Expropriation in International Investment Law

by

Freya Baetens

• LAST REVIEWED: 23 August 2017
• LAST MODIFIED: 23 August 2017
• DOI: 10.1093/obo/9780199796953-0159

Introduction

Expropriation is the taking of foreign property by a state, whether for public purposes or other reasons. Historic instances of expropriation included outright takings of property, but nowadays expropriation is most commonly a result of indirect governmental measures that have the equivalent effect of a formal taking of property. International law protecting foreigners from the taking of their property began to be incorporated into treaties in the 19th and 20th centuries. Meanwhile, judicial pronouncements, particularly in the aftermath of World War II, paved the way for customary international law on this issue. This included the development of minimum standards for lawful taking of foreign property, including that expropriation must be for a public purpose; applied in a nondiscriminatory manner; carried out with due process of law; and accompanied by payment of prompt, adequate, and effective compensation. Nowadays, the international legal framework for regulating the right to take foreign property is largely contained in international investment agreements (IIAs). IIAs incorporate the minimum standards for lawful expropriatory measures developed in customary international law, but also provide additional rules on the types of property protected, requirements for such protection, and the actions from which property is protected. One of the biggest questions faced by international investment tribunals interpreting IIAs is the distinction between compensable indirect expropriations and legitimate, non-compensable regulatory measures. Arbitral tribunals are also yet to agree on principles for quantifying compensation and criteria for valuing expropriated property. Much of the literature in this article is devoted to these thorny issues.

Textbooks

Expropriation in international law receives detailed consideration in a variety of textbooks dealing generally with the broader subject area of international investment law. These include Bungenberg, et al. 2015; Dolzer and Schreuer 2012; and Muchlinski, et al. 2008, which are all user-friendly texts suited to a variety of audiences, whether advanced students, academics, or practitioners. Nadakavukaren Schefer 2016 is aimed specifically at students and gives only a high-level overview of the law of expropriation. By contrast, Dugan, et al. 2008 engages with the topic at depth making this text more suitable for practitioners and academics. Sornarajah 2010 is unique for its development perspective and its analysis of developments in economics and political science. Likewise, Subedi 2016 stands out for its focus on current controversies in investment law as well as its interaction with other fields of international law. The monograph Dasgupta 2013 and the two-part series Hoops 2015–2016 are dedicated solely to the topic of expropriation, while the edited volume Reinisch 2008 offers a detailed examination of a variety of core investment protections.

• Bungenberg, M., J. Griebel, S. Hobe, and A. Reinisch, eds. International Investment Law: A Handbook. Oxford: Hart, 2015.

  Globalization has led to an increase in new investment treaties and, consequently, disputes, which has introduced a level of complexity into international investment law that demands careful and balanced academic attention. Expropriation and valuation in cases of expropriation receive such attention in this handbook with comprehensive chapters on each topic from experts in the area, Ursula Kriebaum and Irmgard Marboe. See pp. 959–1030, 1057–1081.

• Dasgupta, R. International Interplay: The Future of Expropriation across International Dispute Settlement. Newcastle upon Tyne, UK: Cambridge Scholars, 2013.

  This monograph provides an engaging analysis of the ways in which modern international arbitral tribunals are tackling expropriation-related questions. It gives a systematic account of the current state of the topic, including a look at how international tribunals deal with questions of attribution and causation, and ends by discussing “future battlegrounds” for international tribunals dealing with expropriation claims.

• Dolzer, R., and C. Schreuer. Principles of International Investment Law. 2d ed. Oxford: Oxford University Press, 2012.

  DOI: 10.1093/law/9780199651795.001.0001

  The authors provide an overview of the principles of international investment law with a focus on the law relating to bilateral and multilateral investment treaties. Chapter 6 is dedicated to expropriation and is subdivided into the topics of the right to expropriate, direct and indirect expropriation, and the legality of expropriation. The authors use a survey of cases to illustrate the variety of scenarios in which questions of expropriation arise. See 98–126.

• Dugan, C., D. Wallace, N. Rubins, and S. Borzu. Investor-State Arbitration. Oxford: Oxford University Press, 2008.

  DOI: 10.1093/law:iic/9780379215441.book.1

  As both practitioners and teachers in the field, the authors offer a practical, dependable guide into the current state of investor-state arbitration. They pitch their book at both practitioners and academics given the proliferation of investment treaties and resulting expansion of investment arbitration as a practice area. A chapter is dedicated to the topic of expropriation, which focuses on the problem of indirect expropriation and finishes with a case study of the Metalclad vs. Mexico case. See pp. 429–491.

• Hoops, B., ed. Rethinking Expropriation Law. Papers presented at the Colloquium on Rethinking Public Interest in Expropriation Law, held in Groningen, The Netherlands, 26–28 September 2013. 2 vols. The Hague: Eleven International, 2015–2016.

  This two-part series is the result of a colloquium of an international expert group on expropriation law. In the first book, experts offer insights into the treatment of public purpose/interest-related issues as they are evolving at the national and international levels. Contributions in the second book engage with the context, criteria, and consequences of expropriation adopting national, comparative, and international perspectives.

• Muchlinski, P., F. Ortino, and C. Schreuer, eds. The Oxford Handbook of International Investment Law. Oxford: Oxford University Press, 2008.

  A critical analysis of international law on foreign investment, this handbook analyzes the major approaches to the substantive issues of foreign investment with a chapter on expropriation by expert in this field, August Reinisch. Reinisch focuses on judicial and arbitral practice relating to indirect expropriation, noting its importance in state practice and that it is nowadays the predominant form of expropriation. See pp. 407–456.

• Nadakavukaren Schefer, K. International Investment Law: Text, Cases and Materials. 2d ed. Cheltenham, UK: Edward Elgar, 2016.

  This book provides an introduction to the law of international investment protection using a casebook style aimed at students. Excerpts of major decisions are accompanied by commentary, questions, and insights from a renowned expert in each area. It includes a chapter on expropriation, which gives an overview of the topics of direct expropriation, indirection expropriation, and valuation. See pp. 167–268.

• Reinisch, A., ed. Standards of Investment Protection. Oxford: Oxford University Press, 2008.

  This edited volume offers a detailed examination of standards of investment protection aiming to shed light on the current meaning of such standards as well as emerging trends in the case law. It provides a thorough overview of the law relating to expropriation, including a chapter on the legality of expropriation from Reinisch himself and a chapter on indirect expropriation from a senior practitioner. See pp. 151–204.

• Sornarajah, M. The International Law on Foreign Investment. Cambridge, UK: Cambridge University Press, 2010.

  DOI: 10.1017/CBO9780511841439

  The author delivers a thought-provoking analysis on the development of international law aimed at the protection of foreign investment by multinational corporations. He focuses on treaty-based methods for controlling multinational actors and analyzes developments not only in the law but also in economics and political science. His chapter on the taking of foreign property offers a useful historical overview of the topic in addition to a survey of authorities. See pp. 363–411.

• Subedi, S. International Investment Law: Reconciling Policy and Principle. 3d ed. Oxford: Hart, 2016.

  Standards of treatment available to foreign investors in international law are the focus of this book, which includes detailed examination of the topic of expropriation in various chapters. The author investigates recent trends in case law from both developed and developing country perspectives and attempts to find a balance between competing principles of international law and the law of foreign investment.