{"id":225,"date":"2016-06-10T12:01:16","date_gmt":"2016-06-10T16:01:16","guid":{"rendered":"http:\/\/www.iisd.org\/toolkits\/sustainability-toolkit-for-trade-negotiators\/?page_id=225"},"modified":"2016-09-01T19:43:20","modified_gmt":"2016-09-01T23:43:20","slug":"5-4-4-indirect-expropriation-regulatory-taking","status":"publish","type":"page","link":"https:\/\/www.iisd.org\/toolkits\/sustainability-toolkit-for-trade-negotiators\/5-investment-provisions\/5-4-safeguarding-policy-space\/5-4-4-indirect-expropriation-regulatory-taking\/","title":{"rendered":"5.4.4 Indirect Expropriation (Regulatory Taking)"},"content":{"rendered":"

Indirect expropriation occurs when a state takes effective control of, or otherwise interferes with the use, enjoyment or benefit of, an investment, strongly depreciating its economic value, even without a direct taking of property<\/em>. But there is no commonly accepted definition of indirect expropriation; ascertaining whether it has occurred will depend on the facts and on the treaty language, and on how both are interpreted by the dispute settlement body.<\/p>\n

This raises sustainable development concerns. Measures taken for a public purpose, such as health or environmental protection, could be considered an indirect expropriation, since they may affect the value of an investment. RTIAs\u2019 expropriation provisions generally do not prevent states from expropriation per se. Rather, they provide that any expropriations, among other things, must be lawfully done and compensated.<\/p>\n

The possibility of having to compensate investors for regulations that affect their bottom line leads to the concern that the fear or threat of an indirect expropriation claim by an investor could chill government regulation in the public interest. These problems have led some states to avoid including indirect expropriation altogether and rather require compensation only for direct expropriate, when a transfer of property actually occurs.27<\/sup><\/p>\n

When states decide that indirect expropriation should be covered by an international agreement, some have established more precise details on the definition. It is, for example, possible to draft provisions that specify the role and place of the criterion of injurious effect and of other criteria of expropriation.<\/p>\n

In accordance with some national approaches to expropriation, states could also envisage introducing the criterion of state appropriation along with that of injurious effect.28<\/sup> In other\u00a0words, the treaty may require that the injurious effect on the investment must have been accompanied by some economic benefit to the state. This might exclude, for example, a situation where a state prohibited the use or production of a toxic substance, but would include the declaration of a privately owned area as a nature reserve.<\/p>\n

It is important to note that simply recognizing the state\u2019s sovereign right to regulate (see Section 5.3.1<\/a>) may not be sufficient to address the definition of indirect expropriation, since expropriation provisions do not prohibit regulation; they simply demand that expropriation be compensated. Similarly, it is not enough to create a presumption in favour of certain regulatory measures; it should be specified that some types of measures\u2014known as \u201cpolice power\u201d measures\u2014are not expropriation, whatever their adverse impact on the investments<\/em>. Most formulations characterize police power measures as being non-discriminatory and in the public interest.<\/p>\n

If the negotiating parties consider including the indirect expropriation clause29<\/sup> in the agreement, they could adopt one or more options listed below, which have incorporated some sustainable development considerations.30<\/sup><\/p>\n","protected":false},"excerpt":{"rendered":"

Indirect expropriation occurs when a state takes effective control of, or otherwise interferes with the use, enjoyment or benefit of, an investment, strongly depreciating its economic value, even without a direct taking of property. But there is no commonly accepted definition of indirect expropriation; ascertaining whether it has occurred will depend on the facts and… Read more »<\/a><\/p>\n","protected":false},"author":7,"featured_media":0,"parent":130,"menu_order":4,"comment_status":"closed","ping_status":"closed","template":"","meta":{"_acf_changed":false,"footnotes":"4"},"class_list":["post-225","page","type-page","status-publish","hentry"],"acf":[],"_links":{"self":[{"href":"https:\/\/www.iisd.org\/toolkits\/sustainability-toolkit-for-trade-negotiators\/wp-json\/wp\/v2\/pages\/225","targetHints":{"allow":["GET"]}}],"collection":[{"href":"https:\/\/www.iisd.org\/toolkits\/sustainability-toolkit-for-trade-negotiators\/wp-json\/wp\/v2\/pages"}],"about":[{"href":"https:\/\/www.iisd.org\/toolkits\/sustainability-toolkit-for-trade-negotiators\/wp-json\/wp\/v2\/types\/page"}],"author":[{"embeddable":true,"href":"https:\/\/www.iisd.org\/toolkits\/sustainability-toolkit-for-trade-negotiators\/wp-json\/wp\/v2\/users\/7"}],"replies":[{"embeddable":true,"href":"https:\/\/www.iisd.org\/toolkits\/sustainability-toolkit-for-trade-negotiators\/wp-json\/wp\/v2\/comments?post=225"}],"version-history":[{"count":0,"href":"https:\/\/www.iisd.org\/toolkits\/sustainability-toolkit-for-trade-negotiators\/wp-json\/wp\/v2\/pages\/225\/revisions"}],"up":[{"embeddable":true,"href":"https:\/\/www.iisd.org\/toolkits\/sustainability-toolkit-for-trade-negotiators\/wp-json\/wp\/v2\/pages\/130"}],"wp:attachment":[{"href":"https:\/\/www.iisd.org\/toolkits\/sustainability-toolkit-for-trade-negotiators\/wp-json\/wp\/v2\/media?parent=225"}],"curies":[{"name":"wp","href":"https:\/\/api.w.org\/{rel}","templated":true}]}}