The Ancestry of “Equitable Treatment” in Trade: Lessons from the League of Nations during the Inter-War Period

How the League of Nations applied the concept of ‘equitable treatment’ in fostering international economic co-operation throughout the inter-war period had practical consequences for both modern multilateral trade law and international investment law. The ‘equitable treatment’ clause constructed by a sub-Commission of the League’s Economic Committee in 1933 was later encapsulated in the non-violation nullification and impairment procedural remedy in multilateral trade law. Moreover, a number of scholars have noted that the ‘fair and equitable treatment’ (FET) clause found in the majority of international investment treaties may be connected to Article 23(e) of the Covenant of the League of Nations, emphasizing ‘equitable treatment for the commerce of other Members of the League’. In light of these connections, a historical contribution that examines the League’s understanding of ‘equitable treatment’ should resonate with scholars and policy-makers.

This article analyses the meaning and scope of the concept of ‘equitable treatment’ as it was elaborated by the League during the inter-war period. It finds that the flexible concept of ‘equitable treatment’ was a necessary ingredient in an inter-war multilateral framework that could adapt to rapidly changing economic circumstances. In addition to a brief historical background, the first part of this article explores how the concept of ‘equitable treatment’ was underlying the League’s efforts to build an ‘international community’ to promote economic co-operation, broaden policy-making perspectives, and to achieve economic stability and growth, all without imposing rigid rules upon its Members. The second part of this article examines how a sub-Commission established during the 1933 World Financial and Economic Conference directly applied the concept of ‘equitable treatment’ in a flexible tool to protect the reciprocally guaranteed benefits arising from international commercial treaties, which reinforced its ambitions for a multilateral framework for international economic ‘equilibrium.’ The third part of this article studies how the drafting of the ‘equitable treatment’ clause by the sub-Commission helped to clarify its purpose and function as a flexible remedy at the time. The final part summarizes key lessons and identifies future work.