The standard of full protection and security in investment arbitration

The commitment to the full protection and safety standard includes two main components:

The State should not harm an investor or an investment, either through the actions of official bodies or through actions that can be attributed to the State.
The State is obliged to protect the investor and his investments from encroachments by third parties, including situations of civil unrest, violence and other forms of interference.
It is important to note that a violation can occur both as a result of state actions (for example, forcible seizure of property) and as a result of inaction — when the state has not taken reasonable measures to prevent damage [2].

Although the FPS standard is fixed in most investment agreements, its wording may vary.:

• "Full protection and security";
• "Full and constant protection";
• Sometimes the words "protection" and "safety" change places, or one of them is omitted.

Nevertheless, in arbitration practice, these variations, as a rule, do not affect the content of the obligation — the tribunals interpret the standard consistently, based on its essence, not terminology [3].

Initially, the FPS standard covered primarily the physical protection of the investor and his property. Thus, in the case of AAPL v. Sri Lanka, the first ICCID dispute based on BIT, the main issue was precisely ensuring physical security in a civil conflict [4].
With the development of practice, some arbitration tribunals have taken a broader position: even the "unspecified" wording of FPS can include legal and commercial protection. This includes, in particular, the right to access effective judicial protection against interference in investments. The argument in favor of this approach is the meaning of the word full, as well as the close relationship between the FPS standard and the fair and Equitable mode (FET) standard. both in context and in history [5].

The State’s obligation to ensure full protection and security is not absolute. The State is not responsible for every incident that has harmed an investor, unless it has been negligent. The main criterion is the reasonableness of the measures that could be taken under the circumstances, taking into account the real capabilities of the state [6].

Thus, each case requires an individual assessment: how predictable the risk was, what resources the State had at its disposal, and what measures it took to protect investments.

An illustrative example of the application of the FPS standard is the case of Frontier Petroleum Services Ltd v. The Czech Republic (2010), which demonstrated that the State’s obligation to ensure full protection and security is not absolute. The provision of legal protection under this standard is possible only in exceptional cases when the actions of government agencies go beyond the limits of reasonableness, good faith or equal treatment [7].

The Canadian company Frontier has obtained arbitration awards in Sweden against the Czech company MA. However, when Frontier tried to recognize and enforce the judgments in the Czech Republic, the local courts refused, citing the provisions of the New York Convention and "public policy." The company filed a lawsuit with the investment arbitration, claiming that the Czech Republic violated the standards of fair treatment and full protection and security.

The Arbitration Tribunal rejected the claims. He found that:
The refusal of the Czech courts to recognize the decisions was not arbitrary, discriminatory or unfair.;
The Czech Republic’s interpretation of the concept of "public order" was within reason;
Giving Frontier priority in the MA bankruptcy case could violate the principles of equality of creditors and fair asset allocation, which in itself is a generally accepted element of public policy.
Thus, the tribunal concluded that the Czech Republic had not violated its obligations under the FPS standard.

The Full Protection and Security standard remains an important tool for protecting foreign investments, but its content and scope of protection depend on the specific wording in the contract and on the approach of a particular arbitration tribunal. In practice, it covers both the physical protection of investments and, in some cases, access to effective legal protection. However, States are not obligated to prevent every potential harm; the key criterion remains the reasonableness of their measures.

[1] Christoph Schreuer, The ICSID Convention: A Commentary, Cambridge University Press, 2009.
[2] Rudolf Dolzer and Christoph Schreuer, Principles of International Investment Law, Oxford University Press, 2012, p. 161–170.
[3] OECD, Fair and Equitable Treatment Standard in International Investment Law, Working Papers on International Investment, 2004/03.
[4] Asian Agricultural Products Ltd. (AAPL) v. Republic of Sri Lanka, ICSID Case No. ARB/87/3, Final Award, 27 June 1990.
[5] Saluka Investments BV v. The Czech Republic, UNCITRAL, Partial Award, 17 March 2006.
[6] Pantechniki S.A. Contractors & Engineers v. Albania, ICSID Case No. ARB/07/21, Award, 30 July 2009.
[7] Frontier Petroleum Services Ltd v. The Czech Republic, UNCITRAL, Final Award, 12 November 2010.