INVESTOR STATE DISPUTE SETTLEMENT ON THE FAIR AND EQUITABLE TREATMENT STANDARD AND LESSONS FOR VIETNAM

MINISTRY OF EDUCATION AND TRAINING
FOREIGN TRADE UNIVERSITY
Table of Content

MASTER THESIS

INVESTOR-STATE DISPUTE SETTLEMENT
ON THE FAIR AND EQUITABLE TREATMENT STANDARD
AND LESSONS FOR VIETNAM

Major: International Economics
Specialization: International Trade Policy and Law
Code: 8310106

Full name: Truong Thi Kim Xuyen
Supervisor: Dr. Vo Sy Manh


2

STATEMENT OF AUTHORSHIP........................................................................V
ACKNOWLEDGEMENTS..................................................................................VI
ABBREVIATIONS..............................................................................................VII
LIST OF FIGURES..............................................................................................IX
SUMMARY OF THESIS RESEARCH RESULTS..............................................X
ABSTRACT........................................................................................................... XI
INTRODUCTION...............................................................................................XII
1. BACKGROUND OF THE STUDY................................................................XII
2. LITERATURE REVIEW...........................................................................XIII
3. OBJECTS AND SCOPE OF THE STUDY............................................XVIII
4. OBJECTIVES OF THE STUDY................................................................XIX

5. METHODOLOGY OF THE STUDY..........................................................XX
6. EXPECTED CONTRIBUTION OF THE THESIS....................................XX
7. STRUCTURE OF THE THESIS.................................................................XX
CHAPTER 1 AN OVERVIEW OF THE INVESTOR-STATE DISPUTE
SETTLEMENT AND THE FAIR AND EQUITABLE TREATMENT
STANDARD.............................................................................................................1
1.1

AN OVERVIEW OF INVESTOR-STATE DISPUTE SETTLEMENT....1

1.1.1 DEFINITION OF INVESTOR-STATE DISPUTE SETTLEMENT
1.1.2 THE SPECIFIC FEATURES OF INVESTOR-STATE DISPUTE SETTLEMENT
1.2

1
2

AN OVERVIEW OF FAIR AND EQUITABLE TREATMENT................6

1.2.1 THE LITERAL MEANING OF FAIR AND EQUITABLE TREATMENT
1.2.2 SPECIFIC FEATURES OF FAIR AND EQUITABLE TREATMENT

6
9

SUMMARY............................................................................................................11
CHAPTER 2 REGULATION AND APPLICATION OF THE FAIR AND
EQUITABLE TREATMENT...............................................................................12
2.1 REGULATION OF FAIR AND EQUITABLE TREATMENT IN
INTERNATIONAL INVESTMENT AGREEMENTS.......................................12

2.1.1 NO FAIR AND EQUITABLE TREATMENT STANDARD

14


3

2.1.2 FAIR AND EQUITABLE TREATMENT AS AN UNQUALIFIED STANDARD 14
2.1.2.1 Stand-alone Fair and Equitable Treatment Standard
14
2.1.2.2 Fair and Equitable Treatment combined with other standards
15
2.1.2.3 FET standard with an open-ended list of State obligations
20
2.1.3 FAIR AND EQUITABLE TREATMENT AS A QUALIFIED STANDARD
21
2.1.3.1 Fair and Equitable Treatment with references to Minimum Standard
of Treatment
21
2.1.3.2 Fair and Equitable Treatment with references to international law 22
2.1.3.3 Fair and Equitable Treatment with references to international law 22
2.1.3.4 Fair and Equitable Treatment with “exhaustive list” of State
obligations
23
2.2 APPLICATION OF FAIR AND EQUITABLE TREATMENT BY
ARBITRAL TRIBUNALS....................................................................................25
2.2.1 AN OVERVIEW OF FAIR AND EQUITABLE TREATMENT IN ARBITRAL
TRIBUNALS
25
2.2.2 INTERPRETATION OF FAIR AND EQUITABLE TREATMENT STANDARD BY

