Among the numerous controversial issues in international investment law, the most significant is the regulation of fair and equitable treatment and more precisely the protection of the investor's legitimate expectation. The principle of fair and equitable treatment is based on a common concept found in numerous trade-related treaties, but academics, governments and even investors have failed to define it absolutely. While there is no clear definition of what fair and equitable treatment is, the parties do not dispute the basic understanding of what fair and equitable treatment is. Say no to plagiarism. Get a tailor-made essay on "Why Violent Video Games Shouldn't Be Banned"? Get an original essay The concept basically means that it is agreed that investors and investments in a host state will be accorded, at a minimum, an international standard of treatment. Therefore, foreign investors and their investments may benefit from a standard of treatment dictated by international law that is different from the treatment accorded to domestic investors or investments and is generally considered to be something more.[1] Therefore a foreign investor will always have some basic exceptions while investing in a foreign country. Therefore, the notion of legitimate expectations, also called basic expectations or reasonable and justifiable expectations, is a key element of the standard of fair and equitable treatment.[2] Legitimate expectations may arise from contractual agreements or informal representations or from the legal framework of the host state. Due to multiple treaties defining fair and equitable standards of treatment, a universally accepted definition has yet to be formulated. In a very important case on the same topic, Waste Management V. United Mexican States, [1] the commission stated: “….. the minimum standard of fair and equitable treatment is violated by conduct attributable to the State and harmful to the plaintiff if the conduct is arbitrary, grossly unfair, unjust or idiosyncratic, is discriminatory and exposes the appellant to sectional or racial prejudice, or involves a lack of due process leading to a result that offends judicial fairness, as might be the case in a manifest failure of natural justice in judicial proceedings or total lack of transparency and frankness in an administrative process. In applying this standard, it is relevant that the processing violates the host state's representations on which the claimant reasonably relied."[2]In 2012, Swisslion V. Macedonia stated[3], "The FET standards fundamentally ensure that foreign investments are not treated unfairly, taking into account all surrounding circumstances, and that it is a means of ensuring justice for foreign investors. From a broader perspective, accepting a standard is a reaction to the problems of an outdated agreement that can intimidate an investor who has invested in the host state but then finds that he or she is subject to discrimination and unfair behavior by the host state. In the case Desert Line v. Yemen, with respect to the situation declared by the Tribunal, it would be offensive to the most basic concept of good faith and offensive to the head of state, to imagine that he offered his assurances and his acceptance with his fingers crossed, so to speak, making a reserve in the sense that we welcome you, but we will not extend the benefits of the BIT with your country.[4] The relationship between legitimate expectation and fair and equitable treatment When it comes to investment law, the doctrine of legitimate expectation occupies an important position as it is one of the key aspects offair and equitable treatment. It has previously been stated that “the standard of fair and equitable treatment is… closely linked to the nation of legitimate expectations which is the dominant element of the standard.[5] Investment Arbitration jurisprudence has shown that the doctrine can be used in four ways The first is when to defend the investor from examples of promises made by the host country which he then refused to follow up on. The second is to protect the investor from the violation of a license that prevented the use of the investment in host country. The third is to assert the investor's substantive rights against changes in laws and government policies. And finally, the use of the Doctrine in its most traditional sense, that of granting the investor procedural rights against a decision of the host State.[6] Changes in declarations made by the host country The first situation in which the Doctrine is used is to safeguard the investor from changes in the declarations of the state. In the PSEG v. Turkey case, the court held that there could be no case of violation of the investor's expectations as there were no identical commitments or promises by the State giving rise to that expectation.[7] As in this case, there was no regulatory context on which to base legitimate expectations. Furthermore, the simple declaration of the State that it wants foreign investments does not constitute testimony that can give rise to a legitimate expectation. B. Protection from withdrawal of license Under the provision on fair and equitable treatment, the host country does not have to revoke permits previously granted to an investor. This doctrine was used in two famous cases Metalclad[8] and Tecmed[9], both against Mexico. In one case the State granted the permit while in the other it declared that the permit will be granted if certain criteria are met and the promise is subsequently not kept. In the Metalclad case, the court realized that the reason for not granting permission was because there was no support from the local community. However, the Court held that the only reason why permission can be denied is where there is a physical defect in the construction of the landfill.[10] In Tecmed the appellant held 99% of the shares of a site that processes hazardous waste. The landfill was built on land purchased by the host country. The government subsequently immediately refused to renew the license. In this regard, the Court held that the failure to grant permission constituted a violation of the fair and equitable treatment standard and noted that bad faith is not required for a violation of the fair and equitable standard. C. Changes in Policy by Government The ICSID tribunals have concluded that it is of the utmost importance that government policies remain the same to ensure that investor expectations remain the same. In the case of Azurix v. Argentina, fair and equitable treatment was held to have been violated because the activities of investors in water supply had been restricted by rising prices. CIESA, which was an Argentine holding company, had shares in TGS, an Argentine gas transportation company. The applicant primarily invested in TGS because there was a convertibility law in place pegging the Argentine currency to the US dollar. This was removed in 1999 due to the economic crisis, which the Argentine Republic claimed was due to the terrible economic crisis and they had no choice but to do the same. The court found that Argentina violated fair and equitable treatment and failed to comply with thetheir obligations in relation to the investment. The court