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International Investment Law: A Changing Landscape

A Companion Volume to International Investment Perspectives

image of International Investment Law: A Changing Landscape

This publication presents four studies which represent recent core work of the OECD Investment Committee. The first study, "Transparency and Third Party Participation in Investor-to-State Dispute Settlement ," aims to enhance understanding of the role of transparency and third party participation in investor-state dispute settlement procedures. It examines the current rules, steps taken to improve transparency, and the perceived advantages as well as the challenges of additional transparency.  Two other studies touch upon two of the most frequently contested provisions in investor-state arbitration. "Fair and Equitable Treatment Standard in International Investment Law" clarifies the concept, based on jurisprudence and state practice. "‘Indirect Expropriation’ and the ‘Right to Regulate’ in International Investment Law" identifies the main criteria found in investment agreements and used by tribunals to articulate the difference between the two concepts.  The final paper looks at most favoured nation treatment.

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“Indirect Expropriation” and the “Right to Regulate” in International Investment Law

In recent times, disputes related to nationalisation of investments that marked the 70s and 80s have been replaced by disputes related to foreign investment regulation and indirect expropriation. Foreign investors increasingly make claims for compensation based on governmental regulations, such as placing restrictions on the legal use of property that do not actually remove the owner’s title to the property but nevertheless substantially affect its value or the owner’s control. There is some concern that concepts such as indirect expropriation may be applicable to regulatory measures aimed at protecting the environment, health and other welfare interests of society. How has state practice defined and articulated the difference between an indirect expropriation requiring compensation and a governmental measure impacting an investment but not requiring compensation? How have arbitral tribunals drawn the line? Has the doctrine shed any additional light on this distinction? This survey provides factual elements of information on jurisprudence, state practice and literature related to “Indirect Expropriation” and the “Right to Regulate”. It presents the issues at stake and describes the basic concepts of the obligation to compensate for indirect expropriation, reviews whether and how legal instruments and other texts articulate the difference between indirect expropriation and the right of the governments to regulate without compensation and attempts to identify a number of criteria emerging from jurisprudence and state practice for determining whether an indirect expropriation has occurred.

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