The Identification And Compensation Of Indirect Expropriation In International Investment Arbitration

During the process of international investment arbitration,we always face the commercial and political risks inherent in market fluctuations and regulatory changes that may arise from investment.There is a congenital tension between the interest of the host country in administering its domestic sphere and the interest of foreign investors investing in the territory of the host country.Regulation of host country may have a negative impact on foreign investor investment.Expropriation is the possession or deprivation of foreign investor's property by the host country.Indirect expropriation is the secret or accidental interference with the foreign investor's property,with the result that it deprives the owner of all or most of the right to use or reasonably anticipate the economic benefits of the property.In order to determine whether the host country's control measures are indirect expropriation,two conflicting interests must be balanced: the host country's public interests and the foreign investor's rights to their private property rights.When the host country manages its own economic affairs,it is inevitable to touch the interests of foreign investors,and the extent to which the host country can reasonably take control measures against foreign investors and their property to intervene remains unclear.Due to the unclear borders,it is difficult to determine whether the recourse to international arbitration is expropriation or normal government management.The host country and the foreign investor stand on their own stand.The host country side tends to strictly define the scope of indirect expropriation,so that it can manage economic behavior on a broader scale,while the investor and its home country side tend to Broadly define its scope,thereby expanding the protection of its own rights.Backtracking to the root,the fundamental cause is that indirect expropriation belongs to a vague area between the direct expropriation of the host country and the government's legal and reasonable management of economic and social affairs.How to define the behavior of this area? It is of great significance for those who protect their own benefits.Since the 1960 s and 1970 s,the standard of compensation has been controversial.Developed countries generally support the "Hull Principle",while developing countries support the "appropriate compensation" principle,and even some developing countries consider "No compensation" principle applicable.Judging from the existing international investment arbitration practice,the issue of compensation for indirect expropriation is still in a state of "All or Nothing",which is almost in the same line with direct expropriation.That is to say,the part on compensation does not need to distinguish whether it is indirect or direct collection.It only needs to judge whether the host country constitutes collection.Once the host country is deemed to constitute a levy,it will face the situation of requiring full compensation for foreign investors.Conversely,if the host country's measures are not identified as a levy,there will be no compensation at all.This extreme approach means that only one of the host country and the foreign investor can get the benefits,a game of 100% and 0%,which is not beneficial for balancing the interests between the host country and the foreign investor,but has aggravated the host country and the Conflicts of interest for foreign investors.In particular,the compensation standards for indirect collection in international investment arbitration have not been unified so far,and have given considerable discretion to arbitrators.In order to clarify the obligation of levying compensation,most international investment agreements signed by various countries have stipulated the basis of levying compensation,in addition to stipulating that full or appropriate compensation should be paid,but the rules are not very clear.