The Effect of Fair and Equitable Treatment Principle Upon State Sovereignty: a Study of Kenya - Switzerland Bilateral Investment Treaty

Abstract

As the Kenyan Government pursues its policy of attracting more Foreign Direct Investment, more investors will seek to invest especially in the natural resource and mining sector. Fair and Equitable Treatment guarantees investors that their investments will be protected from arbitral and discriminatory treatment by the state. The research seeks to analyze Article 4 of the Kenya– Switzerland Bilateral Investment Treaty of 2006 (Kenya-Switzerland BIT) on the Fair and Equitable treatment with a view to bring fore the challenges posed by the broadness, vagueness and ambiguity in this provision. The vagueness of the fair and equitable treatment standard has contributed to the lack of consistency in the application and interpretation by arbitral tribunals. Indeed, such consistency is difficult to expect where different one-off arbitral tribunals adjudicate disputes under a variety of formulated standards and factual situations and furthermore, where there is absence of an effective appellate review. The consequence of the vagueness and ambiguity of the Fair Equitable Treatment Standard, is to expose developing states like Kenya to potential, unnecessary litigation before the arbitral tribunals. The research proposes recommendations to be included in the Fair and Equitable Treatment clauses to ensure they are clear and precise to balance the interest of both the foreign investor and the host state.