Judicial expropriation is a debated form of indirect expropriation, which covers situations where a court’s decision contributes, directly or indirectly, to the loss of a foreign investment.1
According to Article 4 of the ILC Articles, the conduct of national courts as the State’s “judicial organ” can engage the State’s liability under international law, and may constitute a judicial expropriation in certain circumstances that raises a number of challenges.2
II. Forms of judicial expropriation
Judicial expropriation is a concept which divides tribunals and commentators alike. Some investment tribunals have been reluctant to find judicial expropriation breaches unless there was also a denial of justice.3 Others have made findings of judicial expropriation on its own.4 As a result, the application of the legal concept of “judicial expropriation” by investment tribunals is far from uniform.5
Investment treaty awards dealing with expropriatory measures by national courts have been categorized by literature6 in several forms, including interferences (i) with the investor’s rights following a Supreme Court decision annulling an ICC award (in Saipem v. Bangladesh, an ICSID tribunal concluded that such judicial taking was tantamount to “measures having similar effects” to an expropriation),7 (ii) with the investor’s property rights (in Sistem v. Kyrgyzstan, the arbitral tribunal held that the State court’s decision deprived the claimant of its property rights in the hotel as if the State had expropriated it by decree, which constituted a measure tantamount to an expropriation of property),8 and (iii) with the investor’s assets (in Tatneft v. Ukraine, although the tribunal ultimately rejected the expropriation claim on various grounds, this award provides a helpful analysis of how judicial acts may contribute to a wider finding of expropriation).9
Eli Lilly and Company v. Canada, ICSID Case No. UNCT/14/2, Final Award, 16 March 2017, para. 224; MNSS B.V. and Recupero Credito Acciaio N.V v. Montenegro, ICSID Case No. ARB(AF)/12/8, Award, 4 May 2016, para. 370; Loewen Group, Inc. and Raymond L. Loewen v. United States of America, ICSID Case No. ARB(AF)/98/3, Award, 26 June 2003, para. 141; Mr. Franck Charles Arif v. Republic of Moldova, ICSID Case No. ARB/11/23, Award, 8 April 2013, para. 415.
III. Overlap with other related standards of protection
A. Overlap with the Fair and Equitable Treatment standard
The fair and equitable treatment standard in investment treaties comprises a number of elements, including:
As a result, there is significant overlap between “judicial expropriation” and various elements of the “fair and equitable treatment” standard. An important caveat is that an investor is not expected to exhaust local remedies before a fair and equitable treatment claim can be brought,13 which is not the case for “denial of justice” claims14 and may not be for “judicial expropriation” claims.15
B. Overlap with the Denial of Justice standard
Denial of justice is a flexible concept that covers mainly serious procedural irregularities, including when the judiciary:
Arbitral tribunals have more often found breaches of the fair and equitable treatment standard where national courts have caused a denial of justice.19 However, it remains a matter of debate whether judicial measures may amount to “unlawful expropriations”. For instance, in Eli Lilly v Canada, the ICSID tribunal stated that is “unwilling to shut the door” to the possibility that judicial conduct characterized other than as a denial of justice may engage the State’s liability.20
IV. Exhaustion of local remedies
Exhaustion of local remedies is commonly accepted as a substantive requirement for a denial of justice claim.21 In the context of expropriation by a court, an investment tribunal has indicated that Exhaustion of local remedies would be required if the claim of “judicial expropriation” also consisted of a denial of justice.22
However, in Saipem v Bangladesh the tribunal stated that it “tends to consider that exhaustion of local remedies does not constitute a substantive requirement of a finding of expropriation by a court”23 but ultimately it did not make any determination to this effect, leaving open the question of whether exhaustion of local remedies is a requirement for “judicial expropriation” claims.
Gharavi, H., Discord Over Judicial Expropriation, ICSID Review, Vol. 33, No. 2, 2018, pp. 349-357.
Mourre, A., Expropriation by Courts: Is It Expropriation or Denial of Justice?, in Rovine, A. (eds.), Contemporary Issues in International Arbitration and Mediation: The Fordham Papers, 2011.
Sattorova, M., Judicial Expropriation or Denial of Justice? A note on Saipem v. Bangladesh, International Arbitration Law Review, 2010.