Public Health Emergency: Reconsidering the Limits and Scope of the Fair and Equitable Treatment Clause in Investment Agreements

The Fair and Equitable Treatment (FET) clause has remained a dominant feature of most Bilateral Investment Treaties (BITs) owing to its foundational role as a protection mechanism. However, the open-ended and indeterminate nature of the clause, as shown in numerous investment arbitral awards, has sparked significant debate, particularly regarding its meaning, scope, and limits. The jurisprudential inconsistencies and ambiguity of the FET clause have cast doubt on the ability of the host states to exercise their full regulatory sovereignty even in the face of public health emergencies. The COVID-19 pandemic highlighted this tension as states adopted sweeping measures—such as national lockdowns, travel restrictions, and business suspensions—to control the spread of the virus. While these measures appeared necessary to protect public health, they disrupted the regulatory environment, exposing states to potential FET violations. As a result, the need to reconcile and balance investor protection and the legitimate exercise of state sovereignty – especially during public health crises—has become a focal point in treaty-making practice and investor-state dispute settlement. This paper examines the tension between protecting investor rights and preserving states’ regulatory autonomy, offering insights into the evolving interpretation and application of the FET standard in investment agreements, particularly in the context of investor-state arbitration. The paper advances recommendations for refining treaty drafting and arbitral approaches to strike a more equitable balance, ensuring that investment protection aligns with the imperative of state sovereignty to address public health challenges without undue legal risk.