Identification Of Indirect Expropriation In The International Investment

Expropriation is one of the essential clauses in international investment agreements. Nowadays, direct expropriation which is characterized as transfer of ownership has almost disappear, while the issue of indirect expropriation arises which has the effect tantamount to direct expropriation without directly depriving of ownership. Protection against indirect expropriation has been covered in various international legal instruments including bilateral investment agreements, free trade agreements and other international legal instruments. However, the definition and identification of indirect expropriation are usually not clear in international legal instruments. Also, the practice regarding the identification of indirect expropriation by arbitral tribunals is not identical. This thesis will present the criterion and crucial elements for identifying indirect expropriation by reviewing the specification in international investment law and the practice by international arbitral tribunals. Advice on the clause of expropriation in international investment agreements and the protection against risks regarding indirect expropriation will also be provided. Therefore, the thesis is divided into four chapters.The first chapter generally introduces the traditional meaning of expropriation as well as the development of expropriation, and provides the concept of indirect expropriation. Further, this chapter distinguishes indirect expropriation from non-compensable regulation, and distinguishes legal indirect expropriation from illegal expropriation. Besides, this chapter discusses the target and method of expropriation.The second chapter presents the identification of indirect expropriation in international investment agreements. The clause of expropriation is essential in bilateral investment agreement, free trade agreement and other legal instruments. This chapter introduces different types of expropriation clause in defining and identifying expropriation, provides the recent development of expropriation clause in international investments, and analyzes the more detailed definition and identification of indirect expropriation in such development.The third chapter discusses the criterion for identifying indirect expropriation in the practice of international arbitral tribunals. The arbitral tribunals usually focus on the effect and intent of the government measures to identify indirect expropriation. Thus, several criteria for identification of indirect expropriation are raised by scholars according to the practice of arbitral tribunals:sole effect test, purpose test and proportionality. Except from the effect and intent, the elements such as the legitimate investor expectations, transparency and due process are also considered by arbitral tribunals in practice.The fourth chapter introduces the expropriation provisions in China’s laws and the bilateral investment agreements and free trade agreements involved with China. Besides, based on cases, the chapter analyzes the risk faced by China as host country and capital exporting country, and further provides suggestions on the expropriation clauses and protection against risks.