Compensation in the event of expropriation includes the payment of interest from the date of expropriation.45 Most contracts that explicitly address this issue provide for the payment of interest at an economically reasonable rate for the currency in which the payment is made.46 Whereas previous authorities preferred simple interest rates,47 the prevailing practice today is 48 At least one arbitral award recognized “case law”. constant” in favour of compound interest, but nevertheless granted interest on a simple and straightforward basis because of the circumstances of the case.49 Direct expropriation is a mandatory legal transfer of ownership of the property or its complete physical seizure.8 Direct expropriation has become rare.9 This book focuses on the standards of treatment of foreign investors under international law. This includes a detailed discussion of the subject of expropriation in various chapters. The author examines current trends in jurisprudence from the perspective of developed and developing countries, attempting to strike a balance between competing principles of international law and foreign investment law. IV. Different Considerations of Arbitral Tribunals in Relation to an Expropriation Request The tribunal`s breakdown of the various elements governing the design of an expropriation claim is instructive and based on the applicable provisions at issue. For example, in Fireman`s Fund v. Mexico, the tribunal summarized the elements to be considered when a request for expropriation under NAFTA would be made.20 In the 1938 Mexican Oil Expropriation case, the U.S. government stated that the legality of expropriating property or assets depended on the payment of compensation. The authors provide an overview of the principles of international investment law with a focus on the law of bilateral and multilateral investment treaties. Chapter 6 is devoted to expropriation and is divided into topics of the law of expropriation, direct and indirect expropriation and the legality of expropriation.
Using a case overview, the authors illustrate the variety of scenarios in which expropriation issues arise. See 98-126. If the owners are not satisfied with the amount of compensation or the reason for the expropriation, they can challenge the government in court in both cases. At least one court has found that the right to formal negotiations cannot be expropriated.40 The claimant should own a protected investment.2726 Acquired rights may also be subject to expropriation.28 Local law may be relevant in this regard.29 Moreover, in assessing whether the expropriation has occurred, courts have often treated the investment “as a whole”.30 If the expropriation is lawful, the market value must be determined immediately before the expropriation occurs or is disclosed (whichever comes first). The formula is intended to exclude adverse effects on the value of the investment of a government announcement to expropriate the investor`s property. However, establishing an appropriate valuation date can be a complex task in indirect expropriation cases, where there is no formal transfer of ownership and therefore no clear expropriation date can be determined.42 There are a number of words to describe indirect expropriation. To name a few, “equivalent”, “de facto”, “creeping”, “veiled”, “equivalent” or “consecutive” expropriation. The terminology `equivalent to` appears in Article 1110(1) of NAFTA and in certain BITs (see, for example, Article 4(2) of the 2001 Germany–Bosnia and Herzegovina BIT), while the term `equivalent` is used in Article 13(1) of the Energy Charter Treaty (`the ECT`) and in BITs (see, for example, Article 5 of the 2000 UK–Sierra Leone BIT).
[17] While direct expropriation is easy to identify, indirect expropriation is much less clear. For the latter, the focus is not on development, but on the impact of government action on investment, as explained below. Under customary international law, the foreign investor must be compensated if the host State expropriates its property (even if the expropriation was not illegal). [9] Most tribunals ruling on similar requirements stipulate that States must make an offer to the investor in good faith, at least before the expropriation measure:[10] In this context, article 36(1) of the ILC draft provides that “[t]he State responsible for an internationally wrongful act is under an obligation to make reparation for the injury caused by it: to the extent that such damage is not remedied. In commentary No. 22 to article 36, the ILC draft proposed a “fair market value” method for compensation for expropriations: the investor could file a claim with a court, which had to identify the situation as an expropriation. Even if the investor wins the case, the amount of compensation is not defined by the market value of the property. The use of restitution as a means of redress is unusual. While many courts have recognized their power to order restitution, they have also recognized practical or legal impossibilities that may arise.54 Only property rights (which can be alienated or transferred) can be expropriated, as opposed to personality rights.31 As noted above, indirect expropriation focuses on the degree of deprivation suffered by the investor.
and not the form of the State measure(s). [16] Globalization has led to an increase in new investment treaties and, consequently, disputes, which has led to a complexity of international investment law that requires careful and balanced academic attention. Expropriation and expropriation valuation receive this attention in this handbook with full chapters on each topic by experts in the field, Ursula Kriebaum and Irmgard Marboe. See pp. 959-1030, 1057-1081.