Originally from Investor-State Arbitration--Lessons for Asia

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I will start with an overview of some of the case law on expropriation and indirect expropriation. I will look at two of the more interesting decisions, Methanex Corporation v. USA and Saluka Investments BV (The Netherlands) v. The Czech Republic. Then I will talk about the overlap between expropriation and the fair and equitable standard in investment treaties and explain how in some of the cases, because of the restrictions on the remedies you have, you may have to exploit the overlap between those two concepts. I will also talk about the restriction of remedies generally. I will give some practical examples, mostly by reference to one of the Asian cases in which I was acting for the Government of India, which was sued for several billion dollars by GE, Bechtel and Enron in relation to the Dabhol power plant. We can see a practical application of some of these points.

What is indirect or creeping expropriation? We talk about indirect expropriation in contrast to direct expropriation, which is actually very rare. In the disputes that we analyse, the state rarely takes or nationalises the property of the investment. It is far more likely that there is an indirect expropriation rather than an outright taking. This has been defined in a series of cases, the most recent of which is Parkerings-Compagniet AS v. Lithuania. It can be understood in terms of the negative consequences of government measures on the investor’s property, which does not involve an outright transfer of the property but a deprivation of the enjoyment of the property by the investor. Often, we talk about a series of stages of actions and the tribunal is often faced with a series of incremental measures by the government. Taken individually they do not amount to an expropriation, but when accumulated they can lead to an expropriation of the investment by the state. In the Argentina case, the analogy was drawn of the straw breaking the camel's back. The conclusion is that the investment has been expropriated.