ARBITRAL TRIBUNALS
26
2.2.2.1 Interpretation of “No Fair and Equitable Treatment Clause”
26
2.2.2.2 Interpretation of Unqualified Fair and Equitable Treatment
28
2.2.2.3 Interpretation of the Qualified Fair and Equitable Treatment
34
2.3

FAIR AND EQUITABLE TREATMENT CASES OF VIETNAM..........37

2.3.1
2.3.2
2.3.3
2.3.4

MICHAEL LEE MCKENZIE V. THE SOCIALIST REPUBLIC OF VIETNAM
DIALASIE SAS V. THE SOCIALIST REPUBLIC OF VIETNAM
RECOFI V. THE SOCIALIST REPUBLIC OF VIETNAM
TRINH VINH BINH V. THE SOCIALIST REPUBLIC OF VIETNAM

38
40
42
45

SUMMARY............................................................................................................ 47
CHAPTER 3 INVESTOR-STATE DISPUTE SETTLEMENT ON THE FAIR
AND EQUITABLE TREATMENT ON THE PERSPECTIVE OF THE HOST

STATE AND LESSONS FOR VIETNAM GOVERNMENT.............................50
3.1 THE REFORM OF THE FAIR AND EQUITABLE TREATMENT IN
INTERNATIONAL INVESTMENT AGREEMENTS.......................................50
3.1.1 OPTIONS FOR REFORM OF THE FAIR AND EQUITABLE TREATMENT
CLAUSE
51
3.1.1.1 The FET standard with reference to the minimum standard of
treatment under customary international law
51
3.1.1.2 The Fair and Equitable Treatment clause with an open-ended list of
obligations
53


4

3.1.1.3 The Fair and Equitable Treatment clause with an “exhaustive list”
of obligations
54
3.1.1.4 Omitting the FET clause
56
3.1.2 OTHER PROVISIONS LINKING TO FAIR AND EQUITABLE TREATMENT
CLAUSE
57
3.1.2.1 Exception Provision
57
3.1.2.2 Most-Favoured Nation Treatment Provision
59
3.2 LESSONS FOR VIETNAM GOVERNMENT IN RESOLUTION OF
INVESTOR-STATE DISPUTES ON THE FAIR AND EQUITABLE

TREATMENT.......................................................................................................61
3.2.1 THE CIRCUMSTANCES OF VIETNAM IN THE FAIR AND EQUITABLE
TREATMENT CLAIMS
3.2.2 THE INVESTOR’S OBLIGATIONS IN THE FAIR AND EQUITABLE
TREATMENT CLAIMS

62
63

3.3 LESSONS FOR VIETNAM GOVERNMENT IN PREVENTION OF
INVESTOR-STATE DISPUTES ON THE FAIR AND EQUITABLE
TREATMENT.......................................................................................................66
SUMMARY............................................................................................................ 68
CONCLUSION......................................................................................................70
BIBLIOGRAPHY.................................................................................................73
APPENDIX: LIST OF FORMULATIONS OF FET CLAUSES IN
INTERNATIONAL INVESTMENT AGREEMENTS OF VIETNAM.............82
A. LIST OF FORMULATIONS OF FET CLAUSES IN BILATERAL
INVESTMENT TREATIES OF VIETNAM
82
B. LIST OF FORMULATIONS OF FET CLAUSES IN TREATIES WITH
INVESTMENT PROVISIONS OF VIETNAM
86


5

STATEMENT OF AUTHORSHIP

I, Truong Thi Kim Xuyen hereby declare, in fulfilment of the requirements of the

Foreign Trade University that the thesis is my original work under the supervision
of Dr. Vo Sy Manh.


6

ACKNOWLEDGEMENTS
Firstly, I would like to express my gratitude to my supervisor Dr. Vo Sy Manh who
gives me guidance, support and encouragement to complete this thesis.
Secondly, I am also grateful to the Foreign Trade University for providing a
wonderful environment for whole my period time of study.
Finally, a special thanks goes to Dr. Cao Thi Hong Vinh for all her prompt and
enthusiastic responses and support during my course.


