7 Expropriation and Compensation

Subject(s):

Compensation — Arbitration — Awards

Expropriation is a core element of the international legal regime relating to foreign investment. The international law relating to expropriation has evolved rapidly within the context of the modern framework for foreign investments, including multilateral treaties, bilateral investment treaties (BITs), and domestic foreign investment laws. This chapter examines the scope and definition of expropriation in the treaties and case law. It reviews how the provisions on expropriation in China's BITs have evolved and considers their scope, and whether they cover indirect or regulatory expropriation which tribunals are more often faced with today. The majority of claims are for indirect or regulatory expropriation and this has prompted states to include provisions in their Model BITs excluding non-discriminatory regulatory actions by a state implemented in the interest of public health, safety, and the environment. The chapter considers the conditions of a lawful expropriation as it is an accepted principle that expropriation is not illegal. Finally, it looks at the level of compensation awarded for an expropriation, one of the more important aspects of this standard of protection.