Chapter 14 International Investment Law in the Context of State Fragility: Full Protection and Security and Fair and Equitable Treatment

In: Investments in Conflict Zones
Johanna Baumann
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International investment protection is based on the premise of fully functioning statehood. Whether and how aspects of state fragility affect the protection standards of fair and equitable treatment (fet) and full protection and security (fps) is viewed differently by tribunals – if at all. State fragility refers to the existence of ineffective government and the realisation of political risks. With regard to fet, a distinction must be made between the manifestations of state fragility – failing state and failed state: Depending on whether the host state was already fragile at the time of an investment, the expectations of an investor must be adjusted accordingly. If a failing state turns into a failed state or if a failed state turns into a failing state, the expectations for a stable and secure investment environment are not justified and thus illegitimate. Regarding fps, the question of the effect of fragility is particularly relevant concerning the understanding of due diligence. In order to guarantee legal certainty and transparency as the main ideas of international investment protection as well as dogmatic accuracy, an objective understanding of due diligence must be applied. State fragility cannot be considered in terms of the comprehension of fps. Instead, the aspects of fragility can only be taken into account at the level of a possible justification, in particular force majeure.

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Investments in Conflict Zones

The Role of International Investment Law in Armed Conflicts, Disputed Territories, and ‘Frozen’ Conflicts



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