83 2 The takeover of Aminols enterprise is thus not inconsistent with the

83 2 the takeover of aminols enterprise is thus not

This preview shows page 83 - 84 out of 140 pages.

83 2. The takeover of Aminol’s enterprise is thus not inconsistent with the contract of concession, provided always that the nationalisation did not possess any confiscatory character. 3. The clause creates a legitimate expectation that must be taken into account in assessing compensation. Relevant Principle: In theory, contractual limitations on sovereignty are possible, but they must be express and of limited duration. The fact that expropriation runs counter to a stabilisation clause may however, be relevant to a determination of ‘appropriate’ compensation. Measuring Compensation o The rules on the compensation to be paid for a lawful expropriation are the object of heated controversies, with fundamental disagreements between developed and developing states. - The long-standing view of developed states was expressed in a note from US Secretary of State, Hull to the Mexican Government on the expropriation of foreign oil interests by Mexico: o The right to expropriate is conditioned on an obligation to make adequate, effective and prompt compensation. The legality of an expropriation is in fact dependent upon observation of this requirement (i.e an expropriation will not be lawful even if it is for a public purpose and non-discriminatory if it does not provide compensation) - Developing states argue for a standard of ‘appropriate compensation’ to be determined substantially by reference to local law. o This standard has been expressed in varying terms, however has been most favourable expressed in the 1974 Charter of the Economic Rights of Developing sStates § The charter posits a wide discretion of expropriating states to determine the measure compensation. o Similarly, GA Resolution 1803 proposes that the standard should be of ‘appropriate compensation’ however also requires compensation to be in accordance with international law. - Recent practice suggests that ‘appropriate compensation’ could well be the metric. o Applied in Aminoil Case, Amoco Case; Resolution 1803 § In Amnioil used as a standard that permitted by its generality a flexible and equitable response to the legitimate expectations of the parties, taking into account the facts of that case, such as considerations as to the presence of stabilisation clauses and the history of the investment. Determining Compensation In the case of lawful expropriation, there is a growing consensus that compensation should be the value of the undertaking at the date of expropriation ( damnum emergens) . In the case of unlawful expropriation, restitution shall be the first step. If not, compensation should be the value for the undertaking at the date of the expropriation plus the profits which would have been earned after that date had the undertaking not occurred, until the date of judgement.
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