a federal ‘minimum’ standard77
—was also based
68
Edwin M Borchard, The Diplomatic Protection of Citizens Abroad (Banks Law Publishing 1916) 179 [citing Calvo
(n 18) s 1279].
69
ibid 330.
70
ibid 27–8; compare 179: ‘Assuming that the international standard in a given case has not been transgressed by
the municipal law of the state—always a delicate and dangerous allegation—the duty of the alien’s home state is
confined to securing for him the benefit of the local law’ (emphasis added), with Edwin M Borchard, ‘Protection
Diplomatique des Nationaux a l’Estranger’ in Annuaire du Institut de Droit International (1931) 256, 260 (stating that
‘where local protection is ineffective to the point of violating the principles of justice of the civilized world—a very difficult
assertion to sustain—the country of origin can intervene in favor of the victim’ (emphasis added)).
71
See US Constitution, Amendment XIV, s 1: ‘No state shall . . . deprive any person of life, liberty, or property,
without due process of law’.
72
Borchard (n 6) 456–8.
73
Elihu Root, Speeches Incident to the Visit of Secretary Root to South America (US Government Printing Office 1906)
245.
74
ibid 244.
75
Root (n 64) 22.
76
See eg Fred K Nielsen, International Law Applied to Reclamations: Mainly in Cases between the United States and
Mexico (Byrne 1933) 38–9 (stating that the US Supreme Court ‘has given application to provisions of the guarantees
found in . . . the Federal Constitution with respect to ‘‘due process of law’’ in matters pertaining to life, liberty and
property’ and that ‘international tribunals may give effect to the broad principles underlying these guarantees in
dealing with problems of international law pertaining to confiscation of property rights’); Frederick S Dunn,
‘International Law and Private Property Rights’ (1928) 28 Columbia L Rev 166, 175–6 (stating that the ‘minimum
standard of justice is nothing more nor less than the ideas which are conceived to be essential to a continuation of the
existing social and economic order of European capitalistic civilization’—ie, ‘the security of the person from injury or
restraint, and the preservation of private property rights’, which ‘were declared sacred in every bill of rights and in
nearly every constitution that was adopted in the period following the decline of absolutism’); Georg
Schwarzenberger, International Law as Applied by International Courts and Tribunals (Stevens 1957) 201 (stating that
the international standard of justice ‘approximates to the minimum requirements of the rule of law in the AngloAmerican
sense of the term’); Borchard (n 66) 506–8 (stating that the minimum standard protects ‘rights . . . which are
universally accorded by the national law of all civilized states’—which were ‘given positive constitutional expression in
France and the United States in 1789, and since then have in some form been incorporated in most modern
constitutions’).
77
See Quincy Wright, General Discussion (1928) 22 ASIL Proc 109, 125 (stating that the US Constitution’s
provision on ‘‘‘due process of law’’ . . . may be said to have set up a Federal standard of justice’).
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on natural equity, and the Supreme Court of the United States found violations of
the standard when any State in the Union took property without just compensation
or committed other arbitrary acts. In a seminal due process decision of 1897,
Justice John Harlan wrote that the prohibition of expropriation without just
compensation was ‘founded in natural equity, and is laid down as a principle of
universal law’.78
Justice Harlan relied on Chancellor James Kent’s earlier holding
that, ‘upon just and equitable grounds’, ‘fair compensation must, in all cases, be
previously made to the individuals affected [by a taking]’, which was a requirement
‘adopted by all . . . civilized governments, from a deep and universal sense of its
justice’ and which Hugo Grotius, Samuel von Pufendorf, and others ‘all
lay . . . down as a clear principle of natural equity’.79
In another influential opinion,
Justice Harlan wrote in 1908 that the mistreatment of a prisoner violates the US
standard when it ‘shocks or ought to shock the sense of right and justice’.80
The US understanding of the minimum standard (as based on general principles
of justice and equity) is critical because it was based on this understanding that the
United States developed ‘just and equitable treatment’ as a term of art and
proposed to include it in post-war treaty provisions on investment protection.
