Justifying the Protection of Legitimate Expectations in International Investment Law: Legal Certainty and Arbitrary Conduct

Abstract This article argues that legal certainty provides the most compelling justification for recognizing legitimate expectations in international investment law, and that the prohibition on arbitrary conduct provides the most persuasive reason for their protection. After considering other rationales for recognizing legitimate expectations, the article analyses the types of government action typically arising in investment cases through the lens of legal certainty, arguing that the strength of the claim for recognizing legitimate expectations depends on the government conduct at issue, with interference with legal rights or formal decisions generating the strongest claim for recognition, and changes to laws generating the weakest claim. The article discusses the prohibition on arbitrary conduct as the relevant touchstone for protecting legitimate expectations, demonstrates that this interpretation accords with recent treaty innovations, and explains how the expected degree of legal certainty correlates with the risk of arbitrariness in relation to different types of government conduct.