When we talk about Indirect Expropriation in Investment Arbitration, we enter the sphere of the International Responsibility of the State. We see, then, that the States are sovereign when entering into Treaties and/or Agreements with other States in order to attract foreign investment to their country and thus generate income, jobs, among other things, but these State powers have consequences, since at the moment of carrying out acts or making decisions, they can affect the investments of nationals of another State Party, configuring indirect expropriation, precisely one of the Standards protected and agreed upon in those Agreements and/or Treaties, thus opening the door to Investment Arbitration. In these cases, generally, the Arbitral Tribunal will mainly apply the Treaty as the applicable rule of international law, since the claims are based on the provisions of the Treaty, which constitute the lex specialis. The relevant rules of interpretation are established in Articles 31 and 32 of the Vienna Convