Week

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INTERNATIONAL INVESTMENT LAW
Fundamental Principles of IIL – Expropriation
I. Decide whether the following statements are True or False? Briefly explain?
1. Expropriation only occurs when investor’s property is physically seized by the government.
2. Intellectual property rights such as patents and trademarks can be subject to expropriation
protections under investment treaties.
3. A lawful expropriation must be for a public purpose and accompanied by prompt, adequate,
and effective compensation.
4. Indirect expropriation can occur even if the investor keeps legal ownership of the asset.
5. Expropriation is unlawful in all circumstances and can never be justified under international
investment law.
6. Loss of profits caused by general regulatory measures, such as new environmental rules,
necessarily indicates expropriation.
7. Discrimination or targeting of a specific investor can make an expropriation unlawful.
8. A permanent and substantial loss of economic value or control of the investment is a key
criterion for indirect expropriation.
9. Government measures that are temporary or have only minor effects on an investment are
generally not considered indirect expropriation.
10. The investor’s reasonable expectations based on the legal and regulatory environment may be
considered when assessing indirect expropriation.
II. Answer the following questions
1. What is the distinction between direct and indirect expropriation, between sole effects doctrine and
police powers doctrine in determining indirect expropriation?
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 2. Read the Annex 4 of EVIPA (Understanding on Expropriation) and Annex 9-B of CPTPP
Investment Chapter (Expropriation). What are the criteria to establish the existence of an
indirect expropriation?
III. Legal Case Analysis
1. Case study 1: Pope & Talbot Inc. v. The Government of Canada, UNCITRAL, Interim Award of
26 June 2000.
https://www.italaw.com/sites/default/files/case-documents/ita0674.pdf
Summary of facts:
In Pope & Talbot Inc. v. Canada, the U.S. investor operated softwood lumber mills in British
Columbia and claimed that Canada’s implementation of the U.S.-Canada Softwood Lumber
Agreement—through export quotas and fees—substantially interfered with its investment’s
ability to sell to the traditional U.S. market. The company argued that these measures reduced
export volumes, imposed extra costs, harmed profitability, and restricted its economic use and
enjoyment of the investment, amounting to an indirect expropriation in violation of NAFTA
Article 1110.
Question: For what reasons did the Tribunal concluded that Canada did NOT violate the
expropriation clause - NAFTA Article 1110? (paras. 96-105)
2. Case study 2: Técnicas Medioambientales Tecmed, S.A. v. The United Mexican States, ICSID Case No.
ARB (AF)/00/2, Award of 29 May 2003.
https://www.italaw.com/sites/default/files/case-documents/ita0854.pdf
Summary of facts:
In Tecmed v. Mexico, the claimant operated a landfill in Mexico, having obtained the necessary
permits and invested significant resources in establishing and running the facility. Over time,
the Mexican environmental authorities raised concerns about environmental and social impacts
related to the landfill's operations. Subsequently, the authorities denied the renewal of the
landfill’s operational permit and ordered its closure. The denial was based on allegations of
health and environmental risks, prompting the claimant to argue that the State’s actions
effectively deprived it of the economic use and value of its investment. The investor contended
that the non-renewal was unexpected given earlier assurances and practices, leading to
substantial financial loss and disruption to the investment. Tecmed claimed that this
constituted an expropriation under Article 5(1) of the Mexico-Spain Bilateral Investment
Treaty (BIT).
Questions:
a. How does the Tecmed Tribunal define the threshold for expropriation regarding the
“effects” of a state measure? Why is this important for understanding indirect
expropriation? (para. 116-117)
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b. What is the role of the proportionality test as applied by the Tribunal? (para. 122)
c. How did the Tribunal assessed Tecmed’s legitimate expectations. Why are legitimate
expectations relevant to the expropriation inquiry? (paras. 149-150)
d. Discuss the Tribunal’s conclusion regarding the justification of Mexico’s measures.
What factors led to the finding of a violation of the BIT despite the measures being
apparently legitimate under domestic law? (paras. 120, 139, 142, 147)