The protection of foreign investors from uncompensated expropriations traditionally has been one of the main guarantees found in international investment agreements (IIAs). Direct takings involve the transfer of title and/or outright physical seizure of the property. Some measures short of physical takings may also amount to takings in that they permanently destroy the economic value of the investment or deprive the owner of its ability to manage, use or control its property in a meaningful way. These measures are categorized as indirect expropriations. Finally, there are also non-discriminatory regulatory measures, i.e. acts taken by States in the exercise of their right to regulate in the public interest that may lead to effects similar to indirect expropriation but at the same time are not classified as expropriation and do not give rise to the obligation to compensate those affected.

Investors may bring expropriation claims with respect to any conduct that is attributable to the host State and in which the latter engaged in its sovereign capacity. As regards the types of assets that can be expropriated, IIAs typically refer to investments; this enhances the importance of a suitable definition of the term “investment” in the agreements.

Some recent IIAs have specifically narrowed down the range of assets capable of being expropriated to tangible and intangible property rights and property interests in investment. Where a measure affects a discrete economic right or an individual asset, the outcome of the expropriation analysis may depend on whether the asset concerned will be viewed as an investment or whether the investor’s overall business or enterprise is viewed as such. In making this assessment, an important factor is whether the right concerned is capable of economic exploitation independently of the remainder of the business. The nature and validity of rights or interests that are alleged to have been expropriated must be assessed in light of the laws and regulations of the recipient country of investment.