Expropriation—investment treaty arbitration
Produced in partnership with Ben Sanderson
Expropriation—investment treaty arbitration

The following Arbitration practice note produced in partnership with Ben Sanderson provides comprehensive and up to date legal information covering:

  • Expropriation—investment treaty arbitration
  • A definition of expropriation
  • Expropriation in the UK Model BIT
  • Different forms of expropriation
  • Direct expropriation
  • Indirect expropriation
  • Creeping expropriation
  • Regulatory measures
  • Compensation
  • Scope of expropriation provisions

Expropriation—arbitration'>investment treaty arbitration

A definition of expropriation

In the context of investment treaty arbitration, expropriation occurs when a state has taken a foreign investor’s property for which compensation is required.

One of the core protections provided by nearly all bilateral investment treaties (BITs) and multilateral investment treaties (MITs) is the protection against expropriation (or nationalisation) without adequate compensation.

However, the language used in treaties often provides little express guidance on what specifically is understood to constitute expropriation. As a result, many investment treaty arbitration tribunals have grappled with defining the limits of what constitutes a 'taking' of property and the minimum requirements of what constitutes 'adequate' compensation.

The task of providing a clear definition is further complicated by the fact that the provisions found in BITs are similar, but not identical. These subtle drafting differences have become the focus of detailed analysis in a number of investment treaty awards. This Practice Note will use the UK Model BIT to explore these issues in further detail.

Practice Notes: Investment treaty arbitration—an introduction and Protections for foreign investors and investment treaty arbitration provide introductory material on investor protection and investment treaty arbitration.

Expropriation in the UK Model BIT

The expropriation provision in the UK Model BIT (2008) provides:

‘Investments of nationals or companies of either Contracting Party shall not be nationalised, expropriated or subjected to measures having effect equivalent to nationalisation or expropriation

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