7

ABBREVIATIONS

AANZFTA
ACIA
ASEAN

ASEAN-Australia-New Zealand Free Trade Agreement
ASEAN Comprehensive Investment Agreement
Association of Southeast Asian Nations

BIT

Bilateral Investment Treaty

CBDR

Common but Differentiated Responsibility

CIL
COMESA

Customary International Law
Common Market for Eastern and Southern Africa

CPTPP

Comprehensive and Progressive Agreement for
Trans-Pacific Partnership

DPI
ECJ

Department of Planning and Investment
European Court of Justice

ECT

Energy Charter Treaty

FCN

Friendship, Commerce and Navigation

FDI

Foreign Direct Investment

FET

Fair and Equitable Treatment

FPS

Full Protection and Security

FTA

Free Trade Agreement

GATT

General Agreement on Trade and Tariffs

ICJ

International Court of Justice

ICSID

International Center for Settlement of

IIA

Investment Disputes
International Investment Agreement

IMS

International Minimum Standard

IPA
ISDS
LCIA

Investment Protection Agreement
Investor-State Dispute Settlement
London Court of International Arbitratio

MFN

Most-Favoured Nation Treatment

MPI

Ministry of Planning and Investment

MST

Minimum Standard of Treatment


8

NAFTA

North American Free Trade Agreement

NT

National Treatment

OECD

Organization for Economic Cooperation and Development

PCA
SCC

Permanent Court of Arbitration
Stockholm Chamber of Commerce

SFC

South Fork Company

SFT

Swiss Federal Tribunal

SPC

Supreme People’s Court

TIP

Treaty with Investment Provision

UNCITRAL

United Nations Commission on International Trade Law

UNCTAD

United Nations Conference on Trade and Development

VIAC

Vietnam International Arbitration Center

WTO

World Trade Organization


9

LIST OF FIGURES

Known ISDS cases filed by arbitral rules, from

1

Figure 1.1

2

Figure 2.1 qualified and no FET clause, signed between 1959

1987 to 31 July 2017 (Per cent)
Number and share of BITs with unqualified,
and 2016

4

13


10

SUMMARY OF THESIS RESEARCH RESULTS
Being an attractive investment destination with a huge number of international
investment agreements (IIAs) signed with other member states, apart from the
economic benefits achieved, Vietnam has to face more legal risks arising from the
claims of foreign investors on the ground of the IIAs, and one of the most concern is
the breach of FET clause. The study provides the legal risks arising from the
unqualified FET clauses in most IIAs of Vietnam. To have such conclusion, the
research firstly examines the formulations of the FET in IIAs and then make a
comparison between the thresholds of investors’ protection regarding to these
formulations.
The study also examines the investor-state dispute settlement (ISDS) cases on the
FET claims, specifically four cases in which Vietnam government was a respondent
and the provides the elements that Vietnam government should take them into
account when being sued by the foreign investors on the ground of the FET

standard.
The thesis also goes further by analyzing the reform of FET clauses in newgeneration IIAs which is one of the most important goals in World Investment
Forum in 2018. As a result, the study then argues the advantages and disadvantage
of each formulation of FET so that Vietnam government can easily make a
comparison and consideration between these formulations of FET when it comes to
negotiating and signing new IIAs.
Last but not least, the study provides the Vietnamese authorities lessons and
recommendations for better practice in prevention the disputes with foreign
investors regarding to FET claims as well.


