indirect expropriation in the petroleum industry: the response of international arbitrations

The present article aims to argue indirect expropriation in international petroleum agreements and analyze the response of international arbitrations. in particular, international arbitral awards by the iran–us claims tribunal, the yukos case as an energy charter treaty arbitration, and certain north american free trade agreement cases have been examined. the recent trend shows that taking foreign investors’ property may occur not only through legislation or nationalization but also by indirect methods that can have the same effect as direct expropriation. indirect expropriation does not necessarily require the transfer of legal title from the international oil company to the host state. hence, it is difficult to distinguish between legitimate regulation and measures that are tantamount to expropriation with the payment of compensation. identifying an indirect expropriation is complex and depends upon the examination of the legitimate expectations of the investor concerning the enjoyment of its investment. host governments may employ different methods to achieve what amounts to direct taking, but without acknowledging it as such, to avoid legal consequences of expropriation and then payment of compensation.