A review of the limitation of legitimate expectation principle in FET Claims in energy regulatory disputes: Can a balance be achieved?

This article explores the intricate interplay between the right of states to regulate in the context of environmental regulations aimed at decarbonization and an investor's right to investment protection, particularly focusing on the Fair and Equitable Treatment (FET) standard in international investment law. With the increasing importance of environmental regulations such as the US Greenhouse Gas Standards and Guidelines for Fossil Fuel-Fired Power Plants, in the transition to cleaner energy sources, the potential economic impacts on investments and resulting investment disputes could be huge, making the balancing of these competing interests a topical issue. The article delves into the prominence of the FET standard in investment protection and its evolution in international investment law. It argues that the limitation on the legitimate expectation element of the FET standard in modern times poses challenges in balancing states' rights to regulate with the protection of foreign investments in decarbonization disputes. The author asserts that recent developments in international investment law, exemplified by treaties like the EU-Canada Comprehensive Economic and Trade Agreement (CETA) and the United States-Mexico-Canada Agreement (USMCA), signal a shift towards prioritizing states' right to regulate over investment protection. By analyzing the limitations on legitimate expectation and investment protection in modern times and the implications for energy investments in the era of decarbonization, the article aims to shed light on the complexities of reconciling the competing interests of states and investors in the evolving landscape of international investment law. Ultimately, this author contends that achieving a balance between these interests is increasingly challenging and may require a reevaluation of the prevailing norms in investment protection.