International and foreign Investment Law Part III Expropriation Azar Aliyev LL.M. (University of Heidelberg) Overview I. 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!