Legitimate Expectations in Investor State Arbitration: Re-Contextualising a Controversial Concept from a Developing Country's Perspective

The concept of legitimate expectation has evolved as one of the substantive elements of fair and equitable treatment (FET) standard to a self-standing doctrine. Although legitimate expectation as a concept is without much substance, the way legitimate expectation as a concept has evolved over the years, it has provided more protection to investors to the detriment of host states. This piece explores the different contexts in which the concept has been applied before making a case as to why the concept of legitimate expectations as has been interpreted and applied over the years is not sustainable. The paper argues that flexibility and availability of public policy space ought to be ingrained in any investment arrangements. In other words, to the extent that the expectations of foreign investors are integral parts of investment arrangements as well as interpretations by arbitrators, citizens expectations that governments in mostly developing countries properly exercise sovereign rights to protect public interests ought also to be taken into account. Consequently, legitimate expectation should be applied in such a fair and equitable way to all stakeholders as to reflect the competing interests, protecting investors from host states conducts and exonerating the host states where investors’ conduct is questionable.