Judicial expropriation is a debated form of indirect expropriation, which covers situations where either a court’s decision directly causes the loss of an asset, or where a court’s decision forms part of a series of State measures that cumulatively constitute a creeping expropriation.1
According to Article 4 of the ILC Articles, the conduct of national courts as the judicial organ of the State is considered an act of the State under international law, and may constitute a judicial expropriation only in certain circumstances given that it poses a number of complex conceptual and practical questions.3
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, pp. 60-69; Sattorova, M., Denial of Justice Disguised? Investment Arbitration and the Protection of Foreign Investors from Judicial Misconduct, The International and Comparative Law Quarterly, 2012, Vol. 61, Issue 1, p. 225.
II. Judicial misconduct: difficulties in practice
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.4 Others have made findings of judicial expropriation on its own.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 include (i) interferences with commercial arbitration (in Saipem v. Bangladesh, an ICSID tribunal concluded that the taking of the investor’s rights following a Supreme Court decision annulling an ICC award was tantamount to “measures having similar effects” to an expropriation),7 (ii) interferences with the validity of contracts (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 and concluded that the abrogation of contractual rights is tantamount to an expropriation of property),8 and (iii) seizure of 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; Jiménez de Aréchaga, E., International Law in the Past Third of a Century, Collected Courses of the Hague Academy of International Law, 1978, p. 278; Mansour Fallah, S., Judicial Expropriations - Difficulties in Drawing the Line between Adjudication and Expropriation, Judicial Measures and Investment Treaty Law, 2019, p. 3.
III. Overlap with other related standards of protection
Under international law, judicial misconduct could consist of a procedural violation of due process (which is similar to the standard of denial of justice), but also other substantive violations of international law (such as the fair and equitable treatment standard). As a result, two issues divide investment treaty tribunals: (i) whether denial of justice is a requirement for judicial expropriation, and (ii) whether exhaustion of local remedies (a requirement for denial of justice), is also a requirement of judicial expropriation.10
Saipem S.p.A. v. People's Republic of Bangladesh, ICSID Case No. ARB/05/7, Award, 30 June 2009, para. 181; Loewen Group, Inc. and Raymond L. Loewen v. United States of America, ICSID Case No. ARB(AF)/98/3, Award, 26 June 2003, para. 156; Generation Ukraine Inc. v. Ukraine, ICSID Case No. ARB/00/9, Award, 16 September 2003, para. 20.30.
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 conceptual 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,14 which is not the case for “denial of justice” claims and may not be for “judicial expropriation” claims.
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:
Whilst it is relatively more common for national courts to be found in violation of the “fair and equitable treatment” standard by way of a “denial of justice” claim, the question as to whether judicial acts may also constitute “unlawful expropriations” remains largely unresolved.18 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.19
IV. Exhaustion of local remedies
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”21 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, 2018, pp. 349-357.
Greenwood, C., State Responsibility for the Decisions of National Courts, in Fitzmaurice, M. and Sarooshi, D. (eds.), Issues of State Responsibility Before International Judicial Institutions, 2004, pp. 55-73.
Mantilla Blanco, S., Justizielles Unrecht im Internationalen Investitionsschutzrecht: Zur Verletzung völkerrechtlicher Standards des Investitionsschutzes durch nationale Gerichte, Studien zum Internationalen Investitionsrech, 2016, pp. 147-148.
Sattorova, M., Denial of Justice Disguised? Investment Arbitration and the Protection of Foreign Investors from Judicial Misconduct, The International and Comparative Law Quarterly, 2012, pp. 225 – 235.
Sattorova, M., Judicial Expropriation or Denial of Justice? A note on Saipem v. Bangladesh, International Arbitration Law Review, 2010.