Between the State’s Regulatory Power and Investor Protection: Indirect Expropriation and Fair and Equitable Treatment as Dimensions of the Constitutionalization of International Investment Law

Abstract

This article examines the growing constitutionalization of international investment law through the interpretative evolution of two central standards: indirect expropriation and fair and equitable treatment (FET). It argues that arbitral tribunals have progressively transformed these standards from protective clauses into quasi-constitutional principles that structure the relationship between State regulatory authority and investor rights. Through doctrinal and jurisprudential analysis, the study shows how arbitral practice has incorporated constitutional reasoning (such as proportionality, legitimate expectations, and reasonableness) to assess the legality of State measures affecting foreign investment. As a result, arbitral tribunals increasingly perform functions analogous to constitutional review, evaluating public policies adopted by democratically elected authorities. While this process has contributed to greater predictability and coherence within the investment regime, it also raises concerns regarding democratic legitimacy and the potential restriction of States’ regulatory autonomy. The article ultimately advocates for a recalibration of the balance between investor protection and sovereign regulatory power.