This chapter examines the way in which compensation is assessed for the purposes of breaches of an investment treaty. It considers the Hull Formula of gauging compensation, which focuses on market value, and the competing Calvo Doctrine. The chapter also explores the difficulties associated with valuing assets and emerging issues in relation to claims of moral damages.

In this chapter I examine three specific legal interventions which flowed from the revolutionary events of 1917 in relation to the law of expropriation. These legal interventions, and the doctrines and principles that they engendered, still hold significance in investor-state arbitration as they are systematically referred to in legal reasoning presented by counsel and continue to shape and influence the decisions of international arbitration tribunals. In light of the analysis carried out in this chapter, it is possible to articulate two main arguments. The first argument relates to the claim, often put forward by international investment law proponents,1 that international investment law and investment treaty arbitration are crucial to the depoliticisation of disputes between investors and host states. According to this view, the international investment law system is capable of ‘avoiding espousal of investors’ interests by their home states’, mainly by directly excluding recourse to diplomatic protection to solve conflicts arising between host states and foreign investors.2 Depoliticisation, within this view, is understood as the transfer of such conflicts ‘from the political arena of diplomatic protection to a judicial forum with objective, previously agreed standards and a pre-formulated dispute settlement process’.3 This view also acknowledges, however, that the disputes decided upon by international investment tribunals indeed remain political in nature for both host and home states.

It explores the BRI and China’s bilateral investment treaty (BIT) regime in the context of expropriation. It focuses on the notion of expropriation and the related compensation standard by examining expropriation clauses in China’s existing BITs. China’s BITs have been experiencing a generational evolution. Since 2006 when China signed a BIT with India, China includes the concept of indirect expropriation in her BITs. Yet most of the BITs between China and the BRI counterparties were signed before 2006, which suggests that the expropriation and compensation standards in these existing BITs were not up to higher standards for protecting China’s outbound investment in BRI counterparties. A sensible approach to fill in the gap is to have a BIT network covering China and BRI countries and applying the doctrines of indirect expropriation and ‘Hull Formula’ to compensate expropriated investment.