Browsing by Author "Kokkonen, Maija"

The concept of expropriation under international investment law has traditionally entailed situations in which foreign investors have been deprived of their legal title to property through formal measures attributable to states. In recent years, as formal expropriations have become rare, if non-existent, the focus of international investment law has shifted to indirect expropriations. In other words, to expropriations which take place through state measures with similar effects as those of direct expropriations, but which measures are not formally aimed to expropriate the property of foreign investors. It follows that a large group of versatile governmental measures, including measures adopted for environmental purposes have been under the scrutiny of tribunals in investment arbitration. In essence, it is a question of where the line between non-compensable governmental measures and governmental measures amounting to expropriations should be drawn; also a central theme of this study. In this study the questions framing the concept of indirect expropriation were reflected against states’ climate change mitigation measures. A justified approach by virtue of the ever-growing global environmental concerns and likely increase in states’ climate change mitigation measures following the adoption of the 2015 Paris Agreement on climate change. The focus of this study also contributed to a broader theme in the area of international investment law regarding the balance that needs to be struck between the states’ right to regulate on public policy matters and the states’ obligation to guarantee protection to foreign investors under international investment agreements. From a narrower perspective, the main research question of this study concerned the adjudicative means tribunals may use when determining the scope of indirect expropriation. The two main methodological approaches presented within the scope of this study were the police powers and sole effect doctrines, which were analyzed in detail in the course of this study. The analysis of these doctrines was conducted through interpretation and examination of investment treaty jurisprudence and scholarly writings according to which conclusions were drawn on the contents and applicability of the two doctrines. In accordance with these findings where the sole effect doctrine focuses exclusively on the adverse effects of the state’s measure on the investment of the foreign investor, the police powers doctrine carves out bona fide state regulation adopted for public purposes from the hypothetical scope of indirect expropriation. However, although the approaches adopted by the doctrines seem rather clear, it is far from settled, which one of the approaches should be applied by a tribunal in each particular case. Compelling argumentation exists for the use of either one. Moreover, it is even less clear, how international investment law will interact in the future with states’ climate change mitigation measures. Although environmental measures have gained increasing importance during the last few decades their status within the framework of public policy interests seems, at least to some extent, unresolved. However, a careful assumption might be made on the importance of climate change mitigation objectives as a common concern of humankind. Finally, on the basis of this study, although the effect doctrine does provide a well-justified mean for determining the scope of indirect expropriation, it is for practical reasons that tribunals should favor, although with some case-by-case caution, the use of the police powers doctrine. Through the methodological approach adopted by the police powers doctrine a tribunal is not only able to secure rights guaranteed to foreign investors under the international investment law regime, but also able to ensure the functioning of the international climate change regime. These methodological adjustments will further help investment treaty tribunals strike a better balance between differing interests in investment arbitration. This balance will ultimately enable the international investment law regime to conquer the criticism it has faced in the broader field of international law.