Investors’ Reasonable Expectation In Fair And Equitable Treatment Standard

With the development of international investment arbitration, investors’reasonable expectation rule has become one of important elements of fair and equitabletreatment standard. This thesis will elaborate the development and meaning ofinvestors’ reasonable expectation rule by analyzing ICSID cases of various stages.Investors’ reasonable expectation rule is listed under fair and equitable treatmentstandard rather than expropriation clause. Investor’s reasonable expectation,transparency, consistency and stability are closely connected. Other rules are taken intoconsideration in deciding whether investors’ reasonable expectation has been violated.Apart from the introduction and conclusion, the article is divided into threeChapters. The First Chapter analyzes typical cases concerning investors’ reasonableexpectation rule. According to the developing process of the rule, there are three stages:emergence of investors’ reasonable expectation rule, investors’ reasonable expectationbeing part of fair and equitable treatment standard, wide application of investors’reasonable expectation rule in specific cases. By analyzing cases, summarize thecharacters and development of this rule in different stages.The Second Chapter analyzes three elements of investors’ reasonable expectationrule. Firstly, reasonable expectation is created by contract, promise from host countryor change of legal system of host country. Secondly, the expectation shall bereasonable. With respective to objective aspect, timing and reasonableness of theexpectation will be considered. Reasonableness of the expectation mainly includeslegitimation and predictability of the expectation in combination with actual circumstances, economic situation, and legitimate frame at the time of investment andchanging of policies and rules. As to subjective factors, arbitration would think aboutperformance of fiduciaries and disclosure duties by investors. If the promises andguarantees from the host country were obtained by fraud or nondisclosure by investors,arbitration would decide that the investors should not have had reasonable expectations.Size, frequency and experience of investment are also factors considered indetermining whether the arbitration has reasonable expectation. ICSID weakenssubjective matter of host country. Whether the host country is in bad faith or not nolonger affects arbitration’s decision on violation of investors’ reasonable expectations.In additions, host country can no longer raise necessity as a defense in ICSID casesconcerning business and changing of legitimate frame. Conclusively, the investorshave the burden to prove they suffer loss resulting from dissatisfaction to reasonableexpectation.The Third Chapter focuses on limits on investors’ reasonable expectation rule:balance between public interests of host country and investors’ reasonable expectation,balance between sovereignty and control power of host country and risk of investment,stressing the principle of proportionality.The Fourth Chapter mainly analyzes the enlightenment of the development of thedoctrine of reasonable expectation of investors to China as host country andenlightenment to Chinese investors overseas.