The standard of full protection and security is one of the basic principles of investment protection applicable to investor-State arbitrations. Its content, scope of application and the sanctioned behaviors of host States of investment can be diverse.
Doctrinal Definition of the Standard of Full Protection and Security
According to doctrine, the standard of full protection and security covers protection against physical and legal infringements of the host State directed at foreign investors. The standard appears in variously worded formulas. These vary from the most commonly used ‘full protection and security’, to ‘the most constant protection’, ‘protection and security’ or ‘full legal protection and full legal security’.
Due to its overlapping scope, the standard is often considered part of the wider standard of fair and equitable treatment. For example, the France-Argentina BIT prescribes that investments made on the territories of contracting States shall be accorded full protection and security in accordance with fair and equitable treatment.[1]
The standard of full protection and security could be historically classified in three different stages, depending on the sanctioned behaviour. First, this protection was against riots, then against abuses of police and military forces and finally protecting foreign investors from acts of regulatory authorities of the host State.[2]
Therefore, the standard of full protection and security provides for the sanctioning of acts and omissions of a host State which did not apply reasonable measures and due diligence to prevent physical or legal infringements.
Arbitration Practice
As stated by the arbitral tribunal in the PSEG v. Turkey case, the standard includes providing for the physical safety of people and installations.[3] Sanctioned acts can be performed by both private persons and public entities. Still, not every infringement can be imputable to the host State. As the arbitral tribunal in the ELSI case explained, the standard cannot be understood as “the warranty that property shall never, in any circumstances be occupied or disturbed”.[4]
Frequently, arbitral tribunals extend the standard of full protection and security to legal infringements as well.[5] With this in mind, the connection between the standard of full protection and security and legal protection has been explained in CME v. Czech Republic:
“The host State is obligated to ensure that neither by amendment of its laws nor by actions of its administrative bodies is the agreed and approved security and protection of the foreign investor’s investment withdrawn or devalued.“[6]
In order to prove that a violation of the standard of full protection and security has taken place, the investor must provide sufficient evidence that the host State encouraged, contributed or in another way failed to apply reasonable measures to protect the interests of a foreign investor. In many cases, tribunals have found that this element was missing and thus, the host State was found not to be liable.[7]
Conclusion
A host State may be deemed liable for the breach of the standard if it fails to prevent an interference in a situation which fell within public powers.[8] However, once measures have been applied by the host State, their quality and the goals to be achieved are rarely questioned. In fact, measures that a host State applied may only be problematic if they provoke ‘intolerable consequences’.[9] In any event, measures that a host State enacted should be reasonable in the given circumstances.[10]
However, the purpose of the standard is not the regulation of compensation of damages that have already occurred to foreign investors. To the contrary, the standard of full protection and security serves to encourage host States to prevent the occurrence of harm to foreign investors by performing reasonable due diligence.
1 France – Argentina Bilateral Investment Treaty, entered into force on 13 February 1993, article 5(1).
[2] R. Dolzer, C. Schreuer, Principles of International Investment Law, OUP, 2nd edition, 2012, p. 161.
[3] PSEG Global, Inc., The North American Coal Corporation, and Konya Ingin Electrik Üretim ve Ticaret Limited Sirketi v. Republic of Turkey, ICSID Case No. ARB/02/5, Award, 19 January 2007, para. 258.
[4] Elettronica Sicula S.p.A. (ELSI) (United States of America v. Italy), ICJ Reports (1989) 15, para. 108.
[5] CME Czech Republic B.V. v. The Czech Republic, UNCITRAL, Partial Award, 13 September 2001, para. 613; Sempra Energy International v. The Argentine Republic, ICSID Case No. ARB/02/16, Award, 27 September 2007, para. 323; Compañiá de Aguas del Aconquija S.A. and Vivendi Universal S.A. v. Argentine Republic, ICSID Case No. ARB/97/3 (formerly Compañía de Aguas del Aconquija, S.A. and Compagnie Générale des Eaux v. Argentine Republic), Award, 20 August 2007, para. 7.4.15.
[6] CME Czech Republic B.V. v. The Czech Republic, UNCITRAL, Partial Award, 13 September 2001, para. 613.
[7] Técnicas Medioambientales Tecmed, S.A. v. The United Mexican States, ICSID Case No. ARB (AF)/00/2, Award, 29 May 2003, paras. 176-177; Noble Ventures, Inc. v. Romania, ICSID Case No. ARB/01/11, Award, 12 October 2005, para. 166.
[8] G. Cordero Moss, Full Protection and Security in A. Reinisch (ed.), “Standards of Investment Protection”, OUP, 2008, p. 138.
[9] G. Cordero Moss, Full Protection and Security in A. Reinisch (ed.), “Standards of Investment Protection”, OUP, 2008, p. 139.
[10] Ronald S. Lauder v. The Czech Republic, UNCITRAL, Final Award, 3 September 2001, para. 308.