11

ABSTRACT
Fair and equitable treatment (FET) as an international investment treatment
standard, has been incorporated in most international investment agreements.
According to UNCTAD’s IIA Mapping database, which includes over 2500 mapped
BITs (UNCTAD 2016), there are only 117 BITs with no FET clauses out of 2538
BITs signed between 1959 and 2016. The standard, however, as interpreted by
investor-state arbitration tribunals, is an ambiguous, imprecise and unclear
obligation that turns it into a “catch-all” provision. FET is therefore frequently
invoked by investors in investor – state arbitration that the awards sometimes cost
for billions of dollars.
For these reasons, it is time for the government to pay more attention to this
standard, especially developing country as Vietnam. As a small contribution, the
thesis attemps to find the best approach for Vietnam government when it comes to
sign a new IIA in order to balance the interest between the state and foreign
invertors as well as analyzing the legal problems that Vietnam government should
handle to minimize the violation of FET clause. Moreover, the thesis desires to give
some recommendations for Vietnam government when it comes to be a respondent

with a claim on the FET clause during the hearing of investment arbitral tribunal.


INTRODUCTION
1. Background of the study
According to United Nations Conference on Trade and Development (UNCTAD)
(UNCTAD 2018) as of 2018, Vietnam has signed about 65 Bilateral Investment
Treaties and 26 Treaties with Investment Provisions (hereinafter collectively
referred to as the International Investment Agreements- IIAs). It should be noted
that in most of the IIAs that Vietnam has signed such as the ASEAN Comprehensive
Investment Agreement (ACIA), the Comprehensive and Progressive Agreement for
Trans-Pacific Partnership (CPTPP), the Agreement on Investment among the
Governments of the Hong Kong Special Administrative Region of the People’s
Republic of China and the Member States of the Association of Southeast Asian
Nations, Korea- Vietnam Bilateral Investment Agreement and France - Vietnam
Bilateral Investment Agreement or others like the EU-Vietnam Free Trade
Agreement and the Regional Comprehensive Economic Partnership that Vietnam
has been negotiating and shall sign as a member in the near future, they all include
the standard of fair and equitable treatment (FET).
Being an attractive investment destination with a huge amount of IIAs signed with
other member states, apart from the economic benefits achieved, Vietnam has to
face more legal risks arising from the claims of foreign investors on the ground of
the IIAs, and one of the most concern is the breach of FET clause since this
standard is commonly regulated in unqualified way (which shall be discussed
further in Chapter II). In practice, Vietnam’s law, particularly foreign investment
law, treats foreign investors fairly and equitably; however, in practice State
authorities, when applying the law, have not fully accorded such treatment in
administrative and court proceedings (Tuan 2016, p.288). As a result, the
government of Vietnam could be sued in the international arbitral tribunals where
the awards can cost billions of dollars (as in the case between Occidental Petroleum

13

Corporation and Occidental Exploration and Production Company v. The Republic
of

13


14

Ecuador, ICSID Case No. ARB/06/11, in 2012, the arbitration award is roundly
equal to 1.77 billion USD).
Because of the increase of ISDS in both scale and severity, specially the ISDS on
FET clauses, the author attemps to find the best approach for Vietnam government
when it comes to negotiation of a new IIA in order to balance the interests between
the state and foreign invertors as well as analyzing the legal problems that Vietnam
government should handle to minimize the violation of FET clause. Moreover,
regarding to the ISDS, the author would like to give some lessons for Vietnam
government when being sued before the arbitral tribunals in a dispute related to the
FET clause.
2. Literature review
Due to the fact that FET is controversial topic in international investment law, there
are a large number of foreign authors and scholars writing about this topic. In
general, the FET standard can be analyzed from the historical background to the
definition1 as well as the arbitral practice on the FET claim2 while the others address

1 See more in: (1) Abhijit P.G. Pandya, Interpretations and Coherence of the Fair and Equitable Treatment Standard in
Investment Treaty Arbitration, Ph.D thesis in Law, London School of Economics, London in 2011; (2) D. Hauksdóttir,

The Fair and Equitable Treatment Standard in International Investment Treaties, Master thesis in Law, Reykjavík
University, Reykjavík in 2015; (3) Deng Ting Ting, The impact of the Fair and Equitable Treatment Standard on State
Sovereignty, Ph.D thesis in Juridical Science, City University of Hong Kong, Hong Kong in 2012; (4) Julien Fouret, The
notion of Fair and Equitable treatment, Master thesis in Law, McGill University, Montreal in 2003; (5) J. Roman
Picherack, The Expanding Scope of the Fair and Equitable Treatment Standard: Have Recent Tribunals Gone Too Far?,
Journal of World Investment & Trade, Vol. 9, Issue 4, 2008.

