Traditionally, one of the central pillars of the FET standard has been the protection of legitimate expectations. Legitimate expectations can be either based on a host state’s specific representations provided to the investor, or, under certain conditions, such expectation can be based on the regulatory framework that existed at the time of making the investment.

Numerous tribunals have stressed that the specific representations provided to an investor by a host state form the strongest basis for the creation of legitimate expectations.1) Notwithstanding this, the level of specificity required varies from case to case. The common understanding conveyed by numerous investment tribunals is that only a host state’s specific representation to a particular investor can form legitimate expectations subject to treaty protection. However, a broader understanding still finds its place in the investment arbitration community. For example, in the recent renewable energy award in ESPF v. Italy (September 2020), the majority of the tribunal found that a specific representation can also be based on general legislation.

This blog post analyses the part of the ESPF v. Italy award that concerns the assessment of the legitimate expectations of the investor. The inclusion or not of legitimate expectations in the FET standard will have significant impact on investor protection given the protections role and standing in the world of investment arbitration (see discussion on the scope of a FET standard in the context of ECT modernisation process). Moreover, the narrowing or broadening of its scope and application also have significant practical consequences and ramifications.