Fair and Equitable Treatment in International Investment Law: The Tension with Pharmaceutical Patent Regulation

Xudong Sun

Simen Owen Academic Proceedings Series, 2026, vol. 6, 20-27

Abstract: This paper examines the tension between the fair and equitable treatment (FET) standard in international investment law and states' regulatory autonomy in pharmaceutical patent governance. As pharmaceutical patents increasingly intersect with trade, investment protection, and public health, the open-textured formulation of the FET standard has expanded into disputes over patent revocation, compulsory licensing, and pricing regulation. This paper argues that the core difficulty is the tendency of investment claims to recast ordinary patent regulation as an issue of investor reliance, thereby compressing the public law character of pharmaceutical regulation into a private law narrative centered on economic injury. The analysis develops three primary claims. First, pharmaceutical patent regulation differs structurally from classic investment administration because it operates within a dynamic knowledge regime characterized by scientific uncertainty and significant distributive effects on public welfare. Second, arbitral tribunals must adopt a more disciplined approach to legitimate expectations, avoiding the inference of regulatory freezes or quasi-vested entitlements based merely on investment-backed patent portfolios. Third, a contextual reading of the FET standard, informed by comparative public law and international health norms, offers a coherent method to reconcile investor protection with domestic policy space. Ultimately, while states remain bound by good faith and procedural fairness, investment law must not serve as an indirect mechanism for constitutionalizing maximal patent protection in the pharmaceutical sector.

Keywords: investment law; pharmaceutical patents; regulatory autonomy; public health; equitable treatment; legitimate expectations (search for similar items in EconPapers)
Date: 2026
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