Too Low a Threshold: Bilcon v Canada and the International Minimum Standard of Treatment

Abstract

Treaty obligations to afford foreign investors a minimum standard of treatment (MST) and/or fair and equitable treatment (FET) are hallmarks of international investment law. However, the relationship between such treaty-based obligations and customary international law has been the subject of considerable debate. In the North American Free Trade Agreement (NAFTA) context, the majority tribunal decision and dissenting opinion in Clayton and Bilcon of Delaware Inc. v Government of Canada (Bilcon) reflect ongoing disagreement regarding the threshold for breach of the MST under NAFTA Article 1105. This article charts NAFTA investment tribunals’ decisions regarding FET claims under Article 1105 and the development of the customary international MST on which that provision is based, in particular, the prohibition on arbitrary treatment. It argues that the majority in Bilcon applied an inappropriately low threshold in finding a breach of Article 1105, which could represent a new and unwelcome direction in NAFTA Chapter 11 jurisprudence.