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Business problems caused by the states’ normal exercise of regulatory power do not necessarily amount to an expropriation
“Indirect expropriation” and “measure tantamount to expropriation” are functionally equivalent
- North American Free Trade Agreement > Chapter Eleven – Section A – Investment > Article 1110 – Expropriation and Compensation > Measures Tantamount to Expropriation
- International Investment Treaties (IITs) > Protection of Investors under IITs > Expropriation and Standards of Protection > Expropriation > Measures Tantamount to Expropriation
A tribunal has to distinguish between whether an expropriatory action took place and the requirements imposed on such actions by the treaty
Regulations can constitute an indirect expropriation
General remarks regarding the conflict of regulatory interests by the state and protection of investors
- North American Free Trade Agreement > Chapter Eleven – Section A – Investment > Article 1110 – Expropriation and Compensation > Indirect Expropriation / Regulations > Right to Regulate
- International Investment Treaties (IITs) > Protection of Investors under IITs > Expropriation and Standards of Protection > Expropriation > Indirect Expropriation / Regulations > Right to Regulate
Protection against indirect expropriation includes protection against creeping expropriation
Remarks regarding possibility of suspension of time periods as a general principle
Tax regulations can constitute an expropriation within the meaning of Article 1110 NAFTA
Generally, Article 1105 NAFTA is not applicable in tax cases, but it may be relevant in such cases due to the cross-reference in Article 1110(1)(c) NAFTA
Article 1117(2) NAFTA does not permit a suspension of the limitation period
The concept of discrimination requires distinctions between foreign and domestic investors in like circumstances, and for those distinctions to be unreasonable
There may be cases in which a state is estopped from resorting to a limitation defence, for example after an acknowledgment of the claim under dispute by the competent organ in the form prescribed by law or after a long, uniform, consistent, and effective behaviour of the state organs recognizing at least the existence of the claim
The exhaustion of local remedies rule of customary international law may be altered by treaty
Articles 1121(2) and (3) NAFTA derogate from the exhaustion of local remedies rule of customary international law and, therefore, must be regarded as a special rule on the relationship between domestic and international judicial proceedings
Despite the waiver, the claimant may continue to pursue local remedies inasmuch as they concern the question of whether the state measure was in compliance with local law
- International Investment Treaties (IITs) > Protection of Investors under IITs > Dispute Settlement Clauses > Waiver Clauses
- North American Free Trade Agreement > Chapter Eleven – Section B – Settlement of Disputes between a Party and an Investor of Another Party > Article 1121 – Conditions Precedent to Submission of a Claim to Arbitration
Protection against indirect expropriation includes protection against creeping expropriations
Regulations can constitute an indirect expropriation
Tax regulations can constitute an expropriation within the meaning of Article 1110 NAFTA
Business problems caused by the state’s normal exercise of regulatory power do not necessarily amount to an expropriation
A tribunal must distinguish between the question whether an expropriatory action took place and the requirements imposed on such actions by the treaty
The purely declaratory character of the relief sought by the claimant is not necessarily inconsistent with Article 1116(1) and Article 1117(1) NAFTA
There may be cases in which a state is estopped from resorting to the limitation defence, for example, after an acknowledgment of the claim under dispute by the competent organ in the form prescribed by law or after a long, uniform, consistent, and effective behaviour of the state organs recognizing at least the existence of the claim
Generally, Article 1105 NAFTA is not applicable in tax cases, but it may be relevant due to the cross-reference in Article 1110(1)(c) NAFTA
- North American Free Trade Agreement > Chapter Eleven – Section A – Investment > Article 1105 – Minimum Standard of Treatment > Character and Scope of the Standard
- North American Free Trade Agreement > Chapter Eleven – Section A – Investment > Article 1110 – Expropriation and Compensation > General Remarks
A tribunal must distinguish between the question whether there an expropriatory action took place and the requirements imposed on such actions by the treaty
Article 1102 NAFTA does not require a claimant to demonstrate explicitly that a distinction is a result of the his or her foreign nationality
Lack of transparency alone does not constitute a violation of NAFTA
General remarks regarding shift of burden of proof and prima facie evidence
The exhaustion of local remedies rule of customary international law may be altered in any way by IIT
The concept of discrimination requires distinctions between foreign and domestic investors in like circumstances to be unreasonable
International Law Rules Applicable to IITs
Relationship of IITs to Other Sources of International Law
Relationship of an IIT to Customary International Law
The exhaustion of local remedies rule of customary international law may be altered by treaty
Relationship of an IIT to General Principles of International Law
Estoppel
