Consent, Forced Renegotiation and Expropriation in International Law

Abstract

Expropriation is evolving. In recent times, host states with a desire to redraw the domestic status quo have demonstrated a tendency not simply to ‘take’ property from foreign investors by decree or proclamation. Rather, they are increasingly carrying out their objectives by murkier means; placing pressure on foreign investors to transfer control of their investments under threat of expropriation – that is, by ‘forced renegotiation’. With the transfer taking place with the apparent consent of the investor, the host state muddies what was once perceived as a clear line between legality and illegality in international law. In this context, scholars and tribunals have failed to define properly the concept of ‘consent’ within the definition of expropriation. This has left considerable doubt hanging over the question of whether forced renegotiation can come within the expropriation paradigm. Determining the existence or absence of consent is vital to determining whether an expropriation exists. After reasserting the importance of ‘consent’, this article identifies two divergent approaches to this much neglected issue. First, the ‘broad’ view of consent requires that a consent procured by duress is nevertheless a consent and prevents expropriation being made out. Alternatively, the ‘narrow’ view demands ‘real and substantive’ consent and rejects any agreement of the parties that is not free and informed. Each approach draws support from different comparative materials. The article concludes that while state practice is consistent with the ‘broad’ view, the trend does appear to be towards adoption of the ‘narrow’ view, both in customary international law and in the BIT context. Nevertheless, even if the ‘broad’ view were to be adopted, the investor would not be left without remedy when subject to illegitimate pressure to vary its contractual arrangements. Investors may look for protection in either the bilateral investment treaty framework, which guarantees fair and equitable treatment and prohibits legally unjustified measures, or in what could be characterised as an emerging doctrine of compensable duress under international law.