Best Practices Indirect Expropriation

By Suzy H. Nikiema, March 2012

This paper investigates indirect expropriation in international investment law. Indirect expropriation is when the State acts in a way that is detrimental to foreign private investment, even when it is not directly targeted at an investment. The definition of indirect expropriation is extremely important for international investment law, and it is crucial to have clear conditions in which the State may be considered as amounting to indirect appropriation. However, existing treaties do not provide an explicit definition of the concept, which requires investment tribunals to formulate their own criteria. This paper explains the concept of indirect expropriation, assesses the risks that an ambiguous definition of indirect expropriation poses to the host State of investment, and provides recommendations on the topic.