Study on the concretisation of the “fair and equitable treatment” clause in the field of energy investment within the Shanghai Cooperation Organisation

Abstract

In the field of energy investment within the Shanghai Cooperation Organisation (SCO), the fair and equitable
treatment (FET) clause is constrained by a dual set of impediments: its inherent abstraction and an interpretive tradition shaped by Western-centric premises. As a result, it has fallen into a triple predicament of dysfunction—fragmented rule articulation, a skewed normative orientation, and an adversarial dispute-settlement structure—thereby failing to effectively accommodate the core need of balancing host States’ legitimate regulatory authority with the protection of investors’ rights and interests in energy-investment contexts. To address these deficiencies, this study takes the Shanghai Spirit—mutual trust, mutual benefit, equality, consultation, respect for cultural diversity, and pursuit of common development—as its jurisprudential foundation, and proposes a pathway for constructing a more concretised FET clause. On the substantive plane, it advocates reconstructing the principal standards of application—such as legitimate expectations, dynamic stability, and a public-interest exception—through a closed-list technique of enumerated grounds. On the procedural plane, it proposes establishing a progressive dispute-settlement mechanism of  consultation–mediation arbitration, while strengthening functions of early-stage dispute prevention. The central objective of this jurisprudential reconstruction is to transform the FET clause from a rigid remedial instrument into a governance norm marked by both balance and flexibility. This approach aims to promote a shift in regional energy investment governance from arbitrationcentricity toward a model of consultative co-governance, ultimately offering Global South countries a development-rightoriented paradigm for international investment rule making.