II. Types of expropriation
Expropriation can be direct or indirect:
Most investment treaties contain provisions on in Direct expropriation, equivalent measures, or measures with tantamount effect.10 Tribunals have found that the types of measures that can give rise to expropriation is very broad.11
Generation Ukraine Inc. v. Ukraine, ICSID Case No. ARB/00/9, Award, 16 September 2003, para. 20.22; Kinnear, M., Bjorklund, A. and Hannaford, J., Investment Disputes under NAFTA: An Annotated Guide to NAFTA Chapter 11, Oxford University Press, 2006; Schreuer, C., The Concept of Expropriation under the ECT and Other Investment Protection Treaties, Transnational Dispute Management, 2005, p. 36; Reisman, M. and Sloane, R., Indirect Expropriation and its Valuation in the BIT Generation, British Yearbook of International Law, 2003, pp. 115-150.
Schreuer, C., The Concept of Expropriation under the ECT and Other Investment Protection Treaties, Transnational Dispute Management, 2005, pp. 8-11; Middle East Cement Shipping and Handling Co. S.A. v. Arab Republic of Egypt, ICSID Case No. ARB/99/6, Award, 12 April 2002, para. 107; Egypt-Germany BIT (2005), Art. 4(2); Mexico-United Kingdom BIT (2007), Article 7(1); Japan-Lao People's Democratic Republic BIT (2008), Art. 12(1); France-Uganda BIT (2003), Art. 5(2); Germany-Jordan BIT (2007), Art. 4(2).
UNCTAD, Expropriation, UNCTAD Series on Issues in International Investment Agreements II, United Nation, New York and Geneva, 2012, p. 15; Crystallex International Corporation v. Bolivarian Republic of Venezuela, ICSID Case No. ARB(AF)/11/2, Award, 4 April 2016, para. 672; Fireman’s Fund Insurance Company v. The United Mexican States, ICSID Case No. ARB(AF)/02/1, Award, 17 July 2006, paras. 176-177; Técnicas Medioambientales Tecmed, S.A. v. The United Mexican States, ICSID Case No. ARB (AF)/00/2, Award, 29 May 2003, paras. 113-114; Marvin Roy Feldman Karpa v. United Mexican States, ICSID Case No. ARB(AF)/99/1, Award, 16 December 2002, para. 100; Occidental Exploration and Production Company v. The Republic of Ecuador (I), LCIA Case No. UN3467, Award, 1 July 2004, para. 85.
Colombia-India BIT (2009), Art. 6.2; Canada-Jordan BIT (2009), Annex B(13); Canada-Peru BIT (2006), Annex B(13); Canada-Slovak Republic BIT (2010), Annex A; Australia-United States FTA (2004), Annex 11(B); CAFTA-DR (2004), Annex 10(C); Chile-United States FTA (2003), Annex 10(D); Morocco-United States FTA (2004), Annex 10(B); China-Peru FTA (2009), Annex 9; Investment Agreement for the COMESA Common Investment Area (2007), Art. 20.8; Turkey Model BIT, Art. 5.
III. Requirements for a lawful expropriation
Expropriation is not illegal per se under international law. Under most IIAs, an expropriation will be deemed lawful if it fulfils all of the following criteria:14
According to the doctrine of police powers, States are not liable to pay compensation when, in the normal exercise of their regulatory power, they adopt non-discriminatory, bona fide regulations that are aimed at the general welfare, such as public health or safety.19
Schreuer, C., The Concept of Expropriation under the ECT and Other Investment Protection Treaties, Transnational Dispute Management, 2005, p. 2; Compañia del Desarrollo de Santa Elena S.A. v. Republic of Costa Rica, ICSID Case No. ARB/96/1, Award, 17 February, 2000, para. 72; UNCTAD, Expropriation, UNCTAD Series on Issues in International Investment Agreements II, United Nation, New York and Geneva, 2012, pp. 40-44.
The Chorzów Factory case provides the customary international law rules regarding the consequences of a lawful or unlawful expropriation.20 In the case of a lawful expropriation, the investor is entitled only to compensation equating to the losses suffered upon the date of expropriation (damnum emergens).21 Conversely, when an unlawful expropriation takes place, the investor has the right to full reparation,22 which includes not only losses, but also loss of profits (lucrum cessans).23
Reparation can be equal or exceed compensation, but never fall below it.24 Reparation would be higher than compensation when the loss is greater than the value of the expropriated investment.25 Although the value of the investment remains the same irrespective of the legality or illegality of the expropriation, Reparation may include elements additional to the investment’s value in order to re-establish the situation that would have prevailed had the illicit act not occurred.26