L’expropriation indirecte

The report analyzes the challenges of defining 'indirect expropriation'—measures that deprive an investor of the economic value of an investment without formally seizing the title. It contrasts the 'sole effect doctrine,' which focuses exclusively on the prejudice suffered by the investor, with more balanced approaches like proportionality and the 'police powers' doctrine, which protect legitimate non-discriminatory public regulations. The author argues that current investment treaties often lack precise definitions, leading to inconsistent arbitral rulings that may discourage states from implementing essential public health, environmental, or social protections due to the risk of costly compensation claims.

• Indirect expropriation is defined as a state action that causes severe prejudice to a foreign private investment, even if the investor formally retains the property title.
• Most investment treaties do not provide an explicit definition of indirect expropriation, leaving interpretation to arbitral tribunals. While some treaties use terms like 'measures equivalent to expropriation,' these are generally viewed by tribunals as functionally equivalent to indirect expropriation.
• The 'sole effect doctrine' (or 'orthodox' approach) determines expropriation based exclusively on the economic impact on the investor, ignoring the state's intent or the public interest purpose of the measure.
• To qualify as indirect expropriation under the effect-based approach, the prejudice must be 'substantial,' 'severe,' and 'irreversible,' meaning the investment has lost all economic interest or the investor has lost control and enjoyment of benefits.
• The proportionality criterion seeks a balance between public and private interests, requiring that a measure be necessary to achieve a public goal and be the least damaging option available.
• The 'police powers' doctrine argues that non-discriminatory regulations adopted in good faith for the general welfare (e.g., health, environment, security) are not indirect expropriations and do not require compensation, regardless of the economic loss.
• Recent investment treaty models, such as those from Canada (2004), the US (2004), COMESA (2007), and ASEAN (2009), have introduced specific exclusions or explanatory annexes to protect the state's right to regulate for the public good.
• The 'appropriation' criterion, though marginal in jurisprudence, suggests that indirect expropriation should only be recognized if the state derives an economic benefit from the prejudice caused to the investor.

APA

Nikièma, S. H. (2012). L’expropriation indirecte. International Institute for Sustainable Development. https://www.iisd.org/system/files/publications/best_practice_indirect_expropriation_fr.pdf

Chicago

Nikièma, Suzy H. L’expropriation indirecte. International Institute for Sustainable Development, 2012. https://www.iisd.org/system/files/publications/best_practice_indirect_expropriation_fr.pdf.

Wikipedia

{{cite report |last1=Nikièma |first1=Suzy H. |title=L’expropriation indirecte |publisher=International Institute for Sustainable Development |date=March 2012 |url=https://www.iisd.org/system/files/publications/best_practice_indirect_expropriation_fr.pdf |access-date=17 August 2026 |via=Climate Insights Directory}}

BibTeX

@techreport{nikima2012lexpropriation, author = {Nikièma, Suzy H.}, title = {{L’expropriation indirecte}}, institution = {International Institute for Sustainable Development}, year = {2012}, month = mar, url = {https://www.iisd.org/system/files/publications/best_practice_indirect_expropriation_fr.pdf}, urldate = {2026-08-17}, note = {Indexed by Climate Insights Directory} }