Substantive protections: a comprehensive analysis of the complexities of expropriation in international investment law

2025-12-03

This article was first published on Global Arbitration Review in October 2025; for further in-depth analysis, please visit the GAR Guide to Investment Treaty Protection and Enforcement Third Edition. Click 'View original' at the end of the article to read the original piece.

Substantive protections: a comprehensive analysis of the complexities of expropriation in international investment law

Introduction

Early classical writings on public international law have long accepted that expropriation is lawful as it is a sovereign right. In Grotius’s account, expropriation is a manifestation of the sovereign state’s ‘eminent right’ that justifies the taking of private property for the public good.[1] However, that prerogative is not a licence for uncompensated expropriation. The right to expropriate in eminent domain cannot be unfettered;[2] such a power must be exercised within limits and subject to compensation. In international investment law, the substantive protection against uncompensated expropriation has thus become a cornerstone principle. It is recognised as customary international law and widely codified in international investment treaties. It often serves as a foreign investor’s last resort in investor-state arbitration cases where other substantive standards of protection are either unavailable or not satisfied.

Historical foundations and modern complexity

The protection against uncompensated expropriation is historically rooted in the international minimum standard for the treatment of aliens and in classical writings on vested or acquired rights,[3] which condemned uncompensated expropriation as an unjust transfer of wealth.[4] Civilised states generally accept that a state has the right to expropriate the property of foreigners if it is for a public purpose, non-discriminatory and accompanied by compensation.[5] Despite the modern proliferation of international investment agreements (IIAs) providing various definitions and explanation of expropriation, customary international law has laid the essential foundations for the contemporary treaty law of expropriation. And the precedents decided based on customary international law continue to be a valuable (and frequently invoked) source of law in disputes over expropriation.[6]

In the investment treaty era, specific treaty provisions on expropriation often operate as specific law, prevailing over customary international law in investor-state arbitral practice.[7] In other words, specific treaty provisions on expropriation carry more weight than general customary rules, yet many instruments expressly align their expropriation clauses with international custom to promote coherence.[8] Where there is lack of clarity in the treaty clauses, the arbitral tribunal often relies on customary international law to construe and decide questions relating to expropriation.[9]

The treaty era has clarified definitions and remedies for expropriation, but retained the core tension: while states often argue for their regulatory or police power to act for public interests, investors are keen to seek broad treaty protections as boundaries against states’ uncompensated expropriatory acts.[10] Tribunals aiming to distinguish between a legitimate exercise of the right to regulate and regulatory expropriation that warrants compensation, often rely on analyses of the effects of the state’s act and the principle of proportionality.[11]

The modern complexity of the notion of expropriation stems from the surge in divergent decisions of investor-state arbitration. This is further compounded by textual variations across multiple generations and different regions of IIAs, bilateral investment treaties (BITs) and multilateral investment agreements (MIAs).[12] For instance, definitions of ‘investment’ are asset‑based and generally broad with a non-exclusive list in most investment treaties,[13] while more specific or restrictive in others.[14] Also, expropriation clauses may use different formulations for indirect expropriation.[15] As a result, in some scenarios, a property (right) may be considered a protected ‘investment’ under one treaty but under another does not constitute an ‘investment’ and hence is not protected. Furthermore, compensation clauses in different treaties may set different valuation standards, from the Hull Formula’s ‘prompt, adequate and effective’ standard to more nuanced approaches.[16] Provisions regarding the transfer of funds, exceptions and dispute settlement mechanisms further shape the contours of protection against expropriation. These textual differences provide tribunals and counsel with considerable interpretive space and flexibility. As such, they allow states and investors to tailor their arguments to accommodate the varied treaty language, factual matrix and different mindsets of pro-investor and pro-state arbitrators.

As such, the difficulty in contemporary arbitration practice lies not in whether the concept of expropriation exists, but how to identify and treat it, particularly in the context of indirect expropriation.

Structure of this chapter

Against this backdrop, this chapter first lays out expropriation as a fundamental substantive protection to investors, followed by a review of the jurisdictional hurdle for an investor to overcome in order to assert an expropriation claim against the host state, referencing the narrow scope of consent contained in treaties such as China’s first-generation BITs. This chapter then analyses the three important facets that an arbitral tribunal, after satisfying its jurisdiction, will need to ascertain in dealing with expropriation claims: first, whether an expropriation, either direct or indirect, has occurred; second, whether the expropriation is lawful; and third, what amount of compensation is due to the investor. This chapter concludes with general remarks on the evolution of the expropriation standard and its lasting impact shaping the boundaries of governments’ regulatory actions.

Jurisdiction: the first hurdle of expropriation claims

Jurisdiction is the gateway to any expropriation claim. The parties’ consent to arbitration as contained in the arbitration clause of a given treaty defines the scope of a tribunal’s jurisdiction. However, consent provisions may vary significantly across treaties of different generations and regions. For example, some treaties empower arbitral tribunals to decide on broad issues of expropriation, including the disputes arising from ‘measures affecting property’;[17] others restrict the scope to disputes concerning ‘the amount of the compensation for expropriation’, thereby arguably excluding questions concerning the occurrence and legality of expropriation.[18] The linguistic differences would materially affect the choice of forum strategy, pleadings and proof, particularly under a treaty that appears to allocate the liability issue of an expropriation claim to domestic courts and quantum to international arbitration.

In the early generation BITs concluded in the 80s and 90s, some developing countries, such as China and Pakistan,[19] were inclined to channel the investment claims concerning the occurrence and legality of expropriation to domestic courts as a precondition to any international adjudication of the amount of compensation.[20] This allocation of jurisdiction between domestic courts and international tribunals in treaty practice was not China-specific. The former Soviet Union countries concluded many similar BITs[21] to address ‘general concerns related to the erosion of State sovereignty’.[22] The practical implications of this forum division are profound, including that it requires a more balanced and interactive understanding of the concept of expropriation under domestic law and international law.[23]

However, recent arbitral practice demonstrates that tribunals interpreting restrictive dispute settlement clauses have reached markedly different conclusions regarding their jurisdictional scope. For instance, in AsiaPhos v. China, the tribunal adopted a narrow interpretation, finding jurisdiction only over ‘the calculation of the amount of compensation for expropriation’, explicitly excluding determinations of whether expropriation had occurred or its legality.[24] This contrasts sharply with the approach in Tza Yap Shum v. Peru, where the tribunal interpreted similar language broadly to encompass both the quantum of compensation and the antecedent question of whether expropriation had occurred.[25]

The international tribunals’ divided views on the interpretation of narrow arbitration clauses cast great uncertainties and imposed potential risks to parties dealing with treaties containing similar clauses.[26] In the context below, the authors examine several cases that all involved a narrow arbitration clause providing for arbitration consent for disputes ‘involving’ the amount of compensation for expropriation. The tribunals in these cases differed fundamentally in reading the term ‘involving’ and made contradictory decisions concerning the scope of their jurisdictions.

