II. Types of expropriation
Expropriation can be direct or indirect:
Most investment treaties contain provisions on 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
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
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
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