This chapter argues that the concept of ‘legitimate expectations’, as interpreted in international investment arbitration, poses challenges for the state while enacting public policy. A state may need to drastically change its legal framework when responding to human rights considerations, potentially leading to a foreign investor’s claim before an arbitral tribunal. A costly award complicates the state’s ability to respond to a crisis, particularly when the foreign investment itself is contributing to the problem. Furthermore, an expectation of stability of the legal framework creates problems, especially for developing countries which need to attract investment while taking steps to reduce deep inequalities. This chapter suggests that investor-state contracts can reduce these tensions by clarifying to both the foreign investor and the arbitral tribunal the expectations of the state regarding human rights obligations. Furthermore, it is advised that states introduce limitations to the concept of ‘legitimate expectations’ at the treaty level.
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