In the AsiaPhos case, the Singaporean investor made investment in China engaging in phosphate mining operations through establishing a Sino-foreign joint venture in China’s Sichuan Province in 1996.[27] The investment dispute arose following the Chinese local government’s prohibition of mining activities in the Jiudingshan Nature Reserve, which fell within the scope marked for the construction of a national panda park. This new policy led to the shutdown of the claimants’ operations between 2016 and 2018.[28] The claimants alleged multiple treaty breaches, including expropriation claims under Article 6 of the China–Singapore BIT (1985) and non-expropriation claims under the provisions of fair and equitable treatment (FET), full protection and security (FPS), and the umbrella clause.[29]

The AsiaPhos tribunal first examined the scope of parties’ consent to arbitration by focusing on the treaty interpretation of Article 13(3) of the China–Singapore BIT (1985) under the Vienna Convention on the Law of Treaties (VCLT). It eventually adopted a narrow interpretation approach and confirmed that it only had jurisdiction over the calculation of the amount of compensation for expropriation, explicitly excluding questions on the existence and legality of expropriation.[30]

The tribunal opined that the treaty provides for a dual-track system for expropriation claims: (1) Article 6(2) allows an investor to have the legality of expropriatory measures (which encompasses the question of their occurrence) reviewed by competent domestic courts in a manner prescribed by domestic law; and (2) questions on the amount of compensation are reserved to subsequent international arbitration proceedings.[31] In the tribunal’s view, this narrow interpretation is consistent with the contracting parties’ intention to have segregated proceedings to deal with different facets of expropriation claims and the drafting history of Article 6(2) and Article 13 of the China–Singapore BIT (1985).[32]

Similarly, the tribunal in Beijing Everyway v. Ghana adopted a restrictive interpretation of the narrow arbitration clause[33] contained in the China–Ghana BIT (1989), and it further held that a dual-track structure, consisting of (1) domestic-court review of the occurrence and lawfulness of any alleged expropriation and (2) a subsequent international arbitration determination of the amount of compensation (quantum), is workable in practice.[34]

The tribunal in Junefield Gold v. Ecuador took a different approach from AsiaPhos and Beijing Everyway.[35] In Junefield, the dispute arose from alleged indirect expropriation of the claimant’s gold and silver mining investments through a series of government measures, which included judicial suspensions of mining concessions and police enforcement actions that effectively deprived the investor of control over its operations.[36]

Different from the AsiaPhos and Beijing Everyway tribunals, the Junefield tribunal assumed jurisdiction over the claimant’s expropriation claim in full, covering both the question of whether an expropriation had occurred and the amount of compensation.[37] The tribunal noted that the fundamental question concerned whether the reference in Article 9(3) of the China–Ecuador BIT (1994) to ‘a dispute involving the amount of compensation for expropriation’[38] would limit arbitral jurisdiction to quantum determination only, or encompass broader expropriation-related disputes.[39] The tribunal emphasised that consent to arbitration must be interpreted ‘neither restrictively nor liberally’ but objectively and in good faith under the VCLT.[40]

Ecuador argued that Article 9(3) creates a ‘narrow and specific subset of disputes’ limited to quantum determination after expropriation has been ‘proclaimed’ by state authorities.[41] Moreover, domestic courts retain ‘exclusive jurisdiction’ over liability questions, with arbitration available only for the compensation amount.[42] In return, the investor Junefield argued for a broad interpretation, contending that the term ‘involving’ has an inclusive meaning encompassing both liability and quantum determinations.[43] The investor further argued that Ecuador’s narrow interpretation would render the fork-in-the-road provision[44] meaningless, since domestic courts addressing expropriation legality under Article 4.1 would necessarily consider the question of ‘fair compensation’, which would trigger the fork-in-the-road provision and prevent the investor from subsequent recourse to arbitration on quantum of expropriation.[45]

The tribunal, adopting an expansive reading of the term ‘involving’, held that Article 9(3) granted jurisdiction to the tribunal to adjudicate disputes related to expropriation, extending to its occurrence, legality, and the amount of compensation. Such jurisdiction does not require ‘a prior declaration of expropriation by local courts or authorities’.[46]

The existing case precedents demonstrate that while the AsiaPhos and Beijing Everyway tribunals decided that they only had jurisdiction to hear disputes on the quantum of compensation for expropriation, other tribunals such as Tza Yap Shum v. Peru, Sanum v. Laos (I) and Junefield v. Ecuador have taken an expansive reading of the narrow arbitration clause to include matters of the existence, legality and amount of compensation of expropriation.

The international tribunals’ divergent interpretations of their jurisdiction are also seen in cases involving non-China-related treaties, which contain similar narrow arbitration clauses providing consent for disputes ‘involving the amount of compensation’. In some of these cases, tribunals limited their jurisdiction to quantum of expropriation only,[47] while others saw no problem in expansively accepting jurisdiction over both (existence and legality of) expropriation and quantum.[48]

The divergent jurisprudence in this regard not only adds fuel to the investment arbitration’s legitimacy crisis at a global level due to inconsistent decisions but also poses challenges to the parties’ assessment of potential expropriation claims, which in turn significantly affects the investors’ strategic design of their routes for remedies.[49]

The three-facet analysis of expropriation claims

In the cases where arbitral tribunals have confirmed a full jurisdiction over all aspects of expropriation, they often adopt a structured approach to deal with expropriation claims. This entails a three-facet analysis: first, whether an expropriation has occurred; second, if confirmative, whether the taking was lawful; and third, what compensation is due to the investor. Each element must be proven independently. This section will examine these three facets in turn, touching upon topics including indirect expropriation and the debate on whether contractual rights can be substantively deprived, and then conclude with a case study showcasing the application of this three-facet analysis approach.

Occurrence of expropriation: establishing a deprivation of investment

Expropriation may occur in two forms, direct and indirect. Direct expropriation involves a formal transfer of proprietary rights to either the expropriating state or third parties, or physical seizure of property.[50] It is often seen as a direct taking of properties. Indirect expropriation is more subtle and occurs when any governmental measure in public authority substantially deprives a foreign investor of the value, use, control or management of its investment without a direct taking.[51]

The distinction between the two forms turns on ‘whether the legal title of the owner is affected by the measure in question’.[52] Such a distinction matters in practice for proof and remedy. Direct expropriation is usually easy to identify, but it is rare in modern practice.[53] Indirect expropriation has gradually become the dominant form of contemporary investor-state disputes, as states are reluctant to proclaim an open taking of foreign property. Instead, they prefer to deny the existence of expropriation by using regulatory measures that effectively achieve the same result, without even considering the payment of compensation.[54] A notable example of indirect expropriation is known as ‘creeping expropriation’, which involves ‘a series of acts over a period of time none of which is itself of sufficient gravity to constitute an expropriatory act but all of which taken together produce the effects of expropriation.’[55]

Tribunals usually apply the substantial deprivation test to determine whether indirect expropriation has occurred. The Iran–US Claims Tribunal has long established this foundational principle of substantial deprivation in Tippets, Abbett, McCarthy, Stratton v. TAMS-AFFA Consulting Engineers of Iran, holding that:

The Tribunal prefers the term ‘deprivation’ to the term ‘taking’, although they are largely synonymous, because the latter may be understood to imply that the Government has acquired something of value, which is not required. A deprivation or taking of property may occur under international law through interference by a state in the use of that property or with the enjoyment of its benefits, even where legal title to the property is not affected.[56]

The substantial deprivation test focuses on the effect of the measures of the state, not their form or stated purpose. As the tribunal explained in Pope & Talbot v. Canada, the key question is whether the investor still retains ‘control’ and ‘enjoyment’ of their investment (as a result of the measures of the state).[57] It is irrelevant whether the host state or any third parties would benefit from the expropriatory measures in dispute.[58] The tribunals in Tecmed v. Mexico[59] and Metalclad v. Mexico[60] have endorsed this approach to identify the occurrence of an (indirect) expropriation.

