Research On Legal Issues Of Indirect Expropriation In International Investment

The expropriation has always been one of the most contentious issues in the field of international investment protection. Especially after the1970s and1980s, a more hidden expropriation methods-indirect expropriation gradually has been becoming the focus of people’s attention. Due to the close link between indirect expropriation and government management measures, governments, not only the developing countries, but also the developed countries, were sued to indirect expropriation more than one times which affected the government’s normal government administrative rights to foreign investors. So the indirect expropriation, mainly on the identification of indirect expropriation, causing widespread concern and controversy in theory and practice. However, on the identification of indirect expropriation, there is no uniform regulations in the international treaties, and the Scholars viewpoints are contradictory, each arbitral tribunal also has different arbitration practices on this question at the same time, which further lead to the uncertainty of the indirect expropriation’s identification. China on the one hand as the host country to attract foreign investment, need to effective exercise the economic management power on the foreign investers;on the other hand as Capital-exporting countries, China has taken avtive measures to protect the overseas investors rights. Therefore, the study of Indirect expropriation identified issues will have great significance in improving indirect expropriation legislation, maintaining our government’s power on foreign economic management, and providing theoretical support on protect the legitimate rights of overseas investors.By using comparative analysis and case studies, the author expounds the related theories of indirect expropriation, empirical analyses the international arbitration cases. On the basis of this analysis, the author sums up the general method of identification on indirect expropriation, and puts forward the legal countermeasures for China in response to indirect expropriation.In addition to the introduction and conclusion, this paper is divided into four parts.The first part discusses the general theory of indirect expropriation, including the arisen and substance of indirect expropriation, and the relevant provisions in international treaties related to indirect expropriation. As a management activity taken by a government, indirect expropriation doesn’t directly deprive the property rights of investors, but it has the equivalent effect as the direct expropriation, which affects the investors’normal rights to exercise their investment property. Because of very similar performance between indirect expropriation and government foreign management rights, and the establishment of indirect expropriation relates to the various conflicts of interest. So, the issue of identification of indirect expropriation becomes the focus between nations. Relevant international treaties have specific provisions on the expropriation, but didn’t have the direct provision on indirect expropriation.The second part discusses the the theoretical arguments on the identification the indirect expropriation, including the three test on identifying the indirect expropriation, secondary considerations,and the introduction of the principle of proportionality. Traditional international investment law scholars have three debating standards on identification the indirect expropriation, they are sole effect test, purpose test, effect and purpose test. Comparatively speaking,effect and purpose test is a more reasonable standard in identifying the indirect expropriation. From the practice of arbitration, each arbitral tribunal has its own characteristics on the identification of indirect expropriation, and judge the indirect exprorpiation in different perspectives, such as the interference to the investor property, the duration of government behavior, investors’ reasonably reliance, and government specific commitnent.In addition, the principle of proportionality on traditional administrative law is introduced into the field of international investment, which provides the specific method on the identification of indirect expropriation.The third part deals with the general method on identifying the indirect expropriation. Through the previous discussion, the author summs up a number of factors in consideration the issue of identification on indirect expropriation, including:the determination of property lines, the purpose and the influence of government’s economic management, the proportionality of the responsibility of the government’s economic management behavior and the responsibility investors’have to bear, The defined ownership of indirect expropriation, and the issue of compensation on expropriation.The fourth part puts forward the legal countermeasures for China in response to the issue of indirect expropriation, based on the international treaties signed by China and the relevant provisions on indirect expropriation in domestic legislation. The author advances that China’s revelent legal provisions on indirect expropriation should limit the lines of property, take the "Agreement Between China and Uzbekistan on the Promotion and Protection of Investment" as reference, actively build the dispute settlement mechanism conducive to domestic investment, and perfect the provision of compensation on indirect expropriation.