Regulatory expropriation under international investment law - A case-law analysis

Abstract: While regulatory measures are commonly imposed by states for social, environmental, economical or other reasons and are universally accepted as a part of state sovereignty, they may in various ways adversely affect the interests of foreign investments. Current debates under international investment law centre on whether and when such state interferences, although involving no transfer of legal title from the individual owner to the state, should be regarded as compensatory so called indirect or regulatory expropriations. Most investment treaties and free trade agreements concluded worldwide include expropriation provisions covering indirect expropriation implicitly or with specific clauses to that end. As those legal documents generally provide no more than vague and open-ended provisions on the subject, however, the scope of the term has largely been left for international courts and tribunals to determine based on general rules of international law. The thesis analyses selected case-law on regulatory expropriations under the IUCT, ICSID and UNCITRAL. It explores the standards applied by different tribunals when determining the legal qualification of measures at issue and inquires whether any general guidelines may be found in establishing the line between non-expropriatory regulatory measures and indirect expropriations. The material is divided into four main criteria commonly considered by tribunals and identified in literature on the subject, namely (i) the level of interference, (ii) legitimate expectations of the investor, (iii) state intent&semic and (iv) object and purpose. It is concluded that the international jurisprudence in this area seems to be characterized by highly case-specific reasonings and a scarcity of consistent patterns. Although the four outlined criteria may serve as a helpful framework, the extent to which these are considered, as well as their interpreted practical meaning and scope, vary significantly in the analyzed cases.