Chapter 7 takes the analysis beyond the conduct of hostilities and issues related to physical damage to foreign investments. It addresses the rules on expropriation universally included in investment treaties and analyses them against the backdrop of armed conflict. The chapter shows that the protection from expropriation in times of armed conflict principally follows the same general parameters as in times of peace: investment treaties offer protection from abusive property seizures often observed during armed conflict as well as unreasonable or discriminatory restrictions on the use of property and businesses. When it comes to indirect expropriation, the chapter suggests to follow a mitigated version of the so-called police powers doctrine. While the debate on the delineation between expropriatory measures and non-compensable regulations is not new, the context of armed conflict provides new insights based on domestic and international case law on war-time property restrictions. Armed conflict and the interests involved, the chapter argues, broaden the scope of police powers and increase the state’s leeway in restricting the free enjoyment of property.

Japan started to conclude detailed "new-generation" treaties in 2002, many of which contain provisions on the protection of regulatory space of the host State, taking into account the evolution of arbitral jurisprudence. The present chapter summarizes Japan’s inconsistent treaty practice concerning the protection of the regulatory space of the host State and analyses the rationale underlying this apparent inconsistency. Japan’s treaty practice suggests that restriction of the FET clause or the indirect expropriation clause, which may be politically required, is not necessarily so from a strictly legal point of view. This is perhaps because Japan has confidence in the evolution of the arbitral jurisprudence, which has been prudent enough to ensure that the regulatory space of the host State is not adversely affected by the application of an FET clause, whether autonomous or linked to customary international law, or the clause on indirect expropriation. Japan’s optimistic attitude may be explained by the fact that it has not been respondent in investment arbitration and may change when it is brought to arbitration, and is ordered to pay a hefty sum in damages to a foreign investor.

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.

The law of expropriation stands at the crossroad of three fundamental rights: the right of States to expropriate, their right to regulate and the right of foreign investors to property. Underlying these rights and their interplay, one finds the protection of public and private interests and the conflict between them. In establishing a balance between these, international investment agreements (IIAs) have traditionally subjected the legality of expropriation to certain conditions and failed to address explicitly the issue of the right of States to regulate. A great number of IIAs concluded in the 2010s tackle this issue, typically by distinguishing expropriatory measures from regulatory measures. Likewise, those agreements also contain articles or annexes that specify the scope and modalities of application of the expropriation provision with regards to specific matters pertaining in particular to intellectual property rights, land, subsidies and grants. Those specifications are analysed in Chapter 7. Analysing in detail treaty practice and arbitration practice as well as their evolution, Chapter 6 examines the two main issues raised by the protection of foreign investors against illegal expropriation: (1) the types of expropriation covered; and (2) the conditions of legality of expropriation. As a preliminary matter, it first focuses on the types of property protected, in particular contractual rights.

The development of renewable energy is an important tool to limit greenhouse gas emissions. How the investor-state arbitration tribunals are dealing with renewable energy investment cases can influence the future growth of the renewable energy sector, creating an impact on our efforts to tackle climate change. This chapter analyses renewable energy investment cases that have arisen in Europe and North America. It considers the valuable experiences from a policy perspective which can be drawn from these cases. These cases involve application of provisions prohibiting expropriation and granting the investor fair and equitable treatment, which involve considerations of government policies. As a capital-sensitive and relatively new industry, the renewable energy sector needs government subsidies to compete with traditional fossil fuel. On the other hand, the renewable energy sector changes swiftly due to the advancement of technology, and states have found it difficult to calculate the precise level of subsidies that gives renewable energy the same level of competitiveness but without making it rely on state subsidies to make a profit. Finally, implications of these cases for climate change are analysed.