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 or a lack of due process.3 Others have made findings of judicial expropriation on its own4 (or contemplated that such finding was possible even if judicial expropriation was not found in the case at hand.)5 As a result, the application of the legal concept of “judicial expropriation” by investment tribunals is far from uniform.6
Investment treaty awards dealing with expropriatory measures by national courts have been categorized by literature7 in several forms, including interferences:
III. Overlap with other related standards of protection
Under international law, judicial misconduct could amount to violation of due process, denial of justice and other substantive violations of international law (such as breach of the fair and equitable treatment standard).
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.
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.20 However, as detailed above, it remains a matter of debate whether judicial measures characterized other than a denial of justice may amount to “unlawful expropriations”. For instance, in Eli Lilly v Canada, the ICSID tribunal stated that is “unwilling to shut the door” to this possibility.21
IV. Exhaustion of local remedies
Exhaustion of local remedies is commonly accepted as a substantive requirement for a denial of justice claim (see Exhaustion of local remedies, Section II.B).22 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.23
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”24 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.25
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.
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