Taking of Aliens’ Property: The Line between the Concept of Indirect Expropriation and Government Regulatory Measures Not Requiring Compensation

Abstract

It is a well recognised rule in international law that the property of aliens cannot be     taken, whether for public purposes or not, without adequate compensation. Two decades ago, the disputes before the courts and the discussions in academic literature focused mainly on the standard of compensation and measuring of expropriated value. The divergent   views of the developed and developing countries raised issues regarding the formation and evolution of customary law. Today, the more positive attitude of countries around the world toward foreign investment and the proliferation of bilateral treaties and other investment agreements requiring prompt, adequate and effective compensation for expropriation of foreign investments have largely deprived that debate of practical significance for foreign investors. In this paper, we shall be looking at takings; the indirect expropriation and see how tribunals have dealt with the issue of taking on case by case bases. Although the scope of indirect expropriation was expanded even further by use of the language “take a measure tantamount to nationalization or expropriation of such an investment,†NAFTA’s Chapter 11 did not contain any standard for identifying an indirect expropriation.  Moreover, since the decisions of international tribunals do not have precedential value, there has been no consistency among the indirect expropriation cases. Many scholars have criticized NAFTA’s Chapter 11 provision for going beyond U.S. regulatory takings laws, and the U.S. government also realized that this broad definition of indirect expropriation could result in the undesirable situation of having a legitimate regulation for public welfare hindered by an individual investor under Chapter 11. Therefore the paper further examining the thin line between the concept of indirect expropriation that requires compensation and Government regulatory measures that not requiring compensation.