Study On Full Protection And Security Provision In International Investment Treaty

Most investment treaties contain important provisions granting full protectionand security for investments. The wording of these clauses suggests that the host Stateis under an obligation to take active measures to protect the investment from adverseeffects. The core problem of these provisions is whether its application scope goesbeyond physical protection；whether the obligation standard of the host State is strictliability or due diligence; whether it will have a substantial impact on its scope ofapplication when combined with international law. This paper aims to solve the aboveproblems by studying on the treaty practice and arbitral practice of full protection andsecurity provisions and provide policy recommendations for the future treaty practice.From the point of treaty practice, there are two different classifications.According to the application scope，it can be classified into two types: One is theapplication of the full protection and security standard restricted to physical security,this clear restriction wording can avoid application scope dispute, but this narrowprotection scope is not conducive to investors. The other type only stipulates “fullprotection and security”, so there is no specific formulation on the application scope，which leads tribunals and scholars hold different understanding of “full”. Accordingto whether combined with international law, treaty practice can also be divided intotwo categories: one is not combined with international law, the full protection andsecurity provisions are independent treaty standard; the other is combined withinternational law and has to be interpreted under the international minimum standard.From the view of the arbitral practice, one part is the arbitration practiceassociated with the scope of the full protection and security provisions. some of thetribunals consider the full protection and security provisions apply only to physicalsecurity, and they also have different views on whether the damages caused bynational organs and private third parties should be born by the State; the othertribunals consider that the scope of protection and security provisions goes beyondthe physical security, including legal security. Another part is the arbitral practicerelated to the obligation standard, most of the claimants advocate the government should bear strict liability, but the host State consider that the standard only requires aState to exercise due diligence to ensure the safety of the investment. Arbitral practiceis generally agreed that this standard of protection merely requires due diligence anddoes not create absolute liability，the host State is under an obligation to take activemeasures to protect the investment.Lacking certainty in treaty practice, full protection and security provisions leavebroad space for tribunal interpretation which leads to disputes about the applicationscope and obligation standard，different tribunals or even the same tribunal atdifferent time make different or even conflict awards on similar or the same issues，which will affect the consistency and predictability of award. Thus, interpreting underthe Vienna Convention on the law of treaties framework, referring to the ordinarymeaning of the wording，the object and purpose of the treaty，the context of theclauses and supplementary means，we can have a better understanding of the fullprotection and security provisions.Full protection and security provisions are very important to the host State.When signing a new treaty or amending the old one, all countries，including China，should take these provisions seriously and may wish to consider the followingoptions，such as they can avoid including an obligation to provide protection andsecurity in their treaties; if States decide to include a protection and securityobligation, then it is important to define the standard with care, in particular statingclearly its application scope and the obligation standard; States can also choose tolimit the scope of the standard to international law and national or themost-favored-nation treatment. I suggest that China need stating clearly itsapplication scope and obligation standard in detail, and should not combined withinternational law, national or the most-favored-nation treatment.