Tribunals have taken a holistic approach to assess relevant circumstances, including all measures and acts attributable to the state, in determining whether an expropriation exists.[61] They have considered factors including the duration of the state’s interference,[62] the degree of control retained by the investor (as a result of the state’s interference),[63] and whether the state’s measure targeted specific investment or was applied generally.[64] As required by treaty law[65] and as suggested by the Tecmed and Azuix tribunals, the analysis of the question of whether an expropriation occurs requires a case-by-case examination of the circumstances. No single factor is determinative.[66]

Legality: conditions for lawful and unlawful expropriation

As noted, public international law permits expropriation under specific conditions. These conditions are consistently reflected in treaty law and customary international law. The conditions typically include public purpose, non-discrimination, due process and payment of compensation.[67] The China–Peru BIT (1994) exemplifies this standard approach. Article 4(1) permits expropriation only ‘(a) for the public interest; (b) under domestic legal procedure; (c) without discrimination; (d) against compensation’.[68] Similarly, Article 6(1) the US Model BIT (2012)[69] and Article 13(1) of the Energy Charter Treaty (ECT)[70] have adopted the classical four-element formulation to define the legality of expropriation.

Some tribunals have considered that each of the four conditions is independent, and failure to satisfy a single condition would render the expropriation unlawful. States cannot cure one deficiency by excelling in another area.[71] In the meantime, some other tribunals held that ‘the mere absence of payment of compensation does not’, by itself, ‘establish an unlawful expropriation: it is necessary to consider all the relevant circumstances, including whether an offer of compensation was made and on what terms’.[72]

Once an investor establishes that expropriation has occurred, the burden would then shift to the state to prove that its conduct satisfied all conditions for a lawful taking. As the tribunal noted in CMS v. Argentina, the states bear the burden of proving that their regulatory actions were justified.[73] In this respect, the Yukos tribunal has required that states must show that domestic law has authorised the specific measures taken, and they must also demonstrate that government officials followed the required procedures and acted in the public interest, not for the benefit of a state-owned entity.[74]

This burden allocation reflects policy considerations and factual realities. States are better positioned to prove their motivations, intended purpose, and the procedures followed in the acts of taking, as well as whether the acts were discriminatory or widely applied. Investors would have no or little such information, and thus it would create insurmountable difficulties for the investors if the burden of proof is placed on their shoulders.

Compensation: determining the standard and quantum

Case law has drawn a clear distinction between the compensation standards for lawful and unlawful expropriations: treaty-based compensation applies to lawful expropriations, while the customary rule of full reparation applies to unlawful expropriations.[75]

For lawful expropriation, the well-known Hull formula has established the basic standard of ‘prompt, adequate and effective’ compensation.[76] According to treaty law, compensation for lawful expropriation must be equivalent to the fair market value of the investment immediately before the expropriation occurred.[77]

Tribunals have used various methods to calculate ‘fair market value’ of the investments. The discounted cash flow (DCF) method projects future earnings and discounts them to present value. This approach works well for profitable ongoing businesses with predictable revenue streams.[78] Book value or asset-based approaches examine the investment’s tangible and intangible assets, which are more suitable for early-stage investments or companies without established earnings patterns.[79] Market comparisons use prices paid for similar investments, although finding truly comparable transactions can be challenging.[80]

For unlawful expropriation, the standard of compensation is to ‘wipe out’ the effect of the unlawful acts and to restore the status as if the unlawful acts had not occurred. The Permanent Court of International Justice (PCIJ) articulated this principle in the Chorzów Factory case, saying that:

...a principle which seems to be established by international practice and in particular by the decisions of arbitral tribunals—is that reparation must, as far as possible, wipe out all the consequences of the illegal act and reestablish the situation which would, in all probability, have existed if that act had not been committed.[81]

Accordingly, the compensation standard for unlawful expropriation could be higher. Tribunals can award additional damages for losses caused by the illegality itself.[82] This could include lost profits during the period between the expropriation and the eventual compensation, or lost profits for the remaining term of the relevant licence in cases where the investor’s operation or industry licence has been unlawfully revoked. In the meantime, tribunals could also award moral damages in cases where the state’s conduct is extremely egregious.

The choice of quantum methodology depends on the investment’s nature and stage of its development. Tribunals often consider multiple approaches and crosscheck results.[83] They may also adjust valuations to reflect specific risks or uncertainties.[84]

Debate on whether contractual rights can be expropriated

It has been widely recognised that international investment law protects not only tangible or physical assets, such as the forcibly seized hotels as seen in Wena Hotels v. Egypt,[85] but also intangible property that satisfies the asset-based definition of ‘investment’, typically including contractual rights, claims to money, shares, mortgages, intellectual property, and even judicial or arbitral decisions.[86]

Indeed, contractual rights, such as concessions, licences or other agreements that confer valuable and legally enforceable entitlements, frequently fall within the treaty definition of ‘investment’.[87] It is well established that international law recognises the expropriation of contractual rights in specific circumstances, a view reflected in the leading precedent of the Norwegian Shipowners’ Claims case[88] and progeny decisions, such as AWG v. Argentina,[89] SPP v. Egypt (also known as the Pyramids case),[90] Biloune v. Ghana[91] and Siemens v. Argentina.[92]

However, tribunals have attempted to distinguish between contractual rights that are deemed as property rights, which could give rise to monetary value and are a source of assets, hence capable of being expropriated,[93] and those as pure personal rights, which are inseparable from the personal contractual relationship and lacking an independent proprietary character, such as a professional licence to practice in the legal or medical industry. The latter category, if it is unlawfully revoked, may give rise to violation of due process or discrimination claims, but will not warrant an expropriation claim, as decided in Accession Mezzanine v. Hungary.[94]

Case analysis of Tza Yap Shum and Zhongshan Fucheng

In the Tza Yap Shum case, a Hong Kong citizen Tza Yap Shum invested in Peru’s fishing industry through a local company TSG. Following investigations into alleged tax violations, Peruvian tax authorities (SUNAT) froze TSG’s bank accounts and imposed other restrictive measures, which essentially put TSG’s business operation on halt.[95] The tribunal found that these measures constituted indirect expropriation of Tza Yap Shum’s investment, concluding that ‘the prior precautionary measures resulted in the indirect expropriation of the claimant’s investment and, given that the investor was not compensated, such expropriation was carried out in violation of Article 4 of the BIT’.[96] The tribunal crucially noted that the bank account freeze ‘was an absolute failure’ in terms of tax collection, collecting only approximately US$172 against a tax debt of nearly US$4 million, while having a devastating impact on the company’s operational capacity.[97]

The tribunal found Peru’s conduct to be arbitrary and unlawful. Analysing the four conditions required under Article 4(1) of the China–Peru BIT – public interest, legal procedure, non-discrimination and compensation – the tribunal found multiple failures.[98] The tribunal applied the international standard that ‘the imposition and application of tax measures can acquire an expropriatory character if it is confiscatory, arbitrary, abusive, or discriminatory’.[99] It defined arbitrariness as ‘a decision based not on justice, law or reason but on personal preference or essentially a whim or unlimited exercise of power’.[100] The tribunal noted that SUNAT’s conduct was deficient in multiple respects. The measures were not adequately justified under domestic law,[101] and SUNAT failed to exercise its discretion in a ‘reasonable and justified’ manner despite circular instructions requiring such an approach.[102]