However, ‘just and equitable treatment’ emerged as a common term only after the
initial US terminology for the minimum standard—that is, ‘broad’ denial of
justice—fell into disfavor.
B. The United States Referred to the Minimum Standard in Terms of ‘Broad’
Denial of Justice until That Terminology Fell into Disfavor
Initially, the dominant US term for the international minimum standard was the
‘standard of justice,’ which was also known as the ‘broad’ view of the denial of
justice standard. US diplomats consistently advocated broadening Calvo’s narrow
denial of justice standard beyond the host State’s justice system in order to cover
arbitrary acts committed by the executive and legislative branches. However, by
the 1930s, the ‘broad’ denial of justice terminology was falling into disfavor, and a
search began for a less confusing name for the same minimum standard.
The renowned scholar John Bassett Moore’s advocacy of a broad denial of
justice standard was nearly as influential as Root’s.81
A few months after Root
delivered his famous speech on the standard of justice in 1910, Moore sailed to
78
Chicago, Burlington and Quincy RR Co v City of Chicago, 166 US 226, 236 (1897).
79
Gardner v Newburgh, 2 Johns Ch 162 (NY 1816). See also Chicago, Burlington, 166 US at 237–8 [citing Gardner,
2 Johns Ch 162]. In the Bering Sea Arbitration, Justice Harlan also cited Kent when stating that international law was
founded on ‘general principles of right and justice’. Bering Sea Tribunal of Arbitration: Opinions of Mr Justice Harlan
(US Government Printing Office 1893) 137 (quoting James Kent, Commentaries on American Law, vol 1 (O Halsted
1826) 3). See also ‘James Kent’ (1889) 3 Chicago L Times 333, 340 (stating that Kent considered all law to be
‘founded on general principles of justice and equity’).
80
Twining v New Jersey, 211 US 78, 123 (1908) (Harlan J, dissenting). Today, the due process clause of the US
Constitution prohibits State conduct that ‘shocks the conscience or fails to respect certain decencies of civilized
conduct’. ‘International Decisions: United States v Verdugo-Urquidez’ (1990) 84 AJIL 747, 751. The US standard is
clearly related to the international standard. See Case Concerning Elettronica Sicula SpA (ELSI) (USA v Italy) [1989]
ICJ Rep 15, para 128 (stating that arbitrariness under international law ‘is a wilful disregard of due process of law, an
act which shocks, or at least surprises, a sense of juridical propriety’).
81
Eg, Nielsen cited Moore for the proposition that ‘a denial of justice . . . may properly be regarded as the general
ground of diplomatic intervention’, pursuant to which, ‘on the basis of convincing evidence of a pronounced degree of
improper governmental administration on the part of the legislative, executive or judicial branch of the government,
one nation may properly call another to account’. Intl Fisheries Co (USA) v Mexico (1931), reprinted in UNRIAA, vol
IV, 691, 712 [citing John Bassett Moore, ‘The Relation of International Law to National Law in the American
Republics’ (1915) 9 ASIL Proc 11, 18].
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Argentina to represent the United States at the fourth International Conference of
American States.82
Moore’s trip was a success.83
The conference’s Committee on
Pecuniary Claims unanimously adopted the broad US view of the denial of justice
standard. The Committee concluded that ‘the expression ‘‘denial of justice’’
should be given a most liberal construction, causing it to embrace all cases where a
state fails to furnish the guarantees’ required by international law.84
In other
words, a denial of justice ‘does not come solely from the judicial acts of a state’
but ‘may result also from the acts or omissions of other public authorities,
legislative and administrative’.85
In the 1920s, Fred Nielsen advocated the ‘broad’ view of denial of justice while
representing the United States before two important international commissions.86
First, as US agent before the British-American Claims Commission, Nielsen
asserted that a denial of justice occurred whenever ‘foreigners clearly suffer with
respect to their persons or property . . . an obvious outrage, a clear wrong,
concerning the nature of which reasonable men could not differ’.87
The
Commission adopted the US view in the Robert E Brown Award of 1923.88
Second, Nielsen became the US commissioner on the US-Mexican Claims
Commission in July 1926.89
Nielsen rendered his first opinion in Neer v Mexico.90
The United States claimed a denial of justice based on Mexico’s failure to
prosecute the murderers of Mrs Neer’s husband.91
The Commission rejected the
US claim.92
According to the Neer Award, the applicable standard was whether
the treatment of the alien ‘amount[ed] to an outrage, to bad faith, to wilful neglect
of duty, or to an insufficiency of governmental action so far short of international
standards that every reasonable and impartial man would readily recognize its
82
See Report of the Delegates of the United States to the Fourth International Conference of American States Held at
Buenos Aires (US Government Printing Office 1911) 23 (Report of the US Delegates).
