Political Risks_Nationalizations in Bolivia

To third parties different from the expropriating

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to third parties different from the expropriating state or where such laws or actions deprive persons of their ownership over such assets, without allocating such assets to third parties or to the Government." Thus, a single act of expropriation by the state is not required: it is enough if the measures adopted by the State are permanent and irreversible and if the effect of these measures is that the assets and rights of the investor are affected in such a way that they cannot be exploited. Whilst direct expropriation is readily apparent, it is harder to identify interference with an investor’s rights. It is a question of fact in each case whether the effect of the state action is such that the investor’s rights can no longer be exploited. In the earlier case of Metalclad v. Mexico (2000), the Tribunal had also attached great weight to the effect of the government measures on the rights of the foreign investor. The Tribunal held that the measures were tantamount to expropriation because they "effectively and unlawfully" prevented the investor’s operation of the project. However, the case demonstrates that arbitration awards on the meaning of "expropriation" are not immune from challenge. Mexico appealed to t he Supreme Court of British Columbia and the Court held that it did not have jurisdiction to interfere with the Tribunal’s interpretation though it did not adopt all of its reasoning. Whilst these decisions show that arbitration tribunals and courts have adopted liberal interpretations of the term "expropriation," foreign investors affected by recent developments in Bolivia will first have to turn to their individual policy wordings to see how the term is defined. Only then will the aggrieved foreign investor be able to determine whether to notify a claim under the policy. The insured investor is generally required by the policy wording to notify his insurers of any circumstance likely to give rise to a claim within a short period, normally 30 days. Typically, policies will then require the act or acts of expropriation to s ubsist for a defined "waiting period" which can be as long as 180 days before payment is made. This gives the parties a window in which to settle with the government or obtain compensation from other sources. Foreign investors would be well advised to notify circumstances that may give rise to subsequent claims even if they are currently in negotiations with the Bolivian government for compensation under the terms of a bilateral investment treaty or some other form of investor protection legislation. In fact, it may be more advantageous for the foreign investor to pursue a claim under a Political Risk insurance policy and allow the insurers to recover subsequently under any applicable investment treaty by way of subrogation. http://www.mondaq.com/article.asp?articleid=40494&lastestnews=1
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