The tribunal determined compensation based on customary international law rather than Article 4 of the China–Peru BIT, since Peru’s expropriation failed to meet the treaty’s lawful requirements.[103] Following the Chorzów Factory principle, the tribunal applied the standard that reparation must ‘wipe out all the consequences of the illegal act and reestablish the situation which would, in all probability, have existed if that act had not been committed’.[104] The tribunal rejected both parties’ quantum expert approaches – the investor claimant’s DCF projection of S$56,497,500[105] and the state respondent’s argument of zero value[106] – and employed an adjusted book value method.[107] Notably, the tribunal considered but ultimately rejected the claimant’s request for moral damages.[108]

In the Zhongshan Fucheng case, a Chinese investor invested through a series of agreements, including the 2010 Framework Agreement and the 2013 Joint Venture Agreement, establishing rights to develop and manage an industrial zone in Nigeria.[109] The tribunal found that coordinated actions by Ogun State and the Nigerian authorities between April and August 2016 constituted expropriation. It concluded that ‘the written and oral communications and the actions taken by Ogun State, NEPZA and the police between April and August 2016, namely the 2016 Activities, infringed Nigeria’s obligations under articles 2(2), 2(3), 3(1), and 4’.[110] The tribunal specifically found that ‘The 2016 Activities were plainly designed to deprive, and indeed succeeded in depriving Zhongshan Fucheng of its rights under the 2010 Framework Agreement and the 2013 JVA in circumstances where there were no domestic law grounds for doing so’.[111] The measures included forcing the investor to vacate the zone, seizing control of operations, and intimidating personnel through police action.[112]

The tribunal found Nigeria’s expropriation unlawful on multiple grounds. It held that the actions violated Article 4 of the China–Nigeria BIT, citing Metalclad v. Mexico for the principle that ‘expropriation includes not only open, deliberate and acknowledged taking of property . . . but also covert or incidental interference with the use of property which has the effect of depriving the owner . . . of the use or reasonably-to-be-expected economic benefit of property’.[113] The tribunal found systematic due process violations, stating there was a wholesale ‘lack of due process leading to an outcome which offends judicial propriety’.[114] It concluded that Nigeria produced no evidence that this expropriation was for the public interest, the expropriation was not effected ‘under domestic legal procedure’, it was discriminatory and there was no ‘fair compensation’.[115]

The tribunal awarded compensation to the investor based on the full reparation standard of customary international law. The tribunal applied the Chorzów Factory principle codified in Article 34 of International Law Commission (ILC) Draft Articles on Responsibility of States for Internationally Wrongful Acts, which states that reparation must ‘wipe out all the consequences of the illegal act’.[116]

For valuation methodology, the tribunal considered but ultimately rejected the investor claimant’s DCF approach for most of the zone due to its speculative nature, and eventually awarded US$55.6 million based on a revised DCF analysis, focusing primarily on the developed Fucheng Park area while excluding the speculative future development of other zone areas.[117] The tribunal also awarded moral damages, determining that ‘USD 75,000 would be an appropriate sum’ due to the ‘indefensible and serious infringement’ of human rights, particularly regarding the treatment of Mr Zhao by police in August 2016, which ‘represented . . . a humiliating and frightening experience, lasting the best part of two weeks’.[118]

Conclusion

The substantive protection against expropriation in international investment law has evolved from unrestricted sovereign eminent domain into a blend of treaty-based and customary international law that strikes a balance between state regulatory authority or police power and investor protection. This evolution reflects the broader shift from absolute territorial sovereignty to regulated sovereignty which is needed for the good of the global economy.

During the process of transitioning to an era of restricted sovereignty, Chinese first-generation BITs appear to have presented a unique ‘dual-track’ system – domestic courts determine the occurrence and legality of expropriation, while international arbitration handles the quantum of compensation. This dual-track system has not been unanimously adopted by international tribunals. The divergent tribunal interpretations in Tza Yap Shum, AsiaPhos, Beijing Everyway and Junefield demonstrate that precise treaty language matters significantly, making strategic drafting and case presentation critical.

The shift from direct taking to the effect-based substantial deprivation analysis of indirect expropriation represents one of the most significant developments in international investment law. States cannot avoid compensation through regulatory appearance. However, investors must demonstrate a genuine economic impact beyond mere inconvenience. This creates regulatory uncertainty for states while providing meaningful protection against administrative overreach.

Both Tza Yap Shum and Zhongshan Fucheng demonstrate that procedural violations often prove more decisive than substantive justifications. States lose cases not because their policies are wrong, but because their procedures are deficient. Administrative law reforms that ensure proper notice, the right to be heard and reasoned decision-making could significantly reduce liability exposure.

The expropriation framework at the international law level serves not only as a means of investor protection but also as a means to promote good governance by governments. It encourages more careful government decision-making, benefiting both investors and the public. As new challenges continue to emerge, such as climate regulation, digital oversight and pandemic responses, this flexible framework provides predictable standards while adapting to evolving regulatory needs.

Endnotes

[1] See A Reinisch and C Schreuer, International Protection of Investments: The Substantive Standards (Cambridge University Press 2020), paragraph 5 at 5 (citing H Grotius, The Rights of War and Peace, Book I, Chapter I, Sections 6–10 (1625)).

[2] id., paragraph 8 at 6 (‘This basic premise that expropriation is a sovereign right of states which may be exercised within the limits of international law is still widely accepted in investment arbitration.’). See also J Sicard-Mirabal and Y Derains, Introduction to Investor-State Arbitration (Kluwer Law International 2018), at 115.

[3] See Sicard-Mirabal and Derains (footnote 2), at 117.

[4] See Reinisch and Schreuer (footnote 1), paragraph 5 at 5.

[5] See, e.g., American Law Institute (ed.), Restatement (Third) of the Foreign Relations Law of the United States, § 712 (1987).

[6] See Reinisch and Schreuer (footnote 1), paragraph 27 at 11 (‘in the practice of modern investment arbitration, older precedents decided on the basis of customary international law still play a certain role’).

[7] See, e.g., ADC Affiliate Limited and ADC & ADMC Management Limited v. Republic of Hungary (ADC v. Hungary), ICSID Case No. ARB/03/16, Award, 2 October 2006, paragraph 481 (The tribunal opined that ‘there is a general authority for the view that a BIT can be considered as a lex specialis whose provisions will prevail over rules of customary international law (see, e.g., Phillips Petroleum Co. Iran v. Iran, 21 Iran-U.S. Cl. Trib. Rep. at 121)’.).

[8] See, e.g., the US Model BIT (2012), Annex B(1) (‘The Parties confirm their shared understanding that: 1. Article 6 [Expropriation and Compensation] (1) is intended to reflect customary international law concerning the obligation of States with respect to expropriation.’).

[9] Lone Pine Resources Inc. v. Canada, ICSID Case No. UNCT/15/2, Final Award, 21 November 2022, paragraphs 494-495 (‘The term “expropriation” is not defined under NAFTA. . . . The Parties to this case and the NAFTA non-disputing parties . . . agree that “expropriation” under NAFTA Article 1110 is to be interpreted in accordance with the customary international law meaning of the term, . . . The concept of expropriation is well settled under customary international law . . . ’.).