83
See John Bassett Moore, Memoirs, edited by Edwin M Borchard (unpublished and undated manuscript) 410, in
the Papers of John Bassett Moore, Library of Congress, box 217 (describing the successful renewal of the 1902 InterAmerican
Treaty for the Arbitration of Pecuniary Claims).
84
Report of the Committee on Pecuniary Claims (undated), reprinted in Report of the US Delegates (n 82) 280.
85
ibid. The report continues:
When a state legislates in disregard of rights, or when, although they are recognized in its legislation, the
administrative or judicial authorities fail to make them effective, in either of these cases the international
responsibility of the state arises. In all those cases, inasmuch as it is understood that the laws and the
authorities do not assure to the foreigner the necessary protection, there arises . . . a denial of justice.
ibid 280–2. See also Moore (n 81) 18.
86
Nielsen served as the US State Department solicitor until 1923. His successor as State Department solicitor,
Charles Hyde, also advocated the ‘broad’ view of denial of justice. See Charles C Hyde, International Law Chiefly as
Interpreted and Applied by the United States, vol 1 (Little, Brown, and Co 1922) 491: ‘A denial of justice, in a broad
sense, occurs whenever a state, through any department or agency, fails to observe with respect to an alien, any duty
imposed by international law.’
87
Cayuga Indians Case, US Argument (1926), reprinted in Fred K Nielsen, American and British Claims Arbitration
(US Government Printing Office 1926) 219.
88
The United States claimed a ‘denial of justice resulting from the acts, administrative, legislative, and judicial, by
which Brown was deprived of his [property] rights’ in South Africa. Robert E Brown (USA) v Great Britain, US
Memorial (1923), reprinted in Nielsen (n 87) 165. The Commission agreed that, in its words, Brown was
expropriated by ‘legislation which, on its face, does violence to fundamental principles of justice recognized in every
enlightened community’. Robert E Brown (USA) v Great Britain, Award (23 November 1923), reprinted in UNRIAA,
vol IV, 120, 129. For unrelated reasons, the Commission held that Great Britain was not responsible for South
Africa’s (broad) denial of justice (131).
89
See US-Mexico General Claims Commission Reports (1926), reprinted in UNRIAA, vol IV, 1, 7.
90
See ibid 1–66.
91
Neer (n 5) 60, 62.
92
ibid paras 5–6.
