Dr Yenkong Ngangjoh Hodu is a Senior Lecturer in Law at the University of Manchester School of Law.
In recent years, the concept of ‘legitimate expectations’ has routinely been put forward by claimants as the basis of claims in investment treaty arbitrations, and endorsed by some arbitrators (see International Thunderbird Gaming Corporation v United Mexican States, Separate Opinion of T. Walde, para. 37). Relying on ‘legitimate expectations’ that have been frustrated as grounds for an award is troubling, and in the words of a recent EJIL article by Martins Paparinskis “suggest[s] a radical departure from the traditional model of international responsibility”, and may even be tantamount to deciding ex aequo et bono [(2013) 24 EJIL 617, 628]. Tribunals have regarded the doctrine of legitimate expectations as a part of the fair and equitable treatment standard provided for in investment treaties (see Sempra Energy International v Argentine Republic, pp. 87-88 at para. 298). This is incongruous with the law of state responsibility where the breach of a contract between a state and an alien is not necessarily a violation of international law (Article 4, ILC Articles on State Responsibility). Apart from references to precedent, investment tribunals have, in the majority of cases, hardly taken the pain to justify the overwhelming reliance on legitimate expectations in making awards (Anthea Roberts, 104 AJIL 2010).
Legitimate expectations presuppose that an agreement or a promise generates a certain level of expectations, known as legitimate expectations. It is still unclear what exactly will give rise to legitimate expectations and under what conditions such expectations require unhindered protection. The most popular use of legitimate expectations in domestic jurisdictions (England and Australia) has been in the area of administrative law and more precisely, concerning issues of judicial review. In this context, the basic test for legitimate expectations is the prior existence of a promise (R (Bibi) v London Borough of Newham  EWCA Civ 607) that needed protection by a public authority (Wheeler v Office of the Prime Minister  EWHC 1409). Similarly, in German law the doctrine is connected to the protection of trust (for instance, Article 38 of the German code on Administrative Procedure).
However, in the context of investment arbitration, legitimate expectations is somehow seen as an incentive for foreign investors to settle on a particular investment destination based on a legal structure and representations made by the receiving state. Read the rest of this entry…