Yes. An investment treaty can protect a covered foreign investor from uncompensated expropriation and may provide a route to bring a claim against the host state. Whether it applies—and whether a particular state action counts as expropriation—depends on the treaty’s wording, the investment and investor, and the facts.
What does treaty protection against expropriation mean?
International investment agreements (IIAs), including investment treaties, set standards for how a host state must treat qualifying foreign investors and their investments. Expropriation provisions are intended to protect against certain state takings without compensation. They do not guarantee that an investment will retain its value or that an investor will recover every loss.
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Coverage is conditional. The investor’s nationality and ownership, the investment’s legal form and location, and the challenged state measure all need to fit the particular treaty. A treaty may also require the state to have consented to a specific dispute-resolution process before an investor can bring a claim.
What can count as expropriation?
Direct expropriation
A direct taking generally involves a formal transfer of title or physical seizure of property by the state. The treaty’s definition of protected property and the relevant host-country law can affect whether a particular asset is covered.
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Indirect expropriation
An indirect expropriation claim concerns state action that stops short of formally taking title or physically seizing property. The question is whether the measure’s effects have deprived the investor of meaningful ability to manage, use, or control the property, or have otherwise destroyed its economic value under the applicable legal test. The analysis can depend on whether the relevant investment is a discrete asset or a wider enterprise.
A fall in value, by itself, does not establish expropriation. Tribunals must apply the exact treaty language to the measure and its effects; there is no universal result for every adverse state action.
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Can a government regulation amount to expropriation?
It can be argued to do so, but regulation that harms an investment is not automatically a compensable taking. Some treaties and legal approaches recognize that non-discriminatory measures adopted for a public-interest purpose may have effects resembling indirect expropriation without being classified as expropriation or requiring compensation. Modern treaty drafting may offer tribunals more guidance on where that boundary lies.
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When may an expropriation be lawful?
UNCTAD identifies four conditions commonly associated with a lawful expropriation: a public purpose, non-discriminatory treatment, due process, and payment of compensation. Treaties differ in how they state these conditions, which kinds of property they cover, and how they address compensation. Meeting—or failing to meet—one condition does not resolve every issue under every treaty.
How can an investor pursue a treaty claim?
If the applicable treaty provides investor-State dispute settlement (ISDS), it may let a qualifying investor bring a claim through the forum and process specified in that treaty. The treaty governs the state’s consent to arbitration, eligible investors and investments, available procedures, and any steps required before a claim can proceed.
- Identify the potentially applicable treaty. Check the host state, the investor’s nationality and ownership structure, and when and how the investment was made.
- Read the coverage and expropriation provisions. Confirm which investments and measures are covered, how direct or indirect expropriation is defined, and what conditions or exceptions apply.
- Check consent and procedural requirements. Find the treaty’s dispute-resolution clause and follow its specified forum and pre-arbitration steps. Deadlines and procedures cannot be determined without the particular treaty.
- Assess the measure and potential remedy. The relevant evidence, host-country law, treaty text, and procedural history affect both the merits and any compensation analysis.
This is why the title alone cannot establish that a particular investor has a claim. A case-specific assessment needs the treaty text, investor nationality and ownership, investment structure, host-country law, challenged measure, and procedural history.
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Compensation is not automatically the amount the investor claims. The applicable treaty and law control the analysis, including any valuation standard, date, or method. UNCTAD notes that older-generation IIAs often leave compensation rules unclear, giving tribunals room to interpret them under applicable law; some newer treaties specify valuation approaches or seek to limit awards based on hypothetical future profits.
UNCTAD’s 2024 issues note reports that 98% of ISDS cases were based on old-generation IIAs that typically lack clear compensation guidance. It also reports that the average award rose from US$25 million in 1994–2003 to US$256 million in 2014–2023, and that tribunals awarded more than US$100 million in over a quarter of ISDS cases won by investors. These are figures about ISDS awards, not a prediction of the result or value of a particular expropriation claim.
What to compare when reviewing two treaties
Because treaty protections vary, compare the actual provisions rather than assuming that one treaty’s rules apply to another.
Quick Recap
- Who and what qualify: the definitions of investor and investment, including ownership or nationality requirements.
- What counts as a taking: coverage of direct and indirect expropriation and the treaty’s test for indirect effects.
- Limits on state action: public-purpose, non-discrimination, due-process, and regulatory language or exceptions.
- Compensation: the stated standard and any valuation date or method.
- Dispute procedure: state consent, available forum, and required steps before an investor may file.
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