Legitimate Expectations and the Rule of Law in International Investment Law

The rule of law is one of the yardsticks by which both critics of and apologists for international investment law evaluate the regime, but it has been thus far insufficiently theorised. This chapter offers some thoughts on how the concept of the rule of law might be deployed to justify and delimit the contours of legitimate expectations in international investment law. The chapter deliberately adopts a formal, largely Razian approach to the rule of law, focusing on two of its dimensions: legal certainty and the prohibition on arbitrariness. It argues that legal certainty provides the most compelling justification for the recognition of legitimate expectations in international investment law, when compared to other rationales emerging from investment tribunals and the literature. The chapter analyses four common types of government action arising in investment cases through the lens of legal certainty, arguing that the strength of the claim for recognition of legitimate expectations depends on the government conduct at issue, with government interference with legal rights or formal decisions generating the strongest claim for protection, and changes to the extant legal framework generating the weakest claim. The chapter then identifies the prohibition on arbitrary conduct as the relevant touchstone for protection of legitimate expectations, explains how the two elements of the legal test fit together, and suggests that this interpretation accords with evolving state practice in treaty design, and more recent tribunal decisions concerning legitimate expectations.