Originally from World Arbitration And Mediation Review (WAMR)

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THE DISTINCTION BETWEEN LAWFUL

AND UNLAWFUL EXPROPRIATION
By Audley Sheppard*

I. INTRODUCTION
Professor Christoph Schreuer, in his paper has expertly summarised the
international law concept of expropriation, including direct, indirect and
creeping expropriation, and regulatory takings.
Professor Schreuer notes in his introduction:
“Expropriation is not illegal per se under international law. It has
always been beyond doubt that a state has a power and the right to
expropriate the property of nationals and of foreigners, in principle.
But a legal expropriation of foreign owned property is subject to
certain conditions. These conditions are commonly referred to as a
public interest, absence of discrimination, due process of law and
compensation that is prompt, adequate and effective.”1
This statement describes the position both in customary international
law2 and as prescribed in most investment protection treaties, including the
Energy Charter Treaty (“ECT”) in Article 13.1.3
Article 13(1) of the ECT provides:
“Investments of Investors of a Contracting Party in the Area of any
other Contracting Party shall not be nationalized, expropriated or
subjected to a measure or measures having effect equivalent to
nationalization or expropriation (hereinafter referred to as
“Expropriation”) except where such Expropriation is: (a) for a
purpose which is in the public interest; (b) not discriminatory; (c)
carried out under due process of law; and (d) accompanied by the
payment of prompt, adequate and effective compensation.