IISD Best Practices: Compensation for Expropriation

The document examines the international legal obligations of host States to compensate foreign investors for expropriated investments, noting a historical divergence in views between capital-exporting and newly independent or communist countries. It argues that current investment protection treaties and customary international law now mandate that expropriation follow specific rules. The author recommends that States signing Bilateral Investment Treaties (BITs) provide clearer definitions of indirect expropriation—especially regarding legitimate laws and regulations—and draft more precise compensation clauses to better guide arbitral tribunals in complex evaluations.

• International investment law has evolved from a period of profound disagreement between capital-exporting nations and newly independent or communist states regarding the obligation to compensate foreign investors to a current state where investment protection treaties and customary international law obligate host States to follow specific rules for expropriation.
• There is a critical need for signatory States of Bilateral Investment Treaties (BITs) to more clearly define what constitutes indirect expropriation, particularly when legitimate laws and regulations are involved, and to use more precise language in compensation clauses to assist tribunals in calculating payments.

APA

Nikièma,, S. H. (2013). IISD Best Practices: Compensation for Expropriation. International Institute for Sustainable Development. https://www.iisd.org/publications/guide/iisd-best-practices-compensation-expropriation

Chicago

Nikièma,, Suzy H. IISD Best Practices: Compensation for Expropriation. International Institute for Sustainable Development, 2013. https://www.iisd.org/publications/guide/iisd-best-practices-compensation-expropriation.

Wikipedia

{{cite report |last1=Nikièma, |first1=Suzy H. |title=IISD Best Practices: Compensation for Expropriation |publisher=International Institute for Sustainable Development |date=19 March 2013 |url=https://www.iisd.org/publications/guide/iisd-best-practices-compensation-expropriation |access-date=23 October 2026 |via=Climate Insights Directory}}

BibTeX

@techreport{nikima2013iisd, author = {Nikièma,, Suzy H.}, title = {{IISD Best Practices: Compensation for Expropriation}}, institution = {International Institute for Sustainable Development}, year = {2013}, month = mar, url = {https://www.iisd.org/publications/guide/iisd-best-practices-compensation-expropriation}, urldate = {2026-10-23}, note = {Indexed by Climate Insights Directory} }