Host State’s Liability For Destruction To Foreign Investments By Riots: Examining Ethiopian Experience In Light Of International Investment Law Trend

Abstract

FPS clause is a common standard contained in investment treaties that requires the host state to exercise reasonable care to prevent physical injury or harm to foreign investors and their investments. It also consists of guarantees against violations of the investor’s rights by the operations of laws and regulations of the host state. FPS clause extends protection and security to eligible foreign investors against arbitrary actions of both states entities and third parties. Traditionally, the scope of FPS clause was limited to providing physical protection and security. But the contemporary notion of the clause includes legal protection and security in addition to physical protection and security. The objective of this research is to analyze the host state’s liability for damages to FDI by civil riots under FPS clauses of Ethiopian BITs from legal and practical perspectives. The research employs qualitative research methodology.. The findings of the research reveal that a variety of approaches in formulating FPS clauses is employed. In addition, the scope of applicability of the FPS clauses of Ethiopian BITs includes both physical and legal protection and security. It also indicates that the practical aspect of FPS standard in Ethiopia mainly focuses on physical protection disregarding legal protection and security. The research recommends that Ethiopia should adopt a model BIT, employ a separate formulation of FPS and FET clauses and practically extend or implement legal protection and security to eligible foreign investors and their investments.