Foreign Investment, Insights

Expropriation of Investments: Are There Any Remedies for Foreign Investors?


Assets, in their various forms, are not just sources of investments in developing and developed countries but also vulnerable to the influence of state policies. These assets, often the result of significant investments and efforts by international and multinational companies, are particularly susceptible to state policies that may be detrimental to their economic interests.

In exercising their sovereign powers, various states tend to impose or implement policies/sanctions that are inimical to the economic interests of businesses with foreign ownership within their jurisdictions. The ripple effects of these policy changes or sanctions may precipitate the expropriation, nationalization, or takeover of these assets, triggering the dispute resolution process in relevant International Investment Agreements (IIAs), Bilateral Investment Treaties (BITs), Multilateral Investment Treaties (MITs), or other private international law instruments governing the rights of the investors and the state parties, respectively. In what they deem as ‘deserving circumstances ‘, including addressing socio-economic realities and imminent or prevailing environmental hazards, sovereign states wield the power to regulate economic activities within their territory. However, this regulatory autonomy and police powers, recognized in international law, can sometimes clash with investor’s rights and legitimate expectations, creating a delicate balance that demands careful consideration. This delicate balance underscores the need for a nuanced approach to international investment agreements and disputes.

One of the key issues in an investor-state dispute is the alleged unlawful expropriation of the investor’s assets or investments by the state. While the investor may be entitled to compensation, it is also crucial to protect the regulatory autonomy of the state. Striking a balance between these competing rights is a delicate task. Once a finding of unlawful expropriation has been made, the process of determining the compensation and its quantum begins but the interest of the State may require protection. This article examines the concept of legal and illegal appropriation or unlawful expropriation of an asset and the remedies available in international arbitration.

Conceptual Clarification.

Expropriation is the State’s taking of property belonging to a foreign investor, which, if unlawful, triggers the State’s international responsibility. Nationalization is a form of expropriation that covers an entire industry or geographic region and typically occurs in the context of a significant social, political, or economic change.

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Harrison Ogalagu


Oludayo Ayeni

Senior Associate

Practice Key Contacts

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