Pinpointing the Criteria for Unveiling Indirect Expropriation of Foreign Investments: An Analysis of International Investment Law and Investor-State Disputes before International Arbitral Tribunals

Hassanein Mahmoud Soliman Elwakeel, Hesham

doi:10.21608/ijdjl.2021.47156.1017

Pinpointing the Criteria for Unveiling Indirect Expropriation of Foreign Investments: An Analysis of International Investment Law and Investor-State Disputes before International Arbitral Tribunals

Document Type : Original Article

Author

Hesham Hassanein Mahmoud Soliman Elwakeel

Teaching Assistant in Private International Law - Cairo University

10.21608/ijdjl.2021.47156.1017

Abstract

To secure foreign investment inflows, states have constantly concluded treaties concerning the reciprocal encouragement and protection of investments, either in the form of bilateral investment treaties or multilateral ones. These treaties usually include certain guarantees and standards of protection of foreign investments. This article focuses mainly on an essential standard of protection, which is the prohibition of expropriation without compensation, given the atrocious and grave nature of expropriation as a breach of binding international obligations.
On expropriating the property of foreign investors, states usually adopt indirect or creeping approaches by depriving the investors of the value or the benefit of its investment without nationalizing or directly expropriating the investor’s property. This deviates from the established trust in international relations. On the other hand, states may adopt regulations and measures in good faith to protect their national security and health, to preserve the environment as well. Thus, we need to establish what constitutes indirect expropriation while balancing between states’ sovereignty and investors’ legitimate expectations. Accordingly, it became profoundly important to pinpoint the criteria for “unveiling” the states’ measures amounting to expropriation.
Hence, this article aims to determine the established criteria for unveiling indirect expropriation of investments under international law. It also focuses on the decisions of various arbitral tribunals in investor-state dispute settlement (“ISDS”). Finally, it seeks to determine which criterion is the valid one amongst the sole-effect approach, the police powers doctrine, and the balanced approach.

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