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Application of Proportionality Principle as a judgment Criteria in Indirect Expropriation in International Investment Arbitration

  • Journal of International Business Transactions Law
  • Abbr : IBT
  • 2017, (20), pp.45-77
  • Publisher : The Institute for Legal Studies Dong-A University
  • Research Area : Social Science > Law > Private Law > International Commercial Transactions Law

이인희 1 KIM DAEJUNG 1

1동아대학교

Candidate

ABSTRACT

Investment-hosting country’s regulatory power on their public policy can often be subject to indirect appropriation to be reviewed as an infringement case on the foreign investor’s investment. It is a critical issue that how we should balance the conflicting interests between the hosting county and the foreign investor. Areas such as environment, public health, security and energy are mainfields that countries are regulating in their national law after receiving investment and as such it is necessary to establish more elaborate set of laws to avoid indirect appropriation claim. Proportionality principle is one of the most highlighted standards that can apply both national and international law. Tecmed v. Mexico is the representative case that the arbitration tribunal has applied the proportionality principle. In this principle, hosting countries should prove that they have met proper suitability, necessity, proportionality and legitimate expectation tests when they exercised regulatory measures upon foreign investor’s investment. The principle has long been applied in constitutional law, administrative law, and WTO/GATT cases. Recently, it has been increasingly used in international investment treaty disputes. Proportionality principle has not yet been shaped as a concrete law, so it needs to be improved more in contents to become national and international law. Arbitration tribunal in investment dispute then can use this principle more efficiently to decide indirect expropriation decision. This will gurantee more stable decision by improving predictability on tribunal as well as helping to establish governments’ regulatory measures which is safe from foreign investment disputes.

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