Modern Forms of Expropriation by Anne K' Hoffmann

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Modern Forms of Expropriationby Anne K.
Hoffmann

• Protection of Foreign Investments through Modern
  Treaty Arbitration Diversity and Harmonisation
• Zurich, Switzerland 7 March 2008

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Expropriation

• Classic form
• direct expropriation
• outright and overt taking of property
• Modern form
• indirect expropriation
• erosion of rights associated with ownership
• through state interference

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Different terms used to describe indirect
expropriations

• measures tantamount to expropriation
• measures equivalent to expropriation
• de facto expropriation
• disguised expropriation
• consequential expropriation
• regulatory expropriation

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Criteria used to determine indirect
expropriations

• Substantiality of interference (sole effect
  doctrine)
• deprivation not merely ephemeral (Tippetts,
  Abbett, McCarthy, Stratton v. TAMS-AFFA
  Consulting Engineers of Iran, Award of 22 June
  1984, 6 Iran-US CTR 219,225)
• covert or incidental interference with the use
  of property which has the effect of depriving the
  owner, in whole or in significant part, of the
  use of reasonably-to-be-expected economic benefit
  of property (Metalclad Corp. v. Mexico, Award of
  30 August 2000, para. 103)
• lasting removal of the ability of an owner to
  make use of its economic rights (S.D. Myers Inc.
  v. Canada, Partial Award of 13 November 2000,
  para. 23)
• persistent or irreparable obstacle to the
  Claimants use, enjoyment or disposal of its
  investment (Generation Ukraine Inc. v. Ukraine,
  Award of 16 September 2003, para. 20.32)

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Criteria used to determine indirect
expropriations

• Duration of the interference
• Does the interference have to be permanent
  and irreversible?
• Failure to act
• Do omissions trigger state responsibility?

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Criteria used to determine indirect
expropriations

• 2. Intentions of the state
• often mentioned, but not decisive
• exception
• the Award in CCL v. Kazakhstan in which the
  Tribunal rejected an expropriation claim on the
  basis that Claimant had not shown that any
  motivation to expropriate lay behind any of the
  governments actions (see Final Award 2004, 1
  SIAR 123, 173 (2005))

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Criteria used to determine indirect
expropriations

• Investment-backed expectations of the investor
• reliance upon a stable regulatory and business
  environment without fundamental changes during
  the course of the investment with the ultimate
  effect of jeopardising the reasonable
  expectations of the investor
• (for example Thunderbird Gaming v. Mexico, Award
  of 29 January 2006, para. 147)

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Criteria used to determine indirect
expropriations

• The requirement of proportionality
• a serious urgent situation, crisis, need or
  social emergency could be weighed against the
  deprivation or neutralisation of the economic or
  commercial value of the Claimants investment to
  lead to the conclusion that an otherwise
  expropriatory regulation does not amount to an
  expropriation under the Agreement and
  international law
• (Tecmed v. Mexico, Award of 29 May 2003, para.
  139)

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Indirect expropriation and the states right to
regulate

• state takes measures in connection with its
  right to regulate and exercise its public order
  function
• does measure taken for a public purpose
  automatically lead to the presumption that this
  measure does not constitute an expropriation?
• such a general exemption would lead to a
  gaping loophole in international protection
  against expropriation
• (Pope Talbot v. Canada, Award of 26 June
  2000, para. 99)

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Thank you

• The author can be contacted under
• akhoffmann_at_pplex.ch