[10] ADC v. Hungary (footnote 7), paragraph 423 (‘It is the Tribunal’s understanding of the basic international law principles that while a sovereign State possesses the inherent right to regulate its domestic affairs, the exercise of such right is not unlimited and must have its boundaries. As rightly pointed out by the Claimants, the rule of law, which includes treaty obligations, provides such boundaries.’).

[11] Técnicas Medioambientales Tecmed, S.A. v. United Mexican States (Tecmed v. Mexico), ICSID Case No. ARB(AF)/00/2, Award, 29 May 2003, paragraph 122 (‘The Arbitral Tribunal will consider, in order to determine if they are to be characterized as expropriatory, whether such actions or measures are proportional to the public interest presumably protected thereby and to the protection legally granted to investments, taking into account that the significance of such impact has a key role upon deciding the proportionality.’).

[12] See Reinisch and Schreuer (footnote 1), paragraph 3 at 5.

[13] id., paragraph 67 at 19.

[14] See, e.g., the Canada–Hong Kong, China SAR BIT (2016), Article 1 Definition of ‘investment’; Grand River Enterprises Six Nations, Ltd., et.al. v. United States of America, Ad Hoc Arbitration (UNCITRAL Rules), Award, 12 January 2011, paragraph 82 (‘NAFTA’s Article 1139 is neither broad nor open-textured. It prescribes an exclusive list of elements or activities that constitute an investment for purposes of NAFTA. As the Claimants’ expert Professor Mendelson pointed out, this definition is exclusive and not illustrative.’).

[15] See C McLachlan, L Shore and M Weiniger, International Investment Arbitration: Substantive Principles (2nd edn, Oxford University Press 2017), paragraph 8.75 at 636 (‘Several terms, in addition to “indirect”, are used to describe indirect expropriation, for example “de facto”, “creeping” expropriation, or measures “tantamount to” or “equivalent to” expropriation.’). See also Tecmed v. Mexico (footnote 11), paragraph 114 (‘Generally, it is understood that the term “ . . . equivalent to expropriation. . . ” or “tantamount to expropriation” included in the Agreement and in other international treaties related to the protection of foreign investors refers to the so-called “indirect expropriation” or “creeping expropriation”, as well as to the above-mentioned de facto expropriation. Although these forms of expropriation do not have a clear or unequivocal definition. . . .).

[16] Compare the China–Uganda BIT (2004), Article 4 (2) & (3) (‘(2) Any measures of dispossession which might be taken shall give rise to prompt compensation, the amount of which shall be equivalent to the real value of the investments immediately before the expropriation is taken or the impending expropriation becomes public knowledge, whichever is earlier. . . . The compensation shall also be made without delay, be effectively realizable and freely transferable.’) with the ASEAN–China Investment Agreement (2009), Article 8(2) (‘Such compensation shall amount to the fair market value of the expropriated investment at the time when expropriation was publicly announced or when expropriation occurred, whichever is earlier, and it shall be freely transferable in freely usable currencies from the host country. The fair market value shall not reflect any change in market value occurring because the expropriation had become publicly known earlier.’).

[17] Pope & Talbot Inc. v. Government of Canada(Pope & Talbot v. Canada), Ad Hoc Arbitration (UNCITRAL Rules), Interim Award, 26 June 2000, paragraph 104 (‘References to the decisions of the Iran-U.S. Claims Tribunal ignore the fact that that tribunal’s mandate expressly extends beyond expropriation to include “other measures” affecting property rights.’).

[18] Beijing Everyway Traffic & Lighting Tech. Co., Ltd v. The Republic of Ghana (I) (Beijing Everyway v. Ghana), PCA Case No. 2021-15, Final Award on Jurisdiction (Save as to Costs), 30 January 2023, paragraph 234 (‘In conclusion, the Tribunal considers that the examination of the provision of Article 10(1) within the context of the China-Ghana Agreement suggests that the phrase “concerning the amount of compensation for expropriation” cannot be interpreted as vesting an arbitral tribunal with jurisdiction to decide the question of whether the expropriation is lawful or unlawful.’).

[19] See, e.g., the China–Pakistan BIT (1989), Article 4 (2) and (3). See also the China–New Zealand BIT (1988), Article 13(3).

[20] See, e.g., the China–Singapore BIT (1985), Article 6(2); AsiaPhos Limited and Norwest Chemicals Pte Ltd v. People's Republic of China (AsiaPhos v. China), ICSID Case No. ADM/21/1, paragraph 43 (the respondent China argued that ‘in cases where an expropriation is neither proclaimed nor undisputed, the investor may request a competent local court to make a determination on whether an expropriation has occurred and its lawfulness pursuant to Articles 13(2) and 6(2) of the Treaty—and it has to do so before being permitted to submit the issue of the amount of compensation for expropriation to an international tribunal.’).

[21] Vladimir Berschader and Moïse Berschader v. Russian Federation (Berschader v. Russia), SCC Case No. 080/2004, Award, 21 April 2006, paragraph 155 (‘In the majority of the early BITs concluded by the Soviet Union in 1989 and 1990, the arbitration clause is limited to disputes concerning the amount or method of compensation to be paid on foot of an expropriatory act . . .’.).

[22] R Weeramantry and C Wilson, ‘The Scope of “Amount of Compensation” Dispute-Resolution Clauses in Investment Treaties’ in C Brown and K Miles (eds), Evolution in Investment Treaty Law and Arbitration (Cambridge University Press 2011), at 410–411.

[23] See N Gallagher and W Shan, Chinese Investment Treaties: Policies and Practice (Oxford University Press 2009), at 201 (‘The Pakistan[-China] BIT allows the damages to be calculated under the “laws and regulations” of the host state. An investor would have to look to the provisions of Chinese law on expropriation, which, as can be seen below, is not very prescriptive.’). See also W Shen, Decoding Chinese Bilateral Investment Treaties (Cambridge University Press 2021), Chapter 5 ‘Expropriation in Local and Global Contexts’, at 115–143.

[24] See J Du and Z Zhang, ‘AsiaPhos Limited and Norwest Chemicals Pte Ltd v People’s Republic of China: Unpredictable Jurisdiction under the Restrictive ISDS Mechanism’ (2024) 39 ICSID Review 29, at 29.

[25] See Weeramantry and Wilson (footnote 22), at 425 (‘The decision of the tribunal was unanimous and establishes that this clause in the Peru–China BIT provides tribunals with jurisdiction to ascertain not only the quantum of compensation, but also the matter of whether expropriation had occurred in the first place. This decision is of great significance for both companies investing in China and Chinese investors establishing investments in other States since many Chinese BITs which are still operable contain this or similar dispute resolution clauses.’).

[26] Du and Zhang (footnote 24), at 41.

[27] AsiaPhos v. China (footnote 20), paragraph 26.

[28] id., paragraphs 32–34.

[29] id., paragraph 36.

[30] id., paragraphs 60, 79–81, 110, 134, 140.

[31] id., paragraph 106.

[32] ibid.

[33] Article 10(1) of the China–Ghana BIT (1989) provides that ‘Any dispute between either Contracting State and the investor of the other Contracting State concerning the amount of compensation for expropriation may be submitted to an arbitral tribunal.’.

