Research On The Legal Issues Of Indirect Expropriation In International Investment

The expropriation has always been an important issue in the field of international investment.Whether it is an international investment treaty or a bilateral or multilateral investment treaty,the expropriation is an indispensable clause.According to the manifestation,the expropriation can be subdivided into two types:direct expropriation and indirect expropriation.The former means that the host government directly remits the assets of foreign investors to the state-owned.The most prominent feature is the direct transfer of ownership.The latter is more complicated because the government does not directly transfer the ownership of assets,but instead adopts such measures as appointing managers,restrictions on remittances,domestic requirements and other effects equivalent to the direct expropriation measures,so it's called the indirect expropriation.The academic research on indirect expropriation mainly focuses on two aspects:recognition standard and compensation standard.As to the standard of recognition,in the early practice of arbitration on indirect expropriation,the arbitral tribunal widely adopted the single effect criterion that as long as the host government's behavior harmed the interests of foreign investors,and reached the same level as direct by imposing the same effect,it can be concluded that indirect expropriation took place,regardless of the purpose of the host government.Obviously,this criterion undisguised shows partiality for foreign investors and is a contempt for the sovereignty of the host nation.In order to combat single-effect criterion,a large number of developing countries have set forth a single-purpose criterion that as long as the purpose of the host government's implementation of the act is to safeguard the public interests of its own country,it is lawful no matter what kind of damage the foreign investor has suffered in that act.This criterion can not help but be overkill.It is true that the purpose of determining the conduct of an indirect expropriation by the government of a host country is a factor that must be considered.However,due to the strong subjectivity of purpose,the arbitration institution as a judge is also difficult to grasp.Single-purpose criterion tends to jeopardize the legitimate rights and interests of investors are not conducive to building a sound investment environment in their own country.Followed by the effect and purpose criterion came into being.It requires balancing the interests of the host government and foreign investors.When considering the effect and objective factors,the damage inflicted on the investors by the behavior of the host government must be proportional to the social and public interests gained by the host country.This is the mainstream standard accepted by academia and arbitration practice at present.The compensation standard for indirect expropriation has also gone through a radical to moderate evolution similar to the criteria for recognition.The early compensation standard is the total compensation,that is,the host government's compensation to foreign investors must be "adequate,prompt and effective." It is clear that all the compensation standards,like the single effect recognition criterion,were the means by which the developed countries used their predominance in the international community to suppress the developing countries at that time.Later,developing countries proposed no compensation standards.With the development of the times,everyone accepts the appropriate compensation standards.China is not only a capital-importing country but also a capital-exporting country.In our current domestic legislation,the provisions imposed on expropriation of international investment are still relatively simple,and there are no provisions on indirect expropriation.Among the international investment treaties and bilateral and multilateral investment treaties signed by our country,there are many provisions on indirect expropriation.Therefore,we can refer to international legal norms,further improve relevant laws and regulations in our country,create a more conducive investment environment for our country to win-win situations,and provide better protection for the"going global" of our enterprises.