Intellectual Property Rights and Expropriation in Investment Arbitration

Abstract

This article examines the legal meaning of expropriation of foreign investment in international investment law, with specific attention to the distinction between direct, indirect and creeping forms of state interference. The purpose of the research is to clarify how expropriation is understood in doctrine, treaty practice and investment arbitration, and to identify the conditions under which state measures may be treated as lawful or unlawful. The research is based on doctrinal legal analysis, comparative examination of investment treaties, and analysis of selected arbitral awards dealing with expropriation, nationalization, regulatory measures and compensation. The article shows that modern investment law usually treats nationalization and expropriation as related or functionally equivalent concepts, even though doctrinal writings sometimes distinguish them by purpose, scale or legal form. It also demonstrates that the definition of expropriation has moved beyond formal transfer of title and now includes measures which, without open seizure, deprive the investor of control, use or substantial economic benefit. The findings confirm that direct expropriation is generally easier to identify, while indirect and creeping expropriation require a fact-specific assessment of the cumulative effect of state conduct. The article further argues that the legality of expropriation depends on cumulative requirements: public purpose, non-discrimination, due process and compensation. Failure to satisfy even one of these requirements may be sufficient for a tribunal to treat the measure as unlawful. At the same time, the line between compensable expropriation and non-compensable regulation remains difficult, especially where public health, environmental protection, taxation or economic policy are involved. The article concludes that expropriation should be understood not only as an act of state seizure, but also as a legal mechanism through which the balance between state sovereignty and investor protection is tested.