Fair and Equitable Treatment: Why it matters and what can be done

The document identifies the Fair and Equitable Treatment (FET) standard as a highly controversial element of international investment agreements (IIAs) that frequently leads to investor-state dispute settlement (ISDS) cases. It argues that the lack of a precise definition for FET creates divergent interpretations and a 'regulatory chill' effect. To mitigate these risks, the brief suggests that states should carefully draft FET provisions in new agreements—either by excluding the clause, using alternative terminology, or implementing a limited, well-defined standard—while also taking policy steps to address unqualified FET clauses in existing treaties.

• The Fair and Equitable Treatment (FET) standard is a primary source of conflict in international investment agreements (IIAs) and is the basis for most known investor-state dispute settlement (ISDS) cases.
• FET standards are problematic because they lack a precise meaning, leading to inconsistent interpretations, a broad range of potential breaches, and a 'regulatory chill' that discourages government action.
• Governments can protect their right to regulate and reduce ISDS risks by excluding FET clauses from IIAs, using alternative language that avoids the phrase 'fair and equitable,' or adopting a limited and clearly defined FET standard.
• States should prioritize the standard of treatment clause during the negotiation or renegotiation of IIAs, ensuring that new, carefully drafted provisions are paired with actions to address unqualified FET clauses in existing agreements.

APA

Nikièma,, F. S. H. (2022). Fair and Equitable Treatment: Why it matters and what can be done. International Institute for Sustainable Development. https://www.iisd.org/publications/brief/fair-equitable-treatment

Chicago

Nikièma,, Florencia Sarmiento,Suzy H. Fair and Equitable Treatment: Why it matters and what can be done. International Institute for Sustainable Development, 2022. https://www.iisd.org/publications/brief/fair-equitable-treatment.

Wikipedia

{{cite report |last1=Nikièma, |first1=Florencia Sarmiento,Suzy H. |title=Fair and Equitable Treatment: Why it matters and what can be done |publisher=International Institute for Sustainable Development |date=16 November 2022 |url=https://www.iisd.org/publications/brief/fair-equitable-treatment |access-date=17 August 2026 |via=Climate Insights Directory}}

BibTeX

@techreport{nikima2022fair, author = {Nikièma,, Florencia Sarmiento,Suzy H.}, title = {{Fair and Equitable Treatment: Why it matters and what can be done}}, institution = {International Institute for Sustainable Development}, year = {2022}, month = nov, url = {https://www.iisd.org/publications/brief/fair-equitable-treatment}, urldate = {2026-08-17}, note = {Indexed by Climate Insights Directory} }