Study On The Compensation Of Indirect Expropriation And Its Enlightenment To China

The issue of expropriation has been a concern for a long time, due to involving the interests of both foreign investors and host country national sovereign, however the key of study in the international investment law area has been a shift from the direct expropriation to the indirect expropriation. Although the concept of indirect expropriation has been accepted widely, for the lack of unified clear definition,some countries would make use of this ambiguity. At the same time for the lack of unified clear point of view about the damages of indirect expropriation so far, the result of the relevant case is often hard to predict. With the change of word economy, the traditional line between north and south has been blurred, which makes the future development trend of indirect expropriation more unpredictable, and the final damages could make this system realize the real meaning in practice.This paper systematically combed the theory of indirect expropriation and its damages, starting from the basic definition of indirect expropriation and further outlining the damages controversy. Part II as the main article discusses the indirect expropriation compensation liability and valuation. Finally, combined with China’s economic development, it analyzes the current status of bilateral investment agreements which our country has entered.This paper consists of three parts.At the first part, the article opens with the concept of indirect expropriation source, then goes with the comprehensive analysis of the development cause of indirect expropriation, which are the complexity based on the regulatory acts of the host country, the international economic environment of globalization as well as the intangible assets of investment activities. Therefore the indirect expropriation almost replaces the direct expropriation in the international investment area.In order to further clarification the important value of indirect expropriation, the article explains the reason for the attentions from the legal perspective of indirect expropriation by the practice and theory. They are three main contradictions, the contradictions between developed and developing countries, the host country public interests and private foreign investment, as well as economic and non-economic values.The article then introduces the traditional theory about the criteria for compensation. Although some professors think there should be a separate standard of compensation for in indirect expropriation, but we can see that the impact of indirect expropriation is the same as is imposed by the traditional theory, while in a legal form. Thus there is no need to establish a compensation system just for the indirect expropriation and we could adjust the compensation standards imposed on traditional expropriation. In fact in the current bilateral investment agreements, the previous are both in the same section, therefore we analyzes the application of indirect expropriation.The second part of the article focuses on the scope of liability for damage for indirect expropriation. For a long time, scholars at home and abroad believe that indirect expropriation of legitimacy will have an impact on final damages. Prevailing theory believe that the main factors affecting the scope of liability for damage focuses on the loss of profit and damages, punitive damages, compensation and damages. This distinction seems to be better able to avoid too much national sovereignty and gross interference in some host countries to reasonable investment interest from foreign investors, making legal acts to enjoy better protection. This way to distinguish between legitimate and representative case is started in case of Chorzów. But the author analysis the mentioned several factors, combined with a practical approach for legitimacy, then we can see that there is no need to distinguish the loss of profit, punitive damages seemed to have meaningful discussion from theory but it is not support in practice, compensation and the key to damages is restitution.Followed the above, the article analyzes how to determine the amount of 3 compensation of the indirect expropriation, from the valuation aspect. First, the timing of valuations, due to the characteristic the indirect expropriations are not disproportionately represented at once, the value for expropriated assets is affected, therefore the timing is very important. To introduce this aspect at first of all is to distinguish between its different from collection date, the former is the beginning a series of interventions by the host country, while the latter is the final date of the Act or omission, so that to effectively protect foreign investment assets from derogation at the time of calculation of compensation. While it Is not certain to take valuation date as the ultimate standard, there is also opportunity that expropriated assets of value added during the host Government acts. On the other hand, the article also discusses common valuation basis. This is due to not carefully defined the concept of value, a valuation conclusions will lose its significance. In practice there are many valuation basis may be referred. The author introduces the relevant international standards authority standard based on the sectionalization of market values and non-market values.Last section mainly discusses the study on indirect expropriation compensation for our inspiration. This part first analyses the indirect expropriation and compensation study to our importance, from two aspects of our country as a destination for investment and capital-exporting countries, combined with the objective situation and the future trend of China’s economic development, which describes the study of indirect expropriation is necessary. In the past ten years to attract foreign investment as an important economic driver has always been regarded highly by competent government departments at all levels, combined with the prevailing economic conditions in order to better attract foreign investment, therefore there is almost no foreign investors in the past sued for indirect expropriation cases. But with China’s adjustment of economic structure and change of the international investment environment, these facilities gradually fade out, and the draft of a new foreign investment law in China is reversing the comprehensive examination and approval system, which put forward more strict regulatory requirements. Therefore we should focus on indirect expropriation and compensation studies early. Besides, China is becoming the world’s leading investment country, and combining the country’s investment policy has occupied the main destinations in developing countries. Considering the fact that their legal and political environment is not very stable, to 4 focus on indirect expropriation problems will undoubtedly be able to better protect the interests of foreign investors in China in the future.Thus the article finally discusses the content of the indirect expropriation in the bilateral investment agreement(hereinafter referred to as BIT). Beginning with the development of the related BIT of indirect expropriation, the paper analyzed the various pros and cons, which according to international practice for BIT concluded to give related advises in the future. The article advises for the China’s future BIT on four aspects. First is the preamble as commanding the full text, which laid a tone of BIT to express the conclusion of objective, and in some of the related parties under clearly defined circumstances to give the Adjudicator for the deductibility of provisions intended to explain, which is very important. Second aspect is to emphasize the definition of indirect expropriation, as a basis for damages cases, explicit provisions agreed to better protect the interests of both sides and before you move on to part of the damages. Then the third aspect is the damages part of the concrete proposals, which is not as good as a universal in the international BIT practice and therefore there is a great deal of uncertainty, and our earlier concern and leading in the discussion will undoubtedly be able to reduce future disputes related to uncertainty, so as to better protect our country as the transformation into host developing countries, as well as future capital associated types of national interests. The final aspect discusses the choice of the dispute settlement body, although the ICSID arbitral institutions currently is the most professional representation, Peace ’ case against Fortis in the Agency has filed for arbitration, but its indirect expropriation and compensation did not have a clear opinion on the issue.Therefore we will continue to pay attention to a dynamic and changing. In order to reduce uncertainties, China need to conclude the BIT in accordance with the recommendations set forth in the relevant provisions, which reduces the arbitral tribunal discretion on this issue so as to give the investors a clearer look. On the other hand in the questions of jurisdiction, China should clear international arbitration institution and also emphasizes the judicial powers of the host country, which is not only conducive to the conclusion of the agreement but also resolve conflicts on the basis of respect to the host State.This article begins with the concept of indirect expropriation and introduces the scope of damages in detail, creatively put forward the impact of the legality of indirect expropriation to the damage liability, and at the same time analysis systematically the practice in the BIT our country concluded, combined with the international arbitration case and discussion. In this way it is not only to establishes better authority of our country in the area of international investment law, but also help our country to seize the current opportunities.