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insufficiency’.93
As Freeman noted, ‘[t]he doctrine thus phrased was substantially
that for which Commissioner Nielsen has regularly stood’.94
Today, the Neer standard is often cited as a classic formulation of the minimum
standard under customary international law.95
However, the Neer Commission did
not purport to articulate customary international law. It derived the standard from
the general principles of justice and equity. The treaty under which the
Commission sat required a ‘decision in accordance with the principles of
international law, justice, and equity’.96
As Nielsen explained in other cases
decided under the same treaty, the Commission was bound to apply the ‘general,
applicable principles’,97
which it ascertained by ‘compar[ing] the law of [the host]
nation with similar laws of other nations’ to determine ‘whether [the measure]
outrages ordinary standards of civilization’.98
The US-Mexican Claims Commission typically used the terms ‘international
standard’ or ‘denial of justice’ instead of ‘the minimum standard’ (which was not
yet a term of art). The Neer Award explained:
It is immaterial whether the expression ‘denial of justice’ be taken in that broad sense in
which it applies to acts of executive and legislative authorities as well as to acts of the
courts, or whether it be used in a narrow sense which confines it to acts of judicial
authorities only; for in the latter case a reasoning, identical to that which[,] under the name
of ‘denial of justice’[,] applies to acts of the judiciary, will apply—be it under a different name—
to unwarranted acts of executive and legislative authorities.99
Not long after Neer, ‘a different name’ was indeed used to apply the same
international standard to the acts of executive and legislative authorities. That
different name was ‘just and equitable’ (or ‘fair and equitable’) treatment.100
‘Broad’ denial of justice terminology fell out of favor in the 1930s. Gerald
Fitzmaurice proposed in 1932 ‘to reject the idea that denial of justice and state
responsibility are co-extensive’.101
Charles de Visscher explained in 1935 that,
with the emergence of more specific grounds of State responsibility for the
mistreatment of aliens, ‘[l]ittle by little . . . the authors have come to acknowledge
93
ibid para 4. Nielsen’s separate opinion in Neer articulated a virtually identical standard as in the Commission’s
unanimous award (65). Nielsen wrote separately to clarify his view that the specific term ‘denial of justice’ was
sufficiently broad to apply to all branches of government (64–5).
94
Freeman (n 6) 559–60.
95
See eg Thomas (n 2) 29–38; Glamis Gold, Ltd v United States, Award (8 June 2009) paras 612–27; Paparinskis (n
56) 48–9.
96
General Claims Convention between the United States and Mexico (signed 8 September 1923, entered into
force 1 March 1924) art I.
97
George W Johnson (USA) v Mexico (15 April 1927), reprinted in UNRIAA, vol IV, 164, 170.
98
Garcia and Garza (Mexico) v United States (3 December 1926), reprinted in UNRIAA, vol IV, 119, 124, 127,
129 (rejecting Mexico’s claim that the US failure to punish a military officer who killed an unarmed civilian violated
‘the principles of Universal Justice accepted by all Nations’). See also Faulkner (USA) v Mexico (2 November 1926),
reprinted in UNRIAA, vol IV, 67, 72 (stating that ‘an alien shall be accorded certain rights such as are
guaranteed . . . under the laws of civilized countries generally both to aliens and nationals’); Roberts (USA) v Mexico (2
November 1926), reprinted in UNRIAA, vol IV, 77, 80 (stating that the ‘test is, broadly speaking, whether aliens are
treated in accordance with ordinary standards of civilization’).
99
Neer (n 5) para 4 (emphasis added).
100
Broad denial of justice, the international standard of justice, and FET were used as synonyms. As Freeman
stated in 1938, the term ‘international standard’ was ‘nothing more than a different way of expressing the traditional
broad view’ of denial of justice: ‘The kernel of it consists in the idea that there is a certain minimum of fair treatment
for foreigners, which is demanded by international law’. Freeman (n 6) 104.
101
Gerald Fitzmaurice, ‘The Meaning of the Term ‘‘Denial of Justice’’’ (1932) 33 BYBIL 94. Compare JL Brierly,
The Law of Nations (Clarendon 1928) 139 (‘When a state fails to observe this [international] standard it is said to be
guilty of a ‘‘denial of justice’’’), with JL Brierly, The Law of Nations (2nd edn, Clarendon 1936) 179 (stating that ‘[t]he
term ‘‘denial of justice’’ is sometimes loosely used to denote any international delinquency towards an alien,’ which is
‘confusing,’ because ‘[i]ts more proper sense is an injury . . . committed by a court of justice’).
