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Part I The Concept of Expropriation, 2 Applicable Law »

From: Expropriation in Investment Treaty Arbitration
Johanne M. Cox
This chapter considers the laws that are applicable to expropriation in investment treaty arbitration, including international law. It begins with a discussion of the local law of the host State on expropriation, which offers constitutional protections with regard to property rights, the circumstances in which expropriation is permissible and the payment of compensation. It then examines the role of international law in bilateral investment treaties (BITs) ad other international treaties such as NAFTA and ECT, along with the ICSID Convention that includes a mechanism allowing the arbitral tribunal to decide which law will apply to an investment dispute. It also explains how investment treaty arbitration is initiated under a combination of treaties as well as the option available to foreign investors to institute ad hoc UNCITRAL arbitration. The chapter cites a number of relevant international cases that illustrate which law should apply to expropriation in investment treaty arbitration.

Part I The Concept of Expropriation, 4 The Concept of Expropriation in Investment Treaty Arbitration »

From: Expropriation in Investment Treaty Arbitration
Johanne M. Cox
This chapter examines the concepts of direct and indirect expropriation as well as the conditions for lawfulness of expropriation in investment treaty law and customary international law. It first explains the distinction between two broad catagories of expropriation, namely direct and indirect takings, and the different manifestations of direct expropriation (nationalisation, specific takings, requisition, and confiscation). It then describes the four common forms of indirect expropriation: creeping expropriation, regulatory expropriation, contractual expropriation, and judicial expropriation. It also considers efforts at codification of expropriation of customary international law and how investment treaty tribunals recognise the distinction between direct and indirect expropriation. Finally, it explores lawful expropriation vs. illegal, wrongful or unlawful expropriation, taking into account the conditions of legality under customary international law, bilateral investment treaties (BITs) and international investment treaties. A number of cases are given to illustrate whether the State has breached the treaty conditions of legality.

Part IV Concluding Remarks, 15 Concluding Remarks »

From: Expropriation in Investment Treaty Arbitration
Johanne M. Cox
This concluding chapter discusses certain principles on expropriation that are settled as well as the fundamental tensions in the case law that continue to exist. The settled principles include the following: expropriation is not per se unlawful under international law; a wide array of property rights, including tangible and intangible assets, can be expropriated; the customary international law remedy for unlawful expropriation is the principle of full reparation. On the other hand, some of the tensions that exist relate to the legality requirements for expropriation; whether omissions or acts can constitute expropriatory acts; the role of legitimate expectations and proportionality in the test for indirect (regulatory) expropriation; the concept of partial expropriation; and whether the HULL standard represents customary international law today. The chapter concludes by revisiting the question of whether any of the settled principles in the case law translate into — or otherwise manifest themselves — in customary international law.

Part II The Test for Expropriaton, 8 Contractual Expropriation »

From: Expropriation in Investment Treaty Arbitration
Johanne M. Cox
This chapter examines the concept of contractual expropriation. It considers various cases that affirm the principle that contract rights can be expropriated, including Chorzow Factory, Phillips Petroleum Company v Islamic Republic of Iran, Consortium RFCC v Morocco, Eureko BV v Poland, Vigotop Limited v Hungary, Impregilo S.p.A. v. Islamic Republic of Pakistan, Azurix Corp v the Argentine Republic, and Biwater Gauff (Tanzania) Ltd., v. United Republic of Tanzania. Other cases illustrate the distinction between breach of contract and expropriation, such as those brought by Canadian investors against Venezuela under the Canada–Venezuela BIT signed on 1 July 1996: for example, Vannessa Ventures Limited v Venezuela and Crystallex International Corporation v Venezuela.

Part II The Test for Expropriaton, 6 Creeping Expropriation »

From: Expropriation in Investment Treaty Arbitration
Johanne M. Cox
This chapter focuses on creeping expropriation, a form of indirect expropriation which often manifests itself in cases of regulatory, contractual and judicial expropriation. There are two main points to consider in instances of creeping expropriations in investment treaty arbitration: first, the measures in the chain of events which are said to constitute the expropriation, and second, the final act or omission which crystalises the taking (that is, the measure that becomes the ‘final straw’). The chapter discusses several cases of creeping expropriation, including three handled by the Iran–US Tribunal: Phelps Dodge Corp v Islamic Republic of Iran, Amoco International Finance Corporation v Islamic Republic of Iran, and Phillips Petroleum Company v Islamic Republic of Iran. Investment treaty tribunals have also recognised the concept of creeping expropriation in cases such as Waste Management, Inc. v. United Mexican States and Generation Ukraine v. Ukraine.

