VII Expropriation

Abstract

This chapter addresses the rules of international law governing the expropriation of alien property. Consistent with the notion of territorial sovereignty, the classical rules of international law have accepted the host State’s right to expropriate alien property. Customary international law placed certain limitations on the host State’s right to take alien property, but even modern investment treaties respect the right to expropriate in principle. Treaty law typically addresses only the conditions and consequences of an expropriation, leaving the right to expropriate as such unaffected. The legality of an expropriation depends on whether these conditions have been met. Practice shows that claims for expropriations relate to a variety of assets, tangible and intangible, and even to arbitral awards. Among intangible assets, the expropriation of contract rights has played an important role in practice. The chapter then looks at how indirect expropriations have gained in importance. An indirect expropriation leaves the title untouched but deprives the investor of the possibility to utilize the investment in a meaningful way. A typical feature of an indirect expropriation is that the State will deny the existence of an expropriation and will not contemplate the payment of compensation.