Annex 13: Expropriation
- An action or a series of actions by a Party cannot constitute an expropriation unless it interferes with a tangible or intangible property right or property interest in an investment.
- Expropriation may be either direct or indirect:
- direct expropriation occurs when a state takes an investor's property outright, including by nationalisation, compulsion of law or seizure;
- indirect expropriation occurs when a state takes an investor's property in a manner equivalent to direct expropriation, in that it deprives the investor in substance of the use of the investor's property, although the means used fall short of those specified in subparagraph (a) above.
- In order to constitute indirect expropriation, the state's deprivation of the investor's property must be:
- either severe or for an indefinite period; and
- disproportionate to the public purpose.
- A deprivation of property shall be particularly likely to constitute indirect expropriation where it is either:
- discriminatory in its effect, either as against the particular investor or against a class of which the investor forms part; or
- in breach of the state's prior binding written commitment to the investor, whether by contract, licence, or other legal document.
- Except in rare circumstances to which paragraph 4 applies, such measures taken in the exercise of a state's regulatory powers as may be reasonably justified in the protection of the public welfare, including public health, safety and the environment, shall not constitute an indirect expropriation.
- Page last updated: 03 December 2008
