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Expropriation - Chapter 2 - Investment Arbitration in Eastern Europe: In Search of a Definition of Expropriation

Author: Kaj Hobér
Page Count: 6
Published: February 2007
Media Desc: PDF from "Investment Arbitration in Eastern Europe: In Search of a Definition of Expropriation"
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Investment Arbitration in Eastern Europe: In Search of a Definition of Expropriation - Hardcover
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Kaj Hobér


      Generally speaking, the most serious threat to a foreign
investment is expropriation. From the perspective of a
foreign investor, the most important provisions in any
international treaty for the protection of foreign investment
are the provisions dealing with protection against
expropriation. These provisions do in fact constitute the
heart and soul of every BIT. The ultimate purpose of every
BIT is to protect against expropriation.
      Even though it is generally accepted today in
international law that states have the right to expropriate
property and rights of foreigners, it is equally accepted that
they can do so only under certain circumstances. Most
international agreements on the protection of foreign
investments attempt to spell out such conditions as between
the contracting states.
      A legal dictionary defines expropriation as “[a]
governmental taking or modification of an individual’s
property rights …”. This definition makes it clear that
expropriation need not necessarily entail an actual taking of
property as such. A modification of property rights may also
qualify as expropriation. In order for a modification of
property rights to be classified as expropriation, the
modification must be to the detriment of the original holder
of the rights. Thus, the concept of expropriation encompasses
measures whereby a state deprives an individual or
enterprise of the enjoyment of their property rights.
      Systematic expropriation of private property within one
or more specific sectors of a nation’s economy within the
framework of socio-economic or political reform is often
referred to as nationalization. The general nationalization of
private property in the name of socialism that took place in
Russia following the 1917 revolution and in other
communist countries is occasionally referred to as
socialization. The difference between expropriation and
nationalization (including socialization), is one of scope and
extent rather than of legal nature. In this contribution, I shall
use the term “expropriation” to describe any of the above
forms of expropriation.
      Mention must also be made of the term “confiscation”.
This term is mostly used to refer to the seizure of property
by a state without compensation. Black’s Law Dictionary
defines “confiscation” as “the seizure of private property by
the government without compensation to the owner, often
as a consequence of conviction for crime, or because
possession or use of the property was contrary to law”. In
this contribution, I shall not discuss, nor use, the term,
“confiscation” as defined above.

Table of Contents

Full Table of Contents from "Investment Arbitration in Eastern Europe: In Search of a Definition of Expropriation"



I. Background

II.  Expropriation
     1.  Introduction
     2.  Indirect Expropriation

III.  Current State of International Law with Respect to Expropriation
      1. Introduction
      2. Rules of Attribution
          2.1  Introduction
          2.2  Applicability of the ILC Articles
          2.3  General Rules of Attribution
          2.4  Attribution and Federal States
      3. The International Minimum Standard
          3.1  Public Purpose
          3.2  Non-Discrimination (National Treatment)
          3.3 Compensation

IV.  Bilateral Investment Protection Treaties
     1. Introduction
     2. The Sedelmayer Case
         2.1  The Background
         2.2  The Dispute
     3. The 1998 Financial Crisis in Russia
         3.1 Introduction
         3.2 Measures Taken by the Russian Federation
         3.3 Do the Measures Amount to Expropriation?
     4. The Tradex Case
         4.1 The Background
         4.2 The Dispute
     5. The Land Use Permit Case
         5.1 The Background
         5.2 The Dispute
     6. The SwemBalt Case
         6.1 The Background
         6.2 The Dispute
     7. Golden Shares in Russia Companies
         7.1 The Background
         7.2 Do Golden Shares Constitute Indirect Expropriation?
     8. The Estonian Bank Licence Case
         8.1 The Background
         8.2 The Dispute
     9. The Lauder Cases
         9.1 The Background
         9.2 The Dispute
         9.3 The Stockholm Award
         9.4 The London Award
    10. The Moldovan Case
         10.1 The Background
         10.2 The Dispute
    11. The Ukrainian Case
         11.1 The Background
         11.2 The Dispute
    12. The Refinery Case
         12.1 The Background
         12.2 The Dispute
    13. The Romanian Case
         13.1 The Background
         13.2 The Dispute

V. The Energy Charter Treaty
    1. Introduction
    2. The First ECT Arbitral Award
         2.1 The Background
         2.2 The Dispute
    3. The Second ECT Arbitral Award
         3.1 The Background
         3.2 The Dispute

VI.  Concluding Remarks



Appendix 1 - Sedelmayer v. Russian Federation
Appendix 2 - Tradex v. Republic of Albania
Appendix 3 - SwemBalt AB v. Republic of Latvia
Appendix 4 - Genin v. Republic of Estonia
Appendix 5 - Lauder v. Czech Republic
Appendix 6 - CME v. Czech Republic
Appendix 7 - Link - Trading v. Republic of Moldova
Appendix 8 - Generation Ukraine, Inc. v. Republic of Ukraine
Appendix 9 - The Refinery Case
Appendix 10 - Noble Ventures, Inc. v. Republic of Romania
Appendix 11 - Nykomb v. Republic of Latvia
Appendix 12 - Petrobart Ltd. v. Kyrgyz Republic

Author Detail

Kaj Hobér is a Partner with Mannheimer Swartling Advokatbyrå in Stockholm and Professor of East European Commercial Law at Uppsala University.  He has been heavily involved in the legal aspects of doing business in Eastern Europe and the former Soviet Union for the last 25 years. His arbitration experience includes representing both Eastern and Western European, American and Russian parties as well as parties from developing countries in international arbitrations.  He has also been involved in numerous oil and gas arbitrations, relating primarily to Northern Africa, the Middle East and the former Soviet Union. He has acted as counsel and arbitrator (including chairmanships) in more than 300 international arbitrations, including representation of the claimant in the first ECT award, as well as involvement in many other investment arbitrations. He is Chair of the IBA sub-committee on Investment Treaty Arbitration, a member of the board of the Arbitration Institute of the Stockholm Chamber of Commerce, the International Arbitration Club (London) and a member of the ICC Institute of International Business and Law (corresponding member).

Professor Hobér is the author of Joint Ventures in the Soviet Union (1989), Enforcing Foreign Arbitral Awards Against Russian Entities (1993), Transforming East European Law (1997), Protection of Property Rights in the Baltic Sea Region: Reality or Potemkin Villages? (1999), Applicable Law and Extinctive Prescription in Interstate Arbitration (2001), The Impeachment of President Yeltsin (2003), Essays on International Arbitration (2005), and is also the general editor of the Uppsala Yearbook of East European Law, and co-editor of Arbitration in Sweden (2nd ed., 1984). He has also published numerous articles on international arbitration and East European law.

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