2 See more in (1) Fulvio Maria Palombino, Fair and Equitable Treatment and the Fabric of General Principles, T.M.C.
Asser Press, The Hague and Springer-Verlag, Berlin Heidelberg, 2018; (2) Ioana Tudor, The Fair and Equitable
Treatment Standard in the International Law of Foreign Investment, Oxford University Press, 2007; (3) Roland Klager,
Fair and Equitable Treatment in International Investment Law, Cambridge University Press, 2011; (4) Marc Jacob &
Stephan Schill, Fair and Equitable Treatment: Content, Practice, Method, ACIL Research Paper 2017-20, 2017; (5)
OECD, Fair and Equitable Treatment Standard in International Investment Law, 2004; (6) Rudoff Dolzer, Fair and
Equitable Treatment: A Key Standard in Investment Treaties, The International Lawyer Vol. 39, 2005; (7) Thomas J.
Westcott, Recent Practice on Fair and Equitable Treatment, The Journal of World Investment & Trade, Vol. 8, Issue 3,
2007; (8) UNCTAD, Fair and Equitable Treatment: UNCTAD Series on Issues in International Investment Agreement II


15

the balance of the rights between the investors and the host states. 3 More
specifically, there are so many studies focusing on the formulations of the FET
standard.
According to one of the earliest studies about the FET of the OECD in 2004 (OECD
2004), there are three main formulations of the FET, which are:


FET is linked to the international minimum standard required by customary

international law;



FET is linked to the international law including all sources;



FET is an independent self-contained treaty standard.

The sequent study of UNCTAD in Bilateral Investment Treaties 1995‐2006: Trends
in Investment Rulemaking (UNCTAD 2007, pp.30‐33) grouped FET into seven
formulations:


Treaties that grant investments fair and equitable treatment without making

any reference to international law or to any other criteria to determine the content of
the standard.


Treaties that state that investments will receive fair and equitable treatment

no less favourable than accorded to its own investors or to investors of any third
State.

– A Sequel, 2012.

3 As in (1) Rumana Islam, The Fair and Equitable Treatment (FET) Standard in International Investment Arbitration:
Developing Countries in Context, Springer, Singapore, 2018; (2) Gaukrodger D., “Addressing the balance of interests in
investment treaties: The limitation of fair and equitable treatment provisions to the minimum standard of treatment under
customary international law”, OECD Working Papers on International Investment 2017, OECD Publishing, Paris, 2017;

(3) Graham Mayeda, Playing Fair: The Meaning of Fair and Equitable Treatment in Bilateral Investment Treaties,
Journal of World Trade, Vol. 41, No. 2, 2007; (4) Srilal M. Perera, Equity-Based Decision-Making and the Fair and
Equitable Treatment Standard: Lessons from the Argentine Investment Disputes – Part I & Part II , The Journal of World
Investment & Trade Vol. 13, Issue 3, 2012; (5) Om Krishna Shrestha, A Host State Regulatory Right in Fair and
Equitable Treatment (FET) in Bilateral Investment Treaties (BITs), Master thesis in Law, University of Lapland,
Rovaniemi in 2016.


16



Treaties that couple the fair and equitable treatment standard with an

obligation to abstain from impairing the investment through unreasonable or
discriminatory measures.


Treaties that require investments to be granted “fair and equitable treatment

in accordance with the principles of international law”.


Treaties that similarly require fair and equitable treatment in accordance with

the principles of international law, but that in addition expressly identify some
requirements of the standard. These specific inclusions may broaden the scope of
the standard.


Treaties that make the fair and equitable treatment standard contingent on the

domestic legislation of the host country.