Part II The Test for Expropriaton, 10 Expropriation and Other Treaty Standards »

From: Expropriation in Investment Treaty Arbitration
Johanne M. Cox
This chapter examines expropriation and other treaty standards. It begins with a discussion of expropriation protection in investment treaties as an autonomous standard to other treaty protections, including fair and equitable treatment (FET), full protection and security, national treatment, most-favoured nation treatment, and the umbrella clause. It then considers the overlap that can occur between certain aspects of expropriation and other treaty standards; for example, with respect to non-discrimination or due process. It also looks at cases in which investment treaty tribunals have taken into account the overlap of due process (FET) and non-discrimination (FET, national treatment), the overlap of denial of justice in FET and indirect (judicial) expropriation, and the overlap of legitimate expectations in FET and indirect (regulatory) expropriation when deciding on the lawfulness of indirect expropriations. The chapter concludes by analysing substantial deprivation as a requirement in expropriation.

Expropriation in Investment Treaty Arbitration »

Johanne M. Cox

General Editor’s Preface »

From: Expropriation in Investment Treaty Arbitration
Johanne M. Cox

Index »

From: Expropriation in Investment Treaty Arbitration
Johanne M. Cox

Part III Remedies, 14 Interest »

From: Expropriation in Investment Treaty Arbitration
Johanne M. Cox
This chapter examines how interest is awarded in investment treaty arbitration. It discusses the main factors that determine the interest awarded by investment treaty tribunals: the date of accrual of the interest; the interest rate; whether to award simple interest or compound interest, or a combination of both or an adjustment of one or the other; and whether to calculate pre- and post-award interest on different bases or the same basis, or award interest without considering pre- and post- award interest separately. It also tackles the question of whether the treaty standard of interest should apply in unlawful expropriation and cites a number of cases that illustrate how tribunals apply customary international law remedies, including interest, if expropriation is illegal. Other cases highlight the application of the legal interest rate as opposed to a commercial rate, as well as the issue of whether to award simple or compound interest.

Part II The Test for Expropriaton, 9 Judicial Expropriation »

From: Expropriation in Investment Treaty Arbitration
Johanne M. Cox
This chapter examines judicial expropriation, a form of indirect expropriation also known as takings by decisions of national courts. According to the ILC Articles, the conduct of national courts as the judicial organ of the State can be considered an act of the State under international law, and that a denial of justice by the courts of the State in proceedings brought by the other contracting party constitutes a breach of international law. Two issues divide investment treaty tribunals: whether denial of justice is a requirement for judicial expropriation, and whether exhaustion of local remedies, a requirement for denial of justice, is also a requirement of judicial expropriation. These issues are illustrated in a number of cases, such as Loewen Group Inc and Loewen v The United States, Generation Ukraine Inc v Ukraine, Saipem SpA v. The People's Republic of Bangladesh, and GEA Group Aktiengesellschaft v Ukraine.

List of Abbreviations »

From: Expropriation in Investment Treaty Arbitration
Johanne M. Cox

Part III Remedies, 13 Methods of Valuation »

From: Expropriation in Investment Treaty Arbitration
Johanne M. Cox
This chapter considers a variety of methods used in the valuation of damages in investment treaty arbitration. The method of calculating damages in investment treaty arbitration depends primarily on which of the alternative methods of valuation, either singularly or in combination, is deemed appropriate by the tribunal in a case. The valuation is also contingent upon the valuation date determined by the tribunal. There are two approaches for calculating damages in investment treaty arbitration: forward-looking methods and backward-looking methods. The chapter first explains forward-looking approaches, which include income-based models such as the discounted cashflow (DCF) method, and market-based models such as the ‘Quoted Market Price’ (QMP) approach. It then examines backward-looking approaches, which include asset-based models (liquidation valuation method, replacement value, book value method) and cost-based models. It also describes alternative methods of valuation adopted by arbitral tribunals and cites a number of cases relevant to valuation of damages.