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that international responsibility is not reduced to cases of denial of justice’.102
Freeman stated in 1938 that the broad view of denial of justice was ‘confusing’
because ‘the term ‘‘denial of justice’’ simply becomes coterminous with the notion
of responsibility for damages to aliens’.103
A search began for a new term to refer to (what we call today) the minimum
standard. Freeman echoed calls from other scholars to find a ‘term to designate
the state of facts which exists when the receiving state through its acts or
delinquencies has so injured an alien as to justify the interposition of his
government’.104
Referring to ‘this standard of justice,’ Clyde Eagleton noted that
ASIL had ‘tried to find some phrase to describe it, but ha[d] not succeeded
yet’.105
According to Eagleton, in ASIL’s ‘committee discussions we tried out the
phrase ‘‘The standard required by western civilization,’’ but we decided that that
would not be fair’.106
In the absence of a better term of art for the minimum
standard, the United States maintained its ‘broad’ view of the denial of justice
standard into the 1930s.107
C. The United States Demanded ‘Just and Equitable Treatment’ for Its Nationals
Abroad before the Second World War
The critical shift to FET terminology seems to have occurred in the United States
in the decade or so before the Second World War. US Secretary of State Cordell
Hull and his colleagues abandoned the ‘broad’ denial of justice terminology in the
1930s. Instead, the dominant term for the minimum standard became ‘just and
equitable treatment’ (or its equivalent, ‘fair and equitable treatment’). Like their
predecessors, Hull and his colleagues did not base the minimum standard on
customary international law. They based the standard on the same universal
principles that Root had invoked in his speech in 1910.108
As early as 1928, the United States petitioned for ‘prompt and adequate
compensation’ following Spain’s ‘arbitrary seizures’ of Standard Oil’s invest-
ments.109
The United States wrote that prompt and adequate compensation for
expropriation was required under international law as a matter of ‘fair and equitable
treatment’, which it also referred to as ‘just and equitable treatment’.110
102
Charles de Visscher, Recueil des Cours (Acade´mie de Droit International 1935) 385.
103
Freeman (n 6) 104–5.
104
ibid 104, n 3 [quoting Ellery Stowell, International Law: A Restatement of Principles in Conformity with Actual
Practice (Holt 1931) 160–1 (suggesting ‘[u]njust treatment’ as the new term)].
105
Clyde Eagleton, ‘Discussion’ (1928) 22 ASIL Proc 73, 79.
106
ibid.
107
See Freeman (n 6) 103.
108
Hull’s State Department also began to use the term ‘fair and equitable treatment’ in the separate context of
reciprocal trade agreements to denote a minimum standard of non-discrimination between trading partners. The US
Reciprocal Tariff Agreement Act of 1934 had authorized the President to lower US tariffs for ‘such countries as do
not discriminate against American commerce’. US Department of State, Press Release (5 April 1935). With respect to
tariffs, the non-discrimination rule was simple: ‘Whenever [US trading partners] make trade agreements with other
countries, [the United States must] get the benefit of the lower rates.’ ibid. But, with respect to quantitative
restrictions, where quotas were limited and perfect equality among trading partners was not practicable, the United
States ‘require[d] only that foreign countries shall accord our nationals fair and equitable treatment’—ie, ‘a fair share
of the trade’. ibid. This distinct application of the term ‘fair and equitable treatment’ in the trade context was
consistent with traditional principles of natural equity. See eg Vattel (n 13) bk II, s 172: ‘Equal treaties are those in
which the contracting parties promise . . . things that are equitably proportioned, so that the condition of the parties is
equal’—eg, ‘a league in which the quota of each of the allies is regulated in proportion to the interest he takes or may
have’.
109
Note from US Ambassador to Spain Ogden Hammond to the President of the Spanish Council of Ministers (31
May 1928), reprinted in (1928) 3 FRUS 865 (referring also to the US claim for ‘fair, full and prompt compensation’).
110
ibid 866 (emphasis added).
