Regulatory expropriation, investment protection and international law, when is government regulation expropriatory and when should compensation be paid?

Abstract

Investment protection obligations in bilateral investment agreements and the investment chapter of the 'North American Free Trade Agreement' provide that states must pay compensation for measures tantamount to expropriation. The scope of this obligation is controversial because international law has failed to develop clear rules for determining when a government measure is expropriatory. This thesis analyzes the international law governing expropriation and the scope of foreign investment protection under international law. It argues that states should have significant autonomy in the regulation of foreign investment, even if regulation significantly impairs the value of an investment. An international minimum standard of investment protection should require compensation for appropriations of property, national treatment, respect for state contracts and protection against arbitrary and opportunistic state conduct. The thesis then analyzes the scope of expropriation under Chapter Eleven of the NAFTA and the effect of international investment obligations on domestic regulatory authority.