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Externalization of Effective Legal Protection against Indirect Expropriation

Externalization of Effective Legal Protection against Indirect Expropriation and INTRODUCTION In recent years, direct expropriation' has rarely been seen. States which wish to import capital do not like to be associated with posing a permanent, non-calculable threat to foreign-owned property but prefer to present themselves as places with very stable, reliable and orderly regulatory environments.2 Expropriation, however, has by no means vanished; its execution has just become more subtle. Ambiguous or generously worded laws are "interpreted" in the way that suits certain groups in the government or only enforced when it suits a particular interest; administrative discretion is influenced by factors unrelated to the matter at issue, or administrations fail to conduct their processes in a transparent and comprehensible way. All these measures, turned against a foreign investor, can easily drive him out of business. Virtually all bilateral investment treaties (BITS) and multilateral investment agreements (MITS), therefore, reflect this development and also cover acts of State which may expropriate "indirectly through measures tantamount to expropriation or nationalisation"3 (indirect expropriation�). Moreover, many international investment agreements (IlAs) not only provide rules on (indirect) expropriation but also establish so-called treatment standards "which refer to the legal regime that applies to investments once they have been admitted by the host http://www.deepdyve.com/assets/images/DeepDyve-Logo-lg.png Journal of World Investment and Trade Brill

Externalization of Effective Legal Protection against Indirect Expropriation

Journal of World Investment and Trade , Volume 7 (1): 25 – Jan 1, 2006
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Publisher
Brill
Copyright
Copyright © Koninklijke Brill NV, Leiden, The Netherlands
ISSN
1660-7112
eISSN
2211-9000
DOI
10.1163/221190006X00117
Publisher site
See Article on Publisher Site

Abstract

and INTRODUCTION In recent years, direct expropriation' has rarely been seen. States which wish to import capital do not like to be associated with posing a permanent, non-calculable threat to foreign-owned property but prefer to present themselves as places with very stable, reliable and orderly regulatory environments.2 Expropriation, however, has by no means vanished; its execution has just become more subtle. Ambiguous or generously worded laws are "interpreted" in the way that suits certain groups in the government or only enforced when it suits a particular interest; administrative discretion is influenced by factors unrelated to the matter at issue, or administrations fail to conduct their processes in a transparent and comprehensible way. All these measures, turned against a foreign investor, can easily drive him out of business. Virtually all bilateral investment treaties (BITS) and multilateral investment agreements (MITS), therefore, reflect this development and also cover acts of State which may expropriate "indirectly through measures tantamount to expropriation or nationalisation"3 (indirect expropriation�). Moreover, many international investment agreements (IlAs) not only provide rules on (indirect) expropriation but also establish so-called treatment standards "which refer to the legal regime that applies to investments once they have been admitted by the host

Journal

Journal of World Investment and Trade – Brill

Published: Jan 1, 2006

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