Part I The Concept of Expropriation, 1 Overview »

From: Expropriation in Investment Treaty Arbitration
Johanne M. Cox
This chapter provides an overview of expropriation and how it is applied in investment treaty arbitration. It first considers the concept of expropriation under customary international law and its relevance today as bilateral investment treaties (BITs) continue to proliferate, along with regional and multilateral agreements such as the 1981 OIC Agreement, the 1992 North America Free Trade Agreement (NAFTA), the 1994 Energy Charter Treaty (ECT), the 2006 Dominican Republic–Central America–United States Free Trade Agreement (CAFTA–DR), and the 2009 ASEAN Comprehensive Investment Agreement. The chapter also traces the historical evolution of expropriation in international law, from the UN General Assembly Resolutions of the 1960s and 1970s to the emergence of international investment treaties as an influential factor in the formation of customary international law.

Part II The Test for Expropriaton, 7 Regulatory Expropriation »

From: Expropriation in Investment Treaty Arbitration
Johanne M. Cox
This chapter focuses on regulatory expropriation, asking what criteria must be met for regulatory measures to be considered expropriation and — where regulatory measures constitute expropriation — whether the State is liable to compensate the foreign investor. After describing the different types of regulatory measures identified by investment treaty tribunals in cases of alleged indirect expropriation, the chapter examines bona fide regulation exercised in the police powers of the state and how tribunals determine whether bona fide regulation is capable of constituting compensable expropriation. It also discusses the test used in determining regulatory expropriation in investment treaty arbitration, taking into account six factors that have been applied by tribunals: non-discrimination, the degree of interference or impact on the investment, the government's intent and purpose of the measure, the reasonableness of the measure, the legitimate expectations of the investor, and the proportionality between the impact of the measures and public policy.

Part III Remedies, 11 Remedies in Customary International Law »

From: Expropriation in Investment Treaty Arbitration
Johanne M. Cox
This chapter examines the remedies for international wrongful acts under customary international law and how they can apply to cases of expropriation in investment treaty arbitrations in two instances. It first considers the two principal sources of customary international law for remedies in investment treaty arbitration, namely: the Chorzow Factory case and the ILC Articles. The Chorzow Factory case distinguishes between lawful expropriation and expropriation which is illegal, wrongful, or unlawful, and the consequences that follow: for lawful expropriation, the remedy is the treaty standard of compensation; for unlawful expropriation, the remedy is full reparation. The chapter also explains the relevant provisions of the ILC Articles with regard to reparation (restitution, compensation and satisfaction), interest, contribution and moral damages. A number of cases dealing with these various remedies are discussed.

Part I The Concept of Expropriation, 3 Rights and Interests Protected Under Investment Treaties »

From: Expropriation in Investment Treaty Arbitration
Johanne M. Cox
This chapter examines which rights and interests are protected as investments under investment treaties in the context of expropriation. It first considers the meaning of investment, taking into account the definitions given by investment treaties. Many bilateral investment treaties (BITs) identify a non-exhaustive list of assets that may comprise an investment, such as shares, stock, and other forms of equity participation in an enterprise; bonds, debentures, other debt instruments, and loans; futures, options, and other derivatives; and intellectual property rights. The NAFTA contains an exhaustive definition or what constitutes and does not constitute an investment. The chapter proceeds by discussing the relevance of property rights in national law, the test used in ICSID arbitrations to define investment, and the question of whether separate assets may be regarded as a single investment. Finally, it tackles the issue of whether goodwill and market share constitute an investment.

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From: Expropriation in Investment Treaty Arbitration
Johanne M. Cox

Part III Remedies, 12 The Standard of Compensation »

From: Expropriation in Investment Treaty Arbitration
Johanne M. Cox
This chapter focuses on the standard of compensation as an important factor in determining the compensation for expropriation of an investment in investment treaty arbitration. It first provides an overview of the treaty standard of compensation, taking into account the so-called HULL formula — the requirement to pay ‘full compensation’. It then explains the standard of compensation for unlawful expropriation, along with the importance of the date of valuation date in lawful expropriation. It also considers cases that illustrate how investment treaty tribunals apply the treaty standard of compensation and customary international law, as well as assess damages in accordance with the foreign investor's expectation at the time of the expropriation. Finally, the chapter revisits CME Czech Republic v Czech Republic, a case which demonstrates the merit (or otherwise) of re-conceptualising the approach to damages.

Table of Cases »

From: Expropriation in Investment Treaty Arbitration
Johanne M. Cox