Originally from World Arbitration And Mediation Review (WAMR)

Preview Page

INDIRECT EXPROPRIATION AND THE

RIGHT OF THE GOVERNMENTS TO
REGULATE CRITERIA TO ARTICULATE
THE DIFFERENCE
By Katia Yannaca-Small*

I. INTRODUCTION
I will focus on the right of the governments to regulate and in particular,
on the criteria for distinguishing between indirect expropriation requiring
compensation and governmental measures impacting an investment but not
requiring compensation.
My comments, based on the outcome of the OECD work, approach this
issue from both a legal and policy angle. Since the policy interests of
governments bear on the intent of their investment treaty provisions, these
two perspectives are inter-related.
OECD member countries have, from the earliest days of their work on
investment agreements, indicated that the protection being accorded against
indirect expropriation was not to inhibit legitimate regulation for the general
welfare. There was an awakening of public concern during the MAI
negotiations that concepts such as indirect expropriation might be applied to
regulatory measures aimed at protecting the environment, health and other
welfare interests of society.
Similar concern developed recently in the investment policy
community, largely prompted by the first cases brought under NAFTA. This
led to discussions in the OECD Investment Committee. A Secretariat survey
reviewed and analysed the jurisprudence, doctrine and state practice.1 The
members broadly accepted the analysis and elements which it extracted.
However, they did not wish to embark upon an effort to draw up
government supported definitions or recommendations on how to deal with
this issue.