Standard of Compensation for Expropriation of Foreign Investment

Abstract

The standard of compensation for expropriation or nationalization of foreign investments has been one of the single most contested issues of international law. The debate has centered on whether the host State laws or international law would determine the standard of compensation for expropriation of foreign property. Despite persistent objection from the developing countries, the prompt, adequate, and effective compensation standard have become an integral part of international investment jurisprudence. This chapter examines the international law and practice on standard of compensation for expropriation/Nationalization of foreign investment. Section “International Law on Expropriation” of the chapter shall look briefly at the international law on expropriation of foreign property. Sections “Compensation in International Law: Calvo Clause, Hull Standard, and “Appropriate” Compensation” and “Standard of Compensation for Expropriation: The Dominance of “Prompt, Adequate, and Effective” Standard” shall deal with the general international standard of compensation and the practice of States and tribunals in the context of calvo clause, Hull standard, and “appropriate” compensation, respectively, and the dominance of “prompt, adequate, and effective” standard. Section “Standard of Compensation: Bilateral and Multilateral Approaches” deals with bilateral and multilateral treaty approaches to compensation, with section “Compensation for Indirect Expropriation” deals with indirect expropriation followed by concluding observations in section “Concluding Remarks.”.