[34] Beijing Everyway v. Ghana (footnote 18), paragraphs 209–211.

[35] Junefield Gold v. Republic of Ecuador (Junefield v. Ecuador), PCA Case No. 2023-35, Partial Award on Jurisdiction, 2 June 2025.

[36] id., paragraphs 50, 56-63.

[37] id., paragraph 311 (‘ . . . concluding that: a. It has jurisdiction, under Article 9.3 of the Treaty, with respect to all aspects of Junefield’s expropriation claim.’).

[38] The China–Ecuador BIT (1994), Article 9(3) Sentence 1 reads: ‘If a dispute involving the amount of compensation for expropriation cannot be settled within six months after resort to negotiations as specified in Paragraph 1 of this Article, it may be submitted at the request of either party to an ad-hoc arbitral tribunal’.

[39] Junefield v. Ecuador (footnote 35), paragraphs 77, 108.

[40] id., paragraphs 103-104.

[41] id., paragraphs 85, 112.

[42] ibid.

[43] id., paragraphs 163, 193.

[44] The China–Ecuador BIT (1994), Article 9(3) Sentence 2 provides that ‘The provisions of this paragraph shall not apply if the investor concerned has resorted to the procedure [of domestic court litigation] specified in Paragraph 2 of this Article’.

[45] Junefield v. Ecuador (footnote 35), paragraphs 182–183.

[46] id., paragraph 221.

[47] See, e.g., Berschader v. Russia (footnote 21), paragraphs 152–153; RosInvest Co UK Ltd. v. The Russian Federation ( RosInvest v. Russia), SCC Case No. 079/2005, Award on Jurisdiction, 5 October 2007, paragraphs 110–114 (albeit adopting a narrow interpretation, the tribunal found a broad jurisdiction extending to whether an expropriation occurred and was legal based on applying the MFN clause: paragraphs 132–133.); Austrian Airlines v. The Slovak Republic, Ad Hoc Arbitration (UNCITRAL Rules), Final Award, 9 October 2009, paragraphs 96–97, 107–108.

[48] See, e.g., Quasar de Valores SICAV S.A., Orgor de Valores SICAV S.A., GBI 9000 SICAV S.A. and ALOS 34 S.L. v. The Russian Federation (Renta 4 S.V.S.A. and Others v. Russia), SCC Case No. 24/2007, Award on Preliminary Objections, 20 March 2009; European Media Ventures SA v. The Czech Republic (EMV v. Czech Republic), Award on Jurisdiction, 15 March 2007; Telenor Mobile Communications AS v. Republic of Hungary (Telenor v. Hungary), ICSID Case No. ARB/04/15, Award, 13 September 2006; Mr. Franz Sedelmayer v. The Russian Federation (Sedelmayer v. Russia), SCC, Award, 7 July 1998, which are cited and discussed in Weeramantry and Wilson (footnote 22), pp. 416–422.

[49] See Weeramantry and Wilson (footnote 22), at 425, 428.

[50] Reinisch and Schreuer (footnote 1), paragraph 156 at 39.

[51] id., paragraph 202 at 46–47.

[52] See R Dolzer, U Kriebaum, and C Schreuer, Principles of International Investment Law (3rd edn, Oxford University Press 2022), at 153.

[53] ibid.

[54] ibid.

[55] Telenor v. Hungary (footnote 48), paragraph 63.

[56] Tippets, Abbett, McCarthy, Stratton v. TAMS-AFFA Consulting Engineers of Iran, (1984) 6 Iran-USCTR 219, Award, 29 June 1984, at 225.

[57] Pope & Talbot v. Canada (footnote 17), paragraphs 100, 102.

[58] Reinisch and Schreuer (footnote 1), paragraphs 338–339 at 74-75.

[59] Tecmed v. Mexico (footnote 11), paragraph 113 (‘Although formally an expropriation means a forcible taking by the Government of tangible or intangible property owned by private persons by means of administrative or legislative action to that effect, the term also covers a number of situations defined as de facto expropriation, where such actions or laws transfer assets to third parties different from the expropriating State or where such laws or actions deprive persons of their ownership over such assets, without allocating such assets to third parties or to the Government.’).

[60] Metalclad Corporation v. The United Mexican States (Metalclad v. Mexico), ICSID Case No. ARB(AF)/97/1, Award, 30 August 2000, paragraph 103 (‘expropriation . . . includes not only open, deliberate and acknowledged takings of property, such as outright seizure or formal or obligatory transfer of title in favour of the host State, but also covert or incidental interference with the use of property which has the effect of depriving the owner, in whole or in significant part, of the use or reasonably-to-be-expected economic benefit of property even if not necessarily to the obvious benefit of the host State.’).

[61] Tidewater Investment SRL and Tidewater Caribe, C.A. v. Bolivarian Republic of Venezuela (Tidewater v. Venezuela), ICSID Case No. ARB/10/5, Award, 13 March 2015, paragraph 91 (‘Four measures were relied upon as constituting acts by which Respondent expropriated Claimants’ investments in Venezuela . . . It is necessary to take each of these measures in turn.’).

[62] Telenor v. Hungary (footnote 48), paragraph 63 (‘Moreover, it is not necessary to show a single act or group of acts committed at one time. As stated earlier, there may be “creeping” expropriation involving a series of acts over a period of time none of which is itself of sufficient gravity to constitute an expropriatory act but all of which taken together produce the effects of expropriation.’). See also Generation Ukraine Inc. v. Ukraine, ICSID Case No. ARB/00/9, Award, 16 September 2003, paragraph 20.22 (‘Creeping expropriation is a form of indirect expropriation with a distinctive temporal quality in the sense that it encapsulates the situation whereby a series of acts attributable to the State over a period of time culminate in the expropriatory taking of such property.’).

[63] Compañía de Aguas del Aconquija S.A. (formerly Aguas del Aconquija) and Vivendi Universal S.A. (formerly Compagnie Générale des Eaux) v. Argentine Republic (I) (Vivendi v. Argentina), ICSID Case No. ARB/97/3, Award II, 20 August 2007, paragraph 7.5.34 (‘Paraphrasing the words of the Tecmed CME Santa Elena and Starrett Housing tribunals, Claimants were radically deprived of the economic use and enjoyment of their investment, the benefits of which (ie the right to be paid for services provided) had been effectively neutralised and rendered useless.’).

[64] Saluka Investments BV v. The Czech Republic (Saluka v. Czech), PCA Case No. 2001-04, Partial Award, 17 March 2006, paragraph 262 (‘In the opinion of the Tribunal, the principle that a State does not commit an expropriation and is thus not liable to pay compensation to a dispossessed alien investor when it adopts general regulations that are “commonly accepted as within the police power of States” forms part of customary international law today.’).

[65] See, e.g., the US Model BIT (2012), Annex B(4)(a) says that ‘The determination of whether an action or series of actions by a Part, in a specific fact situation, constitutes an indirect expropriation, requires a case-by-case, fact-based inquiry that considers, among other factors: (i) the economic impact of the government action, although the fact that an action or series of actions by a Party has an adverse effect on the economic value of an investment, standing alone, does not establish that an indirect expropriation has occurred; (ii) the extent to which the government action interferes with distinct, reasonable investment-backed expectation; and (iii) the character of the government action’.