ordered damages because it found that the investor had a legitimate expectation that the law would remain unchanged. D. Procedural Rights Legitimate expectations also arise when the right to participation and due process have been neglected. In the case Rumeli & Telsim v. Kazakhstan it was stated: “as underlined by the AMCO and I and II decisions, regardless of the examination of the substantive grounds invoked by a state body in the context of the revocation of a license, the mere lack of due process would have been an insurmountable obstacle to lawfulness of the revocation. Legal framework for the legitimate expectations doctrine under the fair and equitable treatment standardThe first time a court decided to study legitimate expectations was in the SPP case[14], where it sought to study fair and equitable treatment. The court spoke to investors' expectations by stating that: “Whether legal or not under Egyptian law, the acts in question are acts of the Egyptian authorities, including the highest executive authority of the government. These acts, which are now believed to have violated Egypt's municipal legal system, created expectations protected by established principles of international law." The law became stricter when, in the Tecmed case, the court held that fair and equitable treatment obliges the host to offer treatments that do not disturb the legitimate expectations that were the main reason why the foreign investor invested. The same motivation has been recognized in many cases. In the CME case, the Court found that the State had dishonored the standard by “eliminating the agreements under which the foreign investor was induced to invest”.[17] In this case, CMF owned a television services company. foreign ownership of licensees required to broadcast television, the Czech Media Council created a new CNTS structure held by Cet21, which effectively founded the CNTS. The Council subsequently forced the CNTS and CET21 to create a service agreement between them, following which CET21 terminated that agreement and replaced the CNTS and thus the broadcasting services of the CNTS remained inactive. Whereupon the court held that the legitimate expectation of the foreign investor had been damaged as the appellant had a legitimate expectation on the investment facility provided and the Board should not act with mala fide intentions towards the investors' business. The facts of this case gave rise to a similar dispute, although in this case the Court rejected the investors' claims.[18] The Court stated that the annulment of a previous explicit authorization by a State could constitute a breach of legitimate expectations because there was an expectation on the part of the investor that the State Agency would act in a certain way. Another important case where the issue of legitimate expectations were taken into consideration in the case of the ADF group. In that case, the appellant's argument was that his legitimate expectations had been violated because the State Agency had refused to follow and apply pre-existing case law regarding the attempt. The Court concluded that the appellant failed to demonstrate a breach of fair and equitable treatment because the investor's expectations regarding the relevance or applicability of the case law cited to the State Agency had not been created by misleading statements made by authorized officials of the US federal government. Therefore, false statements provided by the State on which the investor relies may be constituted as a violation of legitimate expectations regarding thestandard of fair and equitable treatment. Breach of legitimate expectations would also occur if the state fails to fulfill its contractual obligations, although simple failure to pay the debt would not demonstrate a breach of the minimum standard and something more would be necessary. However, in SGS v. Philippines, the Court emphasized that unreasonable refusal to pay money owed under a premium or contract goes against the legitimate expectations of the investor.[22] Furthermore, in the case of GAMI Investments, Inc. v. United Mexico Member States, the Court held that a total and unjustified repudiation of the relevant legislation by the host State would constitute a denial of fair and equitable treatment. Balancing Investors and State Interests When we discuss the balance between investors' legitimate expectations and states' law, we must realize that the two are heterogeneous types of interests. The investor expects that the investment will result in a reasonable profit[24], and on the other hand the State executes its interests through its legislative wing. The legislative activity of the State is the fulcrum of a functioning modern democracy as it is the result of the activity of parliament, where people elected by the general conscience vote for a political commitment. This legal framework is subject to change as people's thought process also changes over time. Therefore, investor protection is against the sovereignty of the state in deciding on its own regulations. The second issue that makes balancing problematic is that there is no adequate definition of what constitutes a total or unreasonable change as has been stated and is assessed on a case-by-case basis. The concept of reasonable or total change consists of parameters that have not been established anywhere, but to detect it it is necessary to understand the resonance of the court. In the Impregilo case, the court stated that “investors must be protected from unreasonable changes to the legal framework, which will be judged in accordance with legitimate expectations at that precise moment.[26] Although what constitutes reasonableness was not defined in that case, in a subsequent case it was stated that anything that excessively affects the investor's reasonable profit is not reasonable. After the discussion, it can apparently be understood that the doctrine of legitimate expectation has broad application against the laws and policies of the state. The Tribunals sometimes even go beyond the mandate as there are no constitutional constraints on the Tribunals. Sometimes, however, there are extreme cases where the state has intentionally approved something that would violate the investor's legitimate expectations. I firmly believe that such cases should be subjected to expropriation or arbitrary conduct rather than legitimate expectation. Another area in which there is a lot of discussion is when the State can pass a law that is contrary to legitimate investment expectations. Sometimes, states cannot do anything other than carry out an act contrary to the maintenance of public order. That is why I strongly believe that the court was wrong to reject the argument of necessity in the Argentine case when the entire country was experiencing an economic collapse. Fortunately, in another case of continental causation, the court held that a state emergency, such as an economic crisis, can invoke the doctrine of “necessity” in international law to pass laws contrary to its international obligations. [28] In my opinion, the doctrine of legitimate expectation was formed in this way, simply because the state should keep its promises since such promises were the only.