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Secretary of State Henry Stimson used similar terminology in 1933. Stimson
protested a Liberian statute imposing a moratorium on Liberia’s loan payments to
a US company. Stimson wrote that the statute ‘amounts to a unilateral
denunciation of a legitimate contract’.111
According to Stimson, ‘[w]e do not
request the cancellation of these confiscatory steps taken by the Liberian
Government as a favor or as a bargain; we demand it as a juridical right based
on the general principles of equity and justice prevailing among nations’.112
When Mexico nationalized the investments of Standard Oil in 1938, Secretary
Hull stated that the United States sought ‘a fair and equitable solution for the
expropriation problem,’ which would require ‘just and equitable compensation’.113
Hull wrote to the Mexican ambassador that Mexico could not ‘take the property of
American nationals in disregard of the rule of compensation under international law,’
nor could Mexico ‘nullify this universally accepted principle of international law,
based as it is on . . . equity and justice’.114
According to Hull, ‘under every rule of law
and equity, no government is entitled to expropriate private property, for whatever
purpose, without provision for prompt, adequate, and effective payment therefor’.115
In 1940, Hull petitioned General Francisco Franco for ‘just and equitable
treatment in accordance with the principles of international law’ in response to
Spain’s deprivation of US interests in the National Telephone Company.116
The
United States also informed the Spanish Ambassador that it sought ‘a fair and
equitable solution’—that is, ‘that the telephone properties be restored at once’—
consistent with ‘just and equitable treatment in accordance with the principles of
international law’.117
Scholars writing in the United States during this period also connected the
international standard to the principles of justice and equity. In the words of Charles
Fenwick, ‘[t]he international standard of justice’ referred to what ‘the civilized world
has come to accept as just and equitable’.118
According to Nicholas Doman, the
‘minimum international standard of equitable compensation is the prevailing rule of
111
Note from US Secretary of State Henry L Stimson to US Consul in Geneva (1 February 1933), reprinted in (1933)
2 FRUS 894.
112
ibid 895 (emphasis added).
113
‘Hull Warns Mexico: Secretary of State Indicates Relations May Be Strained’ Southern California Daily Trojan (31
March 1938).
114
Note from Secretary of State Cordell Hull to Mexican Ambassador (21 July 1938), reprinted in (1938) 32 AJIL
Supp 181, 182–4. Hull also explained:
Civilized society determined that common justice required that [expropriations] be paid for. One nation after
another decided that it was fair and . . . equitable . . . to accompany a taking of property by payment of just
compensation. In due time the nations of the world accepted this as a sound basic rule of fair play and fair
dealing. Today, it is embodied in the constitutions of most countries of the world, and of every republic of the
American continent; and has been carried forward as an international doctrine in the universally recognized
law of nations.
Note from Secretary of State Cordell Hull to the Mexican Ambassador (22 August 1938), reprinted in (1938) 32
AJIL Supp 191, 191.
115
Note from Secretary of State Cordell Hull to the Mexican Ambassador (22 August 1938), reprinted in (1938) 32
AJIL Supp 191, 193. See also Memorandum of Conversation by US Under Secretary of State Sumner Welles (25 July
1938), reprinted in (1938) 5 FRUS 27, 29 [stating that Colombia agreed with the United States that ‘one country
must give the nationals of another country just and equitable treatment in accordance with the principles of international
law’ that were ‘universally recognized’) (emphasis added)].
116
Note from US Secretary of State Cordell Hull to the US Ambassador to Spain (2 April 1940), reprinted in
(1940) 2 FRUS 865 (emphasis added).
117
Memorandum of Conversation by US Under Secretary of State Sumner Welles (16 April 1940), reprinted in
(1940) 2 FRUS 873 (emphasis added).
118
Fenwick (n 8) 44.
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international law’, and ‘only reference to the standard of international justice can
produce fair and equitable compensation to foreign nationals’.119
IV. CONCLUSION
After developing the term of art for more than a decade before the Second World
War, naturally it was the United States that first proposed FET provisions for
post-war treaties on trade and investment. In 1945 and 1946, the United States
proposed FET provisions for its regional economic treaties120
and for the Havana
Charter (a multilateral treaty that sought to establish an International Trade
Organization).121
The United States also included FET provisions in its bilateral
treaties of friendship, commerce, and navigation (FCN) of the post-war period—
which led to the inclusion of FET provisions in the first BITs.122
As this article has shown, at the time when the United States introduced FET
provisions to post-war treaty negotiations, ‘just and equitable treatment’ was
already a term of art for what we now call the minimum standard. The minimum
standard was originally based on the general principles of justice and equity—that
is, the most fundamental protections guaranteed in the domestic laws of all
civilized nations—rather than on customary international law. It was only later,
when the era of decolonization turned the distinction between ‘civilized’ and
‘uncivilized’ nations into an untenable anachronism,123
that Western powers began
to shift away from ‘the general principles of law recognized by civilized nations’
119
Nicholas R Doman, ‘Postwar Nationalization of Foreign Property in Europe’ (1948) 48 Columbia L Rev 1125,
1135–6. See also Georges Kaeckenbeeck, ‘The Protection of Vested Rights in International Law’ (1936) 17 BYBIL 1,
16 (stating that the ‘international minimum standard for equitable compensation’ was meant to ensure ‘a minimum of
justice and fairness in the treatment of foreigners’—and, thus, prohibited the ‘depriv[ation] of rights and property in a
way which shocks the sense of justice of civilized men’); ibid (stating that ‘[i]ndividual confiscation of property
without indemnity undoubtedly falls short of the international standard of civilized society, because it violates the
sense of equity of the civilized world’).