Finally, some recent BITs and free trade agreements provide a more precisely

defined scope of the fair and equitable treatment standard. They oblige the
contracting parties to accord covered investments treatment in accordance with the
minimum standard of treatment under customary international law. Some also make
it express that fair and equitable treatment is part of the minimum standard and does
not create additional substantive rights.
In a survey of I.Tuona, she classified FET into five formulations (I.Tuona 2008,
p.22):


In the first one, the standard appears alone;



In the second one, together with the FET, there is a reference to international

law;


In the third one, besides the reference to the FET standard, the States give

examples of concrete acts that amount, in their view, to a breach of the FET
standard and of international law,


In the fourth one the standard is referred to jointly with the notions of

arbitrariness and discrimination and

clause.

In the fifth one, the standard appears next to the “full protection and security”


17

According to other study of UNCTAD (UNCTAD 2012): The most important and
widespread approaches to the FET standard in treaty practice are the following:


No FET obligation;



FET without any reference to international law or any further criteria

(referred to as unqualified, autonomous or self-standing FET standard)


FET linked to international law;



FET linked to the minimum standard of treatment of aliens under customary

international law;


FET

with

additional

substantive

content

(denial

of

justice,

unreasonable/discriminatory measures, breach of other treaty obligations,
accounting for the level of development).
Moreover, in a book of Roland (R.Kläger 2011), the FET was categorized as three
main type in IIAs. The first one is “no reference to fair and equitable treatment”, the
second one is “hortatory references to fair and equitable treatment” and last one is
“legally binding references to fair and equitable treatment.” In “legally binding
references to fair and equitable treatment”, there are five different formulations can
be found as follow:


Fair and equitable treatment in combination with other standards;



Fair and equitable treatment combined with a reference to general

international law;


Fair and equitable treatment combined with a reference to customary

international law;



Fair and equitable treatment contingent on domestic law.

Also about FET, Rumana Islam has other idea by listing FET into three main types
namely: FET minus, simple FET and FET plus (Islam 2014).


FET minus - which refers to those treaties where treaty framers have

connected the definition of the standard to other concepts that define, and appear to
limit its scope. The FET standard then simply means the standard which
international law or customary international law guarantees for aliens (Islam 2014,
p.62) or [t]his appears to be a clear way of limiting the scope of the FET. The denial


18

of justice in administrative or legal proceedings is clearly narrowing the obligation.
The FET clause then only relates to judicial or quasi-judicial processes. Clauses like
this therefore can potentially provide much clearer limits to the scope of the FET
than invocation of international law or customary international law (Islam 2014,
p.77).4


Simple FET where the FET clause is formulated without any reference to

international law, customary international law, or any other limitation. 5 The second
category of treaties stipulate FET without any reference to international law,
customary international law, or any other limitation, thereby implying that FET in
these treaties is an unqualified, autonomous, and separate standard.


FET plus – which refers to treaties which combine the FET standard with an

additional substantive obligation, such as full protection and security, prohibition of
denial of justice, prohibition of arbitrary or discriminatory measures, obligations of
MFN, or guarantee of protection and security. The notions of arbitrariness,
unreasonableness, and discrimination are understood as inherent to the FET
standard. Therefore, it appears that such clauses give further substance to the
otherwise general wording of the standard.6
In Vietnam, there are some studies examining the FET clause as follow:


Hanoi Law University, Textbook on International Investment Law, Youth

Publishing House, 2017; (2) Trinh Thi Hai Yen, Textbook on International

Investment Law, National Political Publishing House, 2017.


Nguyen Phuong Dung, The Fair and Equitable Treatment Standard in

Investor-State Arbitration in Vietnam, International Arbitration Asia, 2016.