[66] Tecmed v. Mexico (footnote 11), paragraph 116 (‘To determine whether such an expropriation has taken place, the Arbitral Tribunal should not . . . restrict itself to evaluating whether a formal dispossession or expropriation took place, but should look beyond mere appearances and establish the real situation behind the situation that was denounced.’); Azurix Corp. v. The Argentine Republic (I) (Azurix v. Argentina (I)), ICSID Case No. ARB/01/12, Award, 14 July 2006, paragraph 312 (‘The parties’ arguments raise issues ranging from whether the BIT should be interpreted in favor of the investor to the requirements of expropriation measures in terms of effect, intention and duration, and whether such measures may, or may not necessarily, be contractual breaches which cumulatively may be tantamount to expropriation or the taking of the benefits legitimately expected by the investor. The Tribunal will now address these arguments in that order.’).

[67] See Reinisch and Schreuer (footnote 1), paragraph 897 at 189. See also OECD Draft Convention on the Protection of Foreign Property, 12 October 1967 (1968) 7 ILM 117, Article 3.

[68] The China–Peru BIT (1994), Article 4(2).

[69] The US Model BIT (2012), Article 6(1) provides that ‘Neither Party may expropriate or nationalize a covered investment either directly or indirectly through measures equivalent to expropriation or nationalization (“expropriation”), except: (a) for a public purpose; (b) in a non-discriminatory manner; (c) on payment of prompt, adequate, and effective compensation; and (d) in accordance with due process of law and Article 5 [Minimum Standard of Treatment](1) through (3)’.

[70] The Energy Charter Treaty (ECT), Article 13(1) reads: ‘Investments of Investors of a Contracting Party in the Area of any other Contracting Party shall not be nationalised, expropriated or subjected to a measure or measures having equivalent to nationalisation or expropriation (hereinafter referred to as “Expropriation”) except where such Expropriation is (a) for a purpose which is in the public interest; (b) not discriminatory; (c) carried out under due process of law; and (d) accompanied by the payment of prompt, adequate and effective compensation’.

[71] ADC v. Hungary (footnote 7), paragraphs 428–444.

[72] McLachlan, Shore and Weiniger (footnote 15), paragraphs 8.144 at 611 and 8.157 at 666. See also Venezuela Holdings, B.V., et al (case formerly known as Mobil Corporation, Venezuela Holdings, B.V., et al.) v. Bolivarian Republic of Venezuela, ICSID Case No. ARB/07/27, Award, 9 October 2014, paragraph 301 (‘However, the mere fact that an investor has not received compensation does not in itself render an expropriation unlawful. An offer of compensation may have been made to the investor and, in such a case, the legality of the expropriation will depend on the terms of that offer. In order to decide whether an expropriation is lawful or not in the absence of payment of compensation, a tribunal must consider the facts of the case.’).

[73] CMS Gas Transmission Company v. The Argentine Republic (CMS v. Argentina), ICSID Case No. ARB/01/8, Award, 12 May 2005, paragraph 263 (‘The Government of Argentina has convincingly argued that the list of issues to be taken into account for reaching a determination on substantial deprivation, as discussed in that case, is not present in the instant dispute. In fact, the Respondent has explained, the investor is in control of the investment; the Government does not manage the day-to-day operations of the company; and the investor has full ownership and control of the investment.’).

[74] Yukos Universal Limited (Isle of Man) v. The Russian Federation (Yukos v. Russia), PCA Case No. 2005-04/AA227, Final Award, 18 July 2014, paragraph 1583 (‘As to condition (c), Yukos was subjected to processes of law, but the Tribunal does not accept that the effective expropriation of Yukos was “carried out under due process of law” for multiple reasons set out above . . . Rather the Russian court proceedings . . . indicate that Russian courts bent to the will of Russian executive authorities to bankrupt Yukos, assign its assets to a State-controlled company, and incarcerate a man who gave signs of becoming a political competitor.’).

[75] Vivendi v. Argentina (footnote 63), para. 8.2.5 (‘There can be no doubt about the vitality of this statement of the damages standard [in the Factory Chorzów case] under customary international law, which has been affirmed and applied by numerous international tribunals as well as the PCIJ’s successor, the International Court of Justice. It is also clear that such a standard permits, if the facts so require, a higher rate of recovery than that prescribed in Article 5(2) for lawful expropriations.’).

[76] See Reinisch and Schreuer (footnote 1), paragraph 1078 at 223–224.

[77] E.g., the Energy Charter Treaty (ECT), Article 13(1) reads that ‘Such compensation shall amount to the fair market value of the Investment expropriated at the time immediately before the Expropriation or impending Expropriation became known in such a way as to affect the value of the Investment (hereinafter referred to as the “Valuation Date”).’; the Canada–Hong Kong, China SAR BIT (2016), Article 10(2) provides that ‘The compensation referred to in paragraph 1 [Lawful Expropriation] must be equivalent to the real value of the expropriated investment immediately before the expropriation took place (“date of expropriation”), and must not reflect a change in value occurring because the intended expropriation had become known earlier. Valuation criteria must include going concern value, asset value including the declared tax value of tangible property, and other criteria, as appropriate, to determine the real value’.

[78] Occidental Petroleum Corporation and Occidental Exploration and Production Company v. Republic of Ecuador (II) (Occidental v. Ecuador (II)), ICSID Case No. ARB/06/11, Award, 5 October 2012, paragraph 708 (‘The difference between these two cash flow streams (the “but for” state of the world with no termination less the actual state of the world with contract termination), discounted to the date of the actual contract termination, is the economically appropriate and reliable measure of the cumulative economic harm suffered by the Claimants as a consequence of the contract termination’.).

[79] Wena Hotels Limited v. Arab Republic of Egypt (Wena Hotels v. Egypt), ICSID Case No. ARB/98/4, 8 December 2000, paragraph 123–124 (‘The Tribunal agrees with Egypt that, in this case, Wena's claims for lost profits (using a discounted cash flow analysis), lost opportunities and reinstatement costs are inappropriate—because an award based on such claims would be too speculative . . . Wena had operated the Luxor Hotel for less than eighteen months, and had not even completed its renovations on the Nile Hotel, before they were seized on April 1, 1991. In addition, there is some question whether Wena had sufficient finances to fund its renovation and operation of the hotels’.).

[80] M A Kantor, Valuation for Arbitration: Compensation Standards, Valuation Methods and Expert Evidence (Kluwer Law International 2008), at 119 (‘Comparing the sales prices of similar businesses is often an effective valuation method for markets where large numbers of single asset companies exist, with a considerable number of sales transactions – markets with a large number of relatively simple-to-analyze companies. Finding such transactions is, of course, a difficult task. Most importantly, the two businesses must truly be comparable’.).

[81] Factory at Chorzów (Germany v. Poland) (Chorzów Factory case), Merits, PCIJ Series A No. 17, 13 September 1928, p. 47.

[82] See footnote 75.

[83] Siemens A.G. v. The Argentine Republic (Siemens v. Argentina), ICSID Case No. ARB/02/8, Award, 6 February 2007, paragraphs 354–384.

[84] id., paragraph 379 (‘The Tribunal considers that the amount claimed on account of lost profits is very unlikely to have ever materialized for the following reasons . . . ’.).

[85] See, e.g., Wena Hotels v. Egypt (footnote 79), paragraph 99.

