The Standards Of Identification Of Indirect Expropriation In International Investment Law

The identification of indirect expropriation has always been a key issue in the international investment law,which relates to the conflict between the public authority of the host countries and the protection of private property rights of investors.And with the development of the international investment environment,the competition between the host countries and the investors' home countries has no more been the main character in the field of expropriation and the balance between host countries and investors become the new pursuit of the international society.Thus,it is of great significance to identify the indirect expropriation in the background.There are three doctrines of identifying indirect expropriation in practice,namely sole effect doctrine,sole purpose doctrine and the combination of effect and purpose doctrine.Sole effect doctrine originated from the emphasis on private property rights of the west countries,which tend to protect the interests of investors.According to the doctrine,the identification of indirect expropriation totally depends on the effect of the governments' measures,if only the measures resulting in the consequence that the investors could not enjoy its investments any more,the governments' measures would be identified as indirect expropriation.And the sole purpose doctrine reflects the reiterating of host countries' sovereign rights and the arising attention of public benefits of modern society.The doctrine only focus on the purpose of governments' actions,and if the government has a proper purpose,the actions would not be identified as indirect expropriation and without a compensate to investors even if the investments of investors has been deprived because of the actions.The doctrine of combining the effect and the purpose of the government measures considering both the effect and the purpose of the governments' measures become the mainstream doctrine in identifying indirect expropriation,which pursuing the balance of the benefits of the host countries and the investors complying the developing trend of the international investment law.The sole effect doctrine has been wildly adopted in the Iran-US Claims Tribunal,such as the Tippets case.And the award of ICSID for Metalclad case also reflects the doctrine.Compared with the sole effect doctrine,the sole purpose is less applicable in practice,typical cases are Methanex case and Saluka case.The applicable of the doctrine of combining of effect and purpose,especially the principle of proportionality,is embodied in the lately arbitration award,such as Tecmed case and LG&E case.In the application of the doctrine of combining of effect and purpose,it is the principle of proportionality that attracts academic attention.The principle of proportionality includes the principle of appropriateness,necessity and equilibrium.Although the principle of proportionality provide a guidance for the relationship of the effect and the purpose,but it also caused some objection,as the arbitration tribunal may only based on the principles of necessity and principles of equilibrium to judge the governments' measures and ignore the principle of appropriateness,there is more possibility for a government's measures will be considered as indirect expropriation.As for the comparison of the three doctrines,the sole effect doctrine has the advantages of judicial certainty,but it is too biased towards investors,which is unfavorable to the balance of the interests of the host country and investors.And the sole purpose doctrine is too subjective,and too biased towards the host country,which is difficult to apply widely in practice.The doctrine of combining the effect and the purpose of a government's measures is complying the trend of balancing of benefits of the host countries and the investors in international investment law,which is the mainstream doctrine in identifying indirect expropriation and this article support the doctrine too.However,it is worth noting that the application of the principle of proportionality should be perfected in practice,so as to avoid the expanding risk of government's measures being considered as indirect expropriation.