Nguyen Quoc Tri, The principles of investor treatment in Comprehensive

and Progressive Agreement for Trans-Pacific Partnership, Journal of Democracy
and Law, 2018.
4 The FET standard then simply means the standard which international law or customary international law guarantees
for aliens. (p.62) Or [t]his appears to be a clear way of limiting the scope of the FET. The denial of justice in
administrative or legal proceedings is clearly narrowing the obligation. The FET clause then only relates to judicial or
quasi-judicial processes. Clauses like this therefore can potentially provide much clearer limits to the scope of the FET
than invocation of international law or customary international law (R.Islam 2014, p.77).
5 The second category of treaties stipulate FET without any reference to international law, customary international law,
or any other limitation, thereby implying that FET in these treaties is an unqualified, autonomous, and separate standard.
6 Fair and Equitable Treatment, UNCTAD Series on Issues in International Investment Agreements Vol. II (n 42) 31.


19



Nguyen Thu Huong, Investment policy under the Vietnam-EU Free Trade

Agreement (EVFTA), Institute of State and Law, 2018.
However, it should be noted that in most of those studies, FET standard is merely

analyzed as a principle among other principles of investment law.
It also can be found the Ph.D thesis related to FET as follows: Nguyen Van Tuan,
The Protection of the Fair and Equitable Treatment Standard under International
Investment Law: A Case Study of Vietnam, Ph.D thesis in Philosophy, La Trobe
University, Victoria in 2016. According to Dr. Nguyen Van Tuan (Tuan 2016), FET
in IIAs can be classified as two main types: no FET Standard in IIAs and FET
Standard in IIAs. The second type includes six main formulations:


FET in Preambles



FET as an Unqualified Clause



FET with Reference to International Law



FET Linked to the Minimum Standard of Treatment under Customary
International Law



FET Linked to Full Protection and Security



FET Linked with Other Investment Standards

In comparison with other studies, my thesis has followed different approach by
broadly grouping IIAs into three categories as follow: the IIAs with no FET clause,
the IIAs with unqualified FET clause and the IIAs with qualified FET clause. In
every category, I will clearly state the main language utilized in the IIAs and
illustrate how it is interpreted by the arbitral tribunals in practice. Moreover, by
carefully analyzing the negative and positive effects of each type, I will suggest the
superior formulation of each category in the perspective of Vietnam government
when it comes to draft new IIAs. In my opinion, it is quite a crucial issue since it
has also linked to the sustainable development and the reform of new generation
IIAs; however, in Vietnam it has not received adequate attention.


20

3. Objects and Scope of the study
The thesis aims to provide the understanding of FET through its historical
background. The thesis also describes the regulation of FET in IIAs as well as its
application in arbitral tribunal.
The study focuses on the formulations of FET in the IIAs in which Vietnam is a
member, in some cases, specific IIAs such as the North American Free Trade
Agreement (NAFTA) or the new generation of the IIAs shall be invoked to analyze
the new approach of FET in the reform IIAs regarding to FET clauses. The thesis
does not aim to analyze the relation between the FET standard and other standards
since this issue has been carefully studied7 but merely expressing how these
standards could be regulated together in treaties practice. Moreover, merely the
ISDS cases of Vietnam regarding to FET claims shall be carefully studied in the
thesis.
The thesis has been conducted from September 2018 to February 2019. However,

the data and information have been collected in various periods of time, not merely
in 2018 and 2019 (for instance, the survey conducted in 2008 by Tudor or the
mapping of BITs carried out in 2016 by UNCTAD.)
4. Objectives of the study
Through the analysis, the study figures out the reasonable way to regulate the FET
standard so that the Vietnam government can limit the disputes at the very
beginning by setting a threshold of investors’s protection. In addition, according to
the elements that investors frequently utilize to claim the states for the breach of
FET clause, the author consumes the features of Vietnamese law, domestic court as
well as administrative proceedings should improve to ensure fair and equitable
treatment for investors and their invesments in the territory of Vietnam.

7 See more R.Islam, Interplay between Fair and Equitable Treatment (FET) Standard and other Investment Protection
Standards Bangladesh Journal of Law, Vol. 14 Nos. 1&2, pp. 117-142, 2014; and Roland Klager, Fair and Equitable
Treatment in International Investment Law, Cambridge University Press, 2011.


