Sovereignty or State Responsibility? Expropriation and the Right to Regulate in International Law on Foreign Investment
Abstract
A state is entitled to be bound by investment agreements, including expropriating alien property on its territory. In international law, both represent the state’s sovereign principle within the boundaries of territorial integrity. Expropriation and the right to regulate are usually included in investment agreements as part of the substantive rules. This study uses a normative juridical approach. This approach is carried out by examining the library materials, which are secondary data; especially the principles and norms of law. While the aim of this research is to examine the legal aspects of several key concepts within the international investment law regime—the right to regulate and expropriation, both in terms of its regulation and implementation, in order to find best practices. Expropriation and the right to regulate are essentially like two sides of the same coin. This is because lawful expropriation implies state obligations (compensation), whereas unlawful expropriation implies state responsibilities (restitution or reparations). Meanwhile, the right to regulate (police powers), which is based on the concept of state sovereignty, does not. Lawful expropriation is defined as the state measures carried out with the due process of law, in a non-discriminatory manner, for the purpose of the public interest and is accompanied by the payment of compensation. In terms of expropriation, the right to regulate can be regarded as a form of lawful expropriation that does not necessitate compensation.
Keywords: international investment law, expropriation, the right to regulate
References
[1] Powell EJ, McDowell SS. “Islamic sovereignty norms and peaceful settlement of territorial disputes.” iCourts. SSRN. 2016;(47): https://doi.org/10.2139/ssrn.2744651
[2] Cassese A. International law, 2nd Press, Oxford: Oxford University Press, 2005.
[3] Kusumaatmadja M, Etty R. Agoes. Pengantar Hukum Internasional. Bandung: Alumni; 2003.
[4] Dolzer R, Schreuer C. Principles of international investment law. Oxford: Oxford University Press; 2008. https://doi.org/10.1093/law:iic/9780199211753.001.1
[5] Subedi SP. International investment law: Reconciling policy and principle. Bloomsbury Academic; 2008.
[6] Titi A. The right to regulate in international investment law. 2014. https://doi.org/10.5771/9783845251783
[7] OECD. “‘Indirect expropriation’ and the ‘right to regulate’ in international investment law.” 2004.
[8] Mouyal LW. International investment law and the right to regulate: A human rights perspective. New York: Routledge.
[9] ASEAN Comprehensive Investment Agreement 2009 (ACIA 2009).
[10] UNCTAD. “Expropriation,” New York and Geneva, 2012.
[11] Bonnitcha J, Poulsen LN, Waibel M. The political economy of the investment treaty regime. Oxford University Press; 2017.
[12] UNCTAD. “International investment agreements and their implications for tax measures: What tax policymakers need to know.” 2021.
[13] Nikièma SH. Best practices indirect expropriation. Manitoba; 2012.
[14] Newcombe A. The boundaries of regulatory expropriation in international law. ICSID Rev. 2005;20(1):1–57.
[15] Titi C. The right to regulate in international investment law. Volume 18. Revisited; 2022.
[16] Vienna Convention on the Law of Treaties. 1969;1155(2014):23–46.
[17] Indonesia-Singapore BIT 2018.
[18] Columbia-United Kingdom BIT 2010.