Expropriatory and Non-Expropriatory Takings Under International Investment Law

Abstract

The question of expropriation is at the heart of modern foreign investment law, yet remains an area of great uncertainty and ambiguity. Neither treaty law nor existing jurisprudence provides clarity on the questions of when government action amounts to an expropriation or what to do if does.This Article provides a framework for approaching questions of expropriation that helps understand the key questions that must be addressed by investment tribunals or, for that matters, host countries and investors. We begin with the neutral category of takings, meaning any government action that negatively affects that value of an investment. We argue that a taking that is more than de minimis is an expropriation unless it promotes public welfare (which we also term “super public purpose”) or is incidental to normal government activity. Whether the taking is an expropriation or not, we must next ask if it is unlawful. As is well known, an expropriation is lawful if it is made for a public purpose, is non-discriminatory, satisfies due process, and if the required compensation is paid. Whether lawful or not, the taking must not violate the fair and equitable obligation. Finally, the Article considers the compensation owed (if any) under each of the four categories constructed above: a lawful expropriation, an unlawful expropriation, an unlawful non-expropriatory taking, and, of course, a lawful non-expropriatory taking. Our approach to questions of expropriation cannot offer a simple and obvious result in every dispute. No discussion of the topic could do so. It does, however, guide the analysis and identify the key questions that must be answered in order to determine the legal implications of a governmental taking. In so doing, it offers a more coherent view of the international investment law of expropriation.