[86] See Dolzer, Kriebaum, and Schreuer (footnote 52), at 147.

[87] Mobil Exploration and Development Inc. Suc. Argentina and Mobil Argentina S.A. v. Argentine Republic (Mobil v. Argentina), ICSID Case No. ARB/04/16, Decision on Jurisdiction and Liability, 10 April 2013, paragraph 816 (‘As in most other BITs, expropriation under the terms of this BIT may be considered to be an act taken by a State in the exercise of its sovereignty by which an investor is involuntarily deprived of property. Property should in this context be given a broad meaning and cover any material and immaterial assets having an economic value, including concessions and contractual rights belonging to the investor.’); Lao Holdings N.V. v. Lao People’s Democratic Republic (II) (Lao Holdings v. Laos (II)), ICSID Case No. ARB(AF)/16/2, paragraph 755 (‘The Tribunal agrees with LHNV that contract rights, in principle, can qualify as protectable assets under the BIT, for example as rights to “performance having an economic value” under Article 1(a)(iii).’).

[88] Norwegian Shipowners’ Claims (Norway v. United States of America) (Norwegian Shipowners Claims case), PCA Case No. 1921-01, Award, 13 October 1922, at 334 (‘These contracts were the property, or created it . . . It is common ground that, in the absence of any treaty, the Norwegian owners of these contracts were protected by the fifth amendment of the Constitution of the United States against any expropriation not necessary for public use, and that they are entitled to just compensation if expropriation occurs.’).

[89] AWG Group Ltd. v. The Argentine Republic (AWG v. Argentina), Decision on Liability, 30 July 2010, para. 102 (‘International law has recognized that contractual rights may be the subject of expropriation at least since the Norwegian Shipowners’ Claims case. The Chorzów Factory case would come to a similar conclusion.’).

[90] Southern Pacific Properties (Middle East) Limited v. Arab Republic of Egypt (SPP v. Egypt), ICSID Case No. ARB/84/3, Award, 20 May 1992, paragraphs 164–165 (‘What was expropriated was not the land nor the right of usufruct, but the rights that SPP(ME), as a shareholder of ETDC, derived from EGOTH’S right of usufruct, which had been “irrevocably’’ transferred to ETDC by the State. Clearly, those rights and interests were of a contractual rather than in rem nature. . . . Moreover, it has been long been recognized that contractual rights may be indirectly expropriated.’).

[91] Antoine Biloune and Marine Drive Complex Ltd. v. Ghana Investments Centre and the Government of Ghana (Biloune v. Ghana), Award on Jurisdiction and Liability, 27 October 1989, paragraph 81 (‘In the view of the Tribunal, such prevention of MDCL from pursuing its approved project would constitute constructive expropriation of MDCL’s contractual rights in the project and, accordingly, the expropriation of the value of Mr Biloune’s interest in MDCL, unless the Respondents can establish by persuasive evidence sufficient justification for these events.’).

[92] Siemens v. Argentina (footnote 83), paragraph 267 (‘The fact that the Contract is subject to Argentine law does not mean that it cannot be expropriated from the perspective of public international law and under the Treaty. The two issues are unrelated. The Contract falls under the definition of “investments” under the Treaty and Article 4(2) refers to expropriation or nationalization of investments. . . . There is a long judicial practice that recognizes that expropriation is not limited to tangible property. The Tribunal will refer, for the sake of brevity, to the findings of the Permanent Court of Arbitration (“PCA’’) in the case of the Norwegian Shipowners’ Claims and the Permanent Court of International Justice (“PCIJ”) in the Factory at Chorzow Case’.).

[93] See, e.g., TH Merril, ‘The Landscape of Constitutional Property’ (2000) 86 Virginia Law Review 885, at 993–994 (‘The general principle is clear: Contract rights are not property for takings purpose insofar as they reflect nothing more than a bilateral agreement; as contract rights break free from the initial contracting parties and enter into general circulation as investments or money, they became property.’). See also Amoco International Finance Corporation v. The Government of the Islamic Republic of Iran and Others (Amoco v. Iran), IUSCT Case No. 56, Partial Award (Award No. 310-56-3), 14 July 1987, paragraph 108 (‘ . . . Expropriation, which can be defined as a compulsory transfer of property rights, may extend to any right which can be the object of a commercial transaction, i.e., freely sold and bought, and thus has a monetary value.’).

[94] Accession Mezzanine Capital L.P. and Danubius Kereskedöház Vagyonkezelö Zrt. v. Hungary (Accession Mezzanine v. Hungary), ICSID Case No. ARB/12/3, Award, 17 April 2015, paragraphs 153–154 (‘It is not possible to expropriate a pure contractual right because it is not a thing that has an independent existence from the personalized contractual relationship in which it is embedded. . . . Pure contractual rights cannot be expropriated or taken because they are incapable of being alienated to a third party. For that reason they cannot be equated with property rights.’).

[95] Tza Yap Shum v. Republic of Peru (Tza Yap Shum v. Peru), ICSID Case No. ARB/07/6, Award, 12 February 2007, paragraphs 152–154.

[96] id., paragraph 170.

[97] id., paragraphs 220–221.

[98] id., paragraph 141.

[99] id., paragraph 181.

[100] id., paragraph 192.

[101] id., paragraphs 202–205.

[102] id., paragraph 203.

[103] id., paragraphs 253–254.

[104] id., paragraph 233.

[105] id., paragraph 258.

[106] id., paragraphs 259–260.

[107] id., paragraph 264.

[108] id., paragraphs 281–285.

[109] Zhongshan Fucheng Industrial Investment Co. Ltd. v. Federal Republic of Nigeria (Zhongshan Fucheng v. Nigeria), Ad Hoc Arbitration (UNCITRAL Rules), Final Award, 26 March 2021, paragraphs 7–19.

[110] id., paragraph 125.

[111] id., paragraph 126.

[112] id., paragraphs 124, 152–153.

[113] id., paragraph 131.

[114] id., paragraph 130.

[115] id., paragraph 131,

[116] id., paragraph 134.

[117] id., paragraph 173.

[118] id., paragraph 178.

作者介绍

钟莉合伙人北京

钟莉律师是汇仲律师事务所北京办公室合伙人。钟律师专注于涉外、跨境和国际争议解决领域，包括仲裁、诉讼以及谈判和调解。在国际商事仲裁领域，钟律师处理了几十起在ICC、LCIA、HKIAC、SCC、SIAC、CIETAC、BAC、SHIAC、SCIA等机构进行的国际商事仲裁案以及在域外进行的适用UNCITRAL仲裁规则的临时商事仲裁案。在国际投资仲裁领域，钟律师是具有多起实际代理经验的主办律师。

mariana.zhong@huizhonglaw.com

黄泽宇律师

黄泽宇博士的主要执业领域是国际仲裁、涉外民商事诉讼和合规调查。他在香港国际仲裁中心(HKIAC)、世界银行国际投资争端解决中心(ICSID)、深圳国际仲裁院(SCIA)等境内外知名仲裁机构和各级人民法院受理的各类民商事纠纷和投资纠纷案件中参与代理仲裁或诉讼案件。他目前正在代理中国投资者在ICSID起诉外国东道国政府和有关外国投资者与外国政府之间投资争议的国际投资仲裁案件，是少有的在该领域具备实战经验的中国律师之一。

huangzeyu@huizhonglaw.com

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