International and foreign Investment LawPart III

Expropriation

Azar Aliyev LL.M. (University of Heidelberg)

OverviewI. Expropriation as a legal term

II. Legality of expropriation

III. Direct and indirect expropriation

IV. Compensation

I. Expropriation as a legal term

Protection of aliens’ property rights Chozrow factrory (PCIJ)

Norwegian Shipowners (PCIJ)

Expropriation, nationalization, confiscation, taking of property

Taking of property in national law and international law

II. Definition of Expropriation

Article 13 (1) ECT

Right to expropriate (rare exceptions: Kazakh law on foreign investment 1992)

“Hull formula” and “Calvo doctrine”

Wording of the expropriation clauses (ECT, CIS-Treaty)

III. Actors, Objects

Who can expropriate State State can be held responsible for actions of

third parties (Draft Articles on State responsibility)

What can be expropriated Expropriation of property Expropriation of rights Expropriation of contracts

IV. Form

Form of expropriation Acts Omissions (Olguin v. Paraguay)

V. Legality of Expropriation

Legal expropriation for a purpose which is in the public interest; not discriminatory; carried out under due process of law; and accompanied by the payment of prompt,

adequate and effective compensation.

Difference to the ‘illegal’ expropriation (AMD v. Hungary)

VII. Indirect Expropriation

Indirect Expropriation Direct and indirect expropriation Doctrine of ‘sole effect’Intention of the

State? (Siemens v. Argentina, Rumeli v. Kazakhastan)

Benefit of the State (Rumeli v. Kazakhastan)

VII. Indirect Expropriation

Regulatory measures and indirect expropriation (Feldman v. Mexico, Generation Ukraine v. Ukraine)

Intensity of interference with investors rights Frustration of legitimate expectation (Metalclad v.

Mexico) Disproportion of measures Non-transpareny, arbitrariness, discrimination

(Rumeli v. Kazakhstan) New Treaty wording (US Model-BIT)

VII. Indirect Expropriation

Typical forms of indirect expropriation Tax increase (Occidental exploration v.

Equador) Revocation of licenses and permits

(ecological measures) (s. below) Interference with management (Rumeli v.

Kazakhatan) Breach of contractual obligations

Sakhalin

Sachalin II

Projekt: 1994 Establishment of Sakhalin Energy,

Proiduction Sharing Agreement

Production: Offshore oil and gas

Problem: protected forests, erosion, flora und fauna.

Stakeholders: till 2006 Mitsui, Royal Dutch Shell und Mitsubishi. Since 2006 Gazprom 50% +1, Mitsui 12,5%, Royal Dutch Shell 27,5% und Mitsubishi 10%.

Disptute: 18.9.2006 revocation of the ecological lisence

19.04.2007 new stakeholder structure

Project is going on with minimal cha.

I. Investment

Compensation Hull formula

Prompt Adequate Effective

Calvo doctrine

Thank you very much!