Exact Boundary Between Indirect Expropriation and Legitimate State Measures in Context of Interpretation of BITs and Arbitration Practice
Abstract
International investment activityplays an important role ín a globalized world aimed at continuous economic growth. The statě effort to give to the foreign investors the most favourable investment conditions faces, in certain areas, legitimate regulátory statě measures that háve been taken with reference to the International legal principle of statě sovereignty.
In the čase where the States exceed a certain degree in implementation thereof the indirect expropriation often occurs which is connected to the obligation of paying compensation. The question is whether there is a clear and indisputable concept of regul átory undertakings.
Are there legitimate measures made within the statě policy which do not require any compensation that would distinguish such legitimate measures from an indirect expropriation? The indirect expropriation means a measure or series of measures taken by a statě having the effect equivalent to direct expropriation without formal transfer of title or direct seizure. In this respect the čase law of arbitral tribunals plays an irreplaceable role and gradually creates a systém of criteria which need to be regarded when determining the character of the statě measures.
Legitimate government measures detrimental to foreign investors, but not requiring compensation, are generally adopted for purposes of common welfare or sociál interest. The adoption of regulátory