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Frequent standards of protection: full protection and security (FPS)

Tags: TTIP TRADE ISDS ICS Investment protection

Our first text about standards of protection in investment treaties is about the frequently occurring provision giving investors “full protection and security” (FPS). Most investment treaties contain this language, or wording similar to it.


In older treaties, the language is usually relatively short. These clauses have historically been interpreted to provide physical protection against interference with foreign investments, particularly during conflicts and/or in regions where the police power might interfere with foreign property.

The very first ISDS case, AAPL v. Sri Lanka, is an example of this interpretation. AAPL won its case against Sri Lanka, after the state was found to have neglected its duty to take precautionary measures in connection with a security force operation against the rebel group Tigers of Tamil. The operation, and the ensuing battle, destroyed AAPL’s shrimp farm, which the tribunal found could have been avoided if the state had acted differently.

A number of other FPS clauses have been interpreted more broadly, and even been found to encompass legal protection and legal security. Such interpretations of FPS overlap to the aspects of fair and equitable treatment (FET) which protects investors against denial of justice.

How broadly a tribunal interprets full protection and security is largely dependent on the language of the individual clause. Many new treaties therefore clarify the scope of the provision, most commonly by making clear that it only applies to physical protection.

 

“The original version of this article was posted on the Stockholm Chamber of Commerce’s ISDS Blog on 11 January 2017."

Please note that the views of our guest bloggers do not necessarily reflect the views or position of the Alliance for Responsible Commerce and ARC.trade.

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