Doctor of Philosophy
School of Law
‘Indirect expropriation’ is not an uncommon concept in international law. It generally concerns situations in which State regulations impact upon the use of private property in a manner tantamount to direct expropriation. However, the conduct and the extent in which State regulation can constitute an indirect expropriation subject to compensation obligations under international investment treaties are still unclear in international law, and the problems of legal indeterminacy in the area of indirect expropriation have resulted in inconsistent and incoherent legal interpretations in a series of investment arbitrations.
In order to develop a more coherent approach with the potential to reduce the indeterminacy of indirect expropriation provisions, this thesis argues that, considering the public law nature of international investment treaties, vague indirect expropriation terms contained within those treaties should be interpreted in light of legal doctrines drawn from public law principles under both domestic and international law. In international law, relevant rules applicable between the parties comprise the context for treaty interpretation, as set out in article 31(3)(c) of the Vienna Convention on the Law of Treaties. These are ‘general principles of law’ recognized as sources of international law under Article 38(1)(c) of the Statute of the International Court of Justice. To identify the relevant public law principles, the thesis focuses on resource materials, doctrinal analysis and case studies drawn from domestic public laws and national jurisprudence developed by the US Supreme Court, the European Court of Human Rights, the Constitutional and Administrative Court of the Kingdom of Thailand and the Supreme Court of Mexico. The diversity of selected jurisdictions is to ensure the comprehensiveness and generalizability of the compared principles.
Analysis of the findings shows that the courts in selected jurisdictions affirm the powers of governments to regulate private properties for public interests. However, as societies evolve economically, the State’s rights to interfere with private property become more limited, and governments can exercise their powers only within a limited bound of permissible legislative and bureaucratic discretion. Courts in the selected jurisdictions generally affirm the emergence of the ‘proportionality doctrine’ as a tool to assess the regulatory interference measure imposed. Indirect expropriation is then typically subject to compensation obligation, first, when a regulation deprives the property owner of all property rights or all economically-viable uses; and second, when the regulatory interference falls short of full deprivation of property rights, but fails to meet the ‘proportionality test’ and imposes an ‘excessive burden’ borne by the property owner. In the latter case, the amount of compensation is not subject to full market price, but rather varied according to the nature of measure and circumstances in each case.
Current national jurisprudence demonstrates that the ‘principle of proportionality’ can provide a coherent framework for legal analysis of expropriation, and enable an adjudicator to scrutinize all kinds of regulatory interferences that expropriate private property, without impeding democratic processes on public policy processes within a country. It can provide important guidance for treaty drafters searching for a less indeterminate model clause on indirect expropriation. The ‘proportionality doctrine’ enables a State to interfere with private property for public policy purposes, providing that the measure is necessary, suitable to the goals pursued and nondiscriminatory and not an excessive burden on the property owner.
Naewmalee, Kiratipong, Indirect expropriation: property rights protection, state sovereignty to regulate and the general principles of law, Doctor of Philosophy thesis, School of Law, University of Wollongong, 2017. https://ro.uow.edu.au/theses1/157