120
In February 1945, the United States proposed an Economic Charter of the Americas, which included a provision
to ensure ‘just and equitable treatment and encouragement for the enterprises, skills and capital brought from one
country to another’. ‘US Proposals at Mexico City Parley for a Hemisphere Charter’ New York Times (27 February
1945). However, the Latin American States watered down that provision. See Economic Charter of the Americas,
reprinted in Final Act of the Inter-American Conference on Problems of War and Peace (Pan American Union 1945) 92,
95: ‘The American Republics will undertake to . . . giv[e] equal treatment to national and foreign capital, except when
the investment of the latter would be contrary to the fundamental principles of public interest.’
121
The United States circulated in 1946 a ‘Suggested Charter for an International Trade Organization,’ which
contained a provision requiring host states to ensure ‘just and equitable treatment for the enterprises, skills, capital,
arts and technology brought from one country to another’. US Department of State, Suggested Charter for the
International Trade Organization of the United Nations (1946) art 50. The final Havana Charter of 1948 referred to ‘just
and equitable treatment’, but it deferred a precise definition of that term until more detailed ‘bilateral or multilateral
agreements’ could be negotiated under the auspices of the International Trade Organization. Havana Charter (n 4) art
11(2)(a). In response, the International Chamber of Commerce published in 1949 a ‘Code of Fair Treatment for
Foreign Investments’, which was meant to serve as ‘a model that might usefully be followed in negotiating bilateral
and multilateral [investment] treaties’. International Chamber of Commerce, Fair Treatment for Foreign Investments:
International Code (1949) 7; see also ibid art 2: ‘By the terms of this Treaty the High Contracting Parties agree to
apply fair treatment, as hereinafter defined, to investments of any kind made in their territories’ (emphasis added).
122
See eg Herman Abs and Hartley Shawcross, ‘Draft Convention on Investments Abroad’ (1960) 1 J Pub L 115,
119 (noting that ‘[t]he statement of principles contained in Article I [ie, the Abs-Shawcross Draft Convention’s FET
provision] is derived from similar provisions in treaties of friendship and commerce concluded in recent years by the
United States of America’). According to the US State Department, the ‘equitable treatment’ provision of the US
model FCN treaty was ‘a statement of general principle rather than a tight legal rule’ and was ‘not intended to serve
as a third standard in addition to national treatment and most-favored-nation treatment’. US Department of State,
Standard Draft Treaty of Friendship, Commerce and Navigation (1970) 67.
123
Traditionally, according to Bin Cheng, ‘for the purpose of determining the general principles of justice, law[,]
and equity recognised by civilised nations, only such [national] systems as merit the name law [were] to be
considered.’ Cheng (n 55) 186. However, by the 1950s, Cheng stated that it now was to be ‘assumed that members of
the international society have all attained the requisite standard of civilisation, and that they accept the basic concepts
of justice, law[,] and equity which are and have been at the foundation of international law.’ ibid 187.