There may be cases in which a state is estopped from resorting to a limitation defence, for example after an acknowledgment of the claim under dispute by the competent organ in the form prescribed by law or after a long, uniform, consistent, and effective behaviour of the state organs recognizing at least the existence of the claim
Further Problems
Remarks regarding possibility of suspension of time periods as a general principle
Protection of Investors under IITs
Expropriation and Standards of Protection
Expropriation
Indirect Expropriation / Regulations
Right to Regulate
Regulations can constitute an indirect expropriation
General remarks regarding the conflict of regulatory interests by the state and protection of investors
Protection against indirect expropriation includes protection against creeping expropriation
Determining Whether a Regulation Constitutes an Indirect Expropriation
Business problems caused by the states’ normal exercise of regulatory power do not necessarily amount to an expropriation
Measures Tantamount to Expropriation
“Indirect expropriation” and “measure tantamount to expropriation” are functionally equivalent
Legality of an Expropriation
A tribunal has to distinguish between whether an expropriatory action took place and the requirements imposed on such actions by the treaty
National Treatment
Justification of Distinction
The concept of discrimination requires distinctions between foreign and domestic investors in like circumstances to be unreasonable
Dispute Settlement Clauses
Exhaustion of Local Remedies Clauses
The exhaustion of local remedies rule of customary international law may be altered in any way by IIT
Waiver Clauses
Despite the waiver, the claimant may continue to pursue local remedies inasmuch as they concern the question of whether the state measure was in compliance with local law
Procedural Questions
Burden of Proof
General remarks regarding shift of burden of proof and prima facie evidence
Chapter Eleven – Section A – Investment
Article 1101 – Scope and Coverage
“Measures” Within the Meaning of Article 1101 NAFTA
Lack of transparency alone does not constitute a violation of NAFTA
Article 1102 – National Treatment
Distinction Between Local and Foreign Investors
Article 1102 NAFTA does not require a claimant to demonstrate explicitly that a distinction is a result of the his or her foreign nationality
Justification of Distinction
The concept of discrimination requires distinctions between foreign and domestic investors in like circumstances, and for those distinctions to be unreasonable
Article 1105 – Minimum Standard of Treatment
Character and Scope of the Standard
Generally, Article 1105 NAFTA is not applicable in tax cases, but it may be relevant due to the cross-reference in Article 1110(1)(c) NAFTA
Article 1110 – Expropriation and Compensation
General Remarks
Generally, Article 1105 NAFTA is not applicable in tax cases, but it may be relevant due to the cross-reference in Article 1110(1)(c) NAFTA
A tribunal must distinguish between the question whether there an expropriatory action took place and the requirements imposed on such actions by the treaty
Indirect Expropriation / Regulations
Right to Regulate
General remarks regarding the conflict of regulatory interests by the state and protection of investors
Protection against indirect expropriation includes protection against creeping expropriations
Regulations can constitute an indirect expropriation
Tax regulations can constitute an expropriation within the meaning of Article 1110 NAFTA
Determining Whether a Regulation Constitutes an Indirect Expropriation
Business problems caused by the state’s normal exercise of regulatory power do not necessarily amount to an expropriation
Measures Tantamount to Expropriation
“Indirect expropriation” and “measure tantamount to expropriation” are functionally equivalent
Legality of an Expropriation
A tribunal must distinguish between the question whether an expropriatory action took place and the requirements imposed on such actions by the treaty
Chapter Eleven – Section B – Settlement of Disputes between a Party and an Investor of Another Party
Article 1116 – Claim by an Investor of a Party on Its Own Behalf
Loss or Damage Incurred by the Investor
The purely declaratory character of the relief sought by the claimant is not necessarily inconsistent with Article 1116(1) and Article 1117(1) NAFTA
Article 1117 – Claim by an Investor of a Party on Behalf of an Enterprise
Article 1117(2) NAFTA does not permit a suspension of the limitation period
There may be cases in which a state is estopped from resorting to the limitation defence, for example, after an acknowledgment of the claim under dispute by the competent organ in the form prescribed by law or after a long, uniform, consistent, and effective behaviour of the state organs recognizing at least the existence of the claim
Article 1121 – Conditions Precedent to Submission of a Claim to Arbitration
Articles 1121(2) and (3) NAFTA derogate from the exhaustion of local remedies rule of customary international law and, therefore, must be regarded as a special rule on the relationship between domestic and international judicial proceedings
Despite the waiver, the claimant may continue to pursue local remedies inasmuch as they concern the question of whether the state measure was in compliance with local law
Further articles relevant to International Investment Law
Article 2103 – Taxation
Tax regulations can constitute an expropriation within the meaning of Article 1110 NAFTA
Generally, Article 1105 NAFTA is not applicable in tax cases, but it may be relevant in such cases due to the cross-reference in Article 1110(1)(c) NAFTA