21

In particular, the study also attempts to highlight some lessons learned from other
countries during the hearing of arbitral tribunal so that Vietnam government can
consider these lessons in case being sued by foreign investors on the ground of FET
clauses.

5. Methodology of the study
To carry out the study, the author combines the method of synthesizing information
and using the statistics to compare, analyze and clarify the problems. Moreover, the
author also incorporates investment dispute cases to clarify theoretical issues.
To be more specific, in Chapter 1, the thesis uses legal analysis to examine
provisions regarding to investor-state dispute settlement and the FET clauses in

international investment.
In chapter 2, cases will be examined to interpret the meaning of the FET standard in
practice. Moreover, the thesis also analyze investor-state cases in which Vietnam
has been a respondent.
Last but not least, in chapter 3, by comparing the advantages and disadvantages
between different formulations of the FET standard, the thesis suggests the lists of
FET clauses that can be used to negotiate in the future international investment
agreements.
6. Expected contribution of the thesis
The thesis could become one of reference sources for further research of the FET
standard in Vietnam. In particular, Vietnamese authorities can use the information
and recommendations in the thesis for having superior practice when tackling the
disputes with foreign investors, specially the disputes related to the FET clause.
7. Structure of the thesis


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Chapter 1

An overview of Investor - State Dispute Settlement and Fair and

Equitable Treatment
This chapter aims to provide the overview of Investor-State Dispute Settlement
(ISDS) mechanism and specifically, the ISDS in Vietnam before analyzing the
historical background of FET and its literal meaning.
Chapter 2

Regulation and Application on Fair and Equitable Treatment

Standard
The formulations regulated in international investment law that can be broadly
categorized into three groups: (1) No FET clauses; (2) unqualified FET clauses and;
(3) qualified FET clauses. This chapter then analyzes how these formulations have
been defined by arbitral tribunals.
After analyzing the FET clauses in treaty practice, the thesis then attempts to
express the arbitral practice of FET claims in general and then carefully examining
the ISDS cases of Vietnam related to FET claims. There are five cases in total: (1)
Trinh Vinh Binh and Binh Chau Joint Stock Company v. The Socialist Republic of
Vietnam (in 2004); (2) Michael L. McKenzie v. The Socialist Republic of Vietnam
(in 2010); (3) DialAsie SAS v. The Socialist Republic of Vietnam (in 2011); (4)
RECOFI v. The Socialist Republic of Vietnam (in 2013) and (5) Trinh Vinh Binh v.
The Socialist Republic of Vietnam (in 2014).8
Chapter 3

Investor-State Dispute Settlement on the Fair and Equitable

Treatment on the perspective of the host state and lessons for Vietnam
government
In the last Chapter, the author makes a comparison between different formulations
of FET clauses in order to figure out the best approach for the Vietnam government
when drafting the FET clauses in the IIAs and then the author goes further by
suggest the suitable model of every formulation of FET clause. Apart from these
FET clauses that have direct effects on the decisions of the arbitral tribunals in
investor-state disputes on the FET claims, there are other provisions such as “MFN
provision” and “Exception provision” that may impact these decisions as well. For
8 In this thesis, the author has examined the two cases of Trinh Vinh Binh together so that the facts appear to be more
coherent.

23

this reason, the thesis takes these provisions into account and analyzes them in
detail in order to determine its impact on the ISDS awards. Moreover, the thesis also
provides the model of these provisions in case the government desires to consider
these provisions.
At this end, the thesis analyzes the elements that may affect the ISDS awards in
favour of the states in arbitral practice. These elements are the circumstances of the
host state and the investor’s obligations within the FET standard that the
government should consider to protect its own legal rights and benefits when being
sued by the investors.
Last but not least, the thesis then comes to conclusion that the government should
remain good governance and should not act without a lawful basis for its conducts
in order to provide the transparent investment environment for the investors. That is
the best way to prevent the investor-state disputes on the FET claims.


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