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(which had traditionally been called ‘the general principles of justice and equity’)
as the basis for the minimum standard.124
In sum, the original meaning of ‘just and equitable treatment’ (and its
equivalent, ‘fair and equitable treatment’) was treatment in accordance with the
general principles of justice and equity—and, thus, treatment in accordance with
what is now known as the minimum standard. This conclusion is significant
because today’s investor–State tribunals should consider FET’s original meaning
when interpreting FET provisions in investment treaties. Tribunals should
interpret FET provisions in accordance with the meaning that FET was
understood to have when the relevant treaty was concluded.125
Based on the
historical evidence discussed in this article, tribunals should generally presume
that investment treaty drafters understood FET as referring to the minimum
standard under international law, unless there is evidence to the contrary.126
In
addition, consistent with FET’s original meaning, tribunals should examine
universally accepted general principles (and not merely customary international
law) in order to establish the content of the minimum standard today.127
124
Discussing the legal basis for the minimum standard in 1960, the drafters of the Restatement (Second) of the
Foreign Relations Law of the United States noted that ‘the standards of ‘‘civilized states’’ . . . ha[d] recently been criticized
as conveying an invidious suggestion that some states are uncivilized.’ American Law Institute, Preliminary Draft 8 of
the Restatement (Second) of the Foreign Relations Law of the United States (1960) s 102, comment e. Therefore, the
Restatement described the minimum standard as ‘the standard of substantive or procedural justice generally
recognized by states which have reasonably developed domestic legal systems.’ ibid. See also American Law Institute,
Restatement (Second) of the Foreign Relations Law of the United States (1965) s 165(2), comment e; Harvard Law
School, Draft Convention on the International Responsibility of States for Injuries to Aliens (1961) arts 4–13 (defining
internationally wrongful conduct by reference to ‘the principles of justice recognized by the principal legal systems of
the world’). Georg Schwarzenberger explained the problem with the ‘embarrassing adjective’ (ie, ‘civilized’) as follows:
[T]he term [‘]civilised nation[’] acquired a meaning which, by and large, was identical with the maintenance of
the rule of law in the Anglo-Saxon meaning of the term in favour of foreign nationals. A State which protected
the life, liberty and property of foreigners in accordance with these minimum standards complied with its
international obligations and was entitled to be regarded as civilised. Sufficient evidence existed to make it
possible to hold that these minimum standards had become rules of international customary law. In any case,
there was little doubt that they could be regarded as general principles of law recognised by civilised States.
Georg Schwarzenberger, ‘The Standard of Civilisation in International Law’ (1955) 8 CLP 212, 215, 227.
125
As stated by Fitzmaurice, ‘[d]ue regard for the historical element in the interpretation of [treaties] is . . . clearly
indicated’. Gerald Fitzmaurice, ‘The Law and Procedure of the International Court of Justice 1951–4’ (1957) 33
BYBIL 203 (stating also that the ‘principle of Contemporaneity’—which requires terms to be interpreted according to
their meaning when the treaty was concluded—is of great ‘importance and significance’). See also International Law
Commission, Draft Articles on the Law of Treaties with Commentaries (1966) art 27, comment 16 (explaining that the
‘correct application of the temporal element would normally be indicated by interpretation of the term in good faith’);
Richard Gardiner, Treaty Interpretation (OUP 2008) 64 (stating that ‘although the ILC found temporal factors too
complex to include in a codification of general principles, the principle of contemporaneity continues to be one to be
taken into account’); Weiler (n 2) 43 (stating that ‘[t]he contemporaneity principle is embedded in VCLT Article 31’).
126
Notably, ‘it is only since 2000, the first significant cases being Metalclad and Maffezini, that investment tribunals
have given content to the meaning of the [FET] standard’. Dolzer and Schreuer (n 2) 119. Most investment treaties
were concluded before 2000—and, thus, before tribunals began to interpret FET provisions as providing an
autonomous standard of protection.
127
See Organisation for Economic Co-operation and Development (OECD), Report 84/14 (27 May 1984) para 36
(stating that—in the view of ‘all the [OECD] member states that have commented’—‘fair and equitable
treatment . . . refer[s] to the general principles of international law even if this is not explicitly stated’); Cheng (n
55) 187 (stating that it now must be ‘assumed that members of the international society have all attained the requisite
standard of civilisation, and that they accept the basic concepts of justice, law[,] and equity which are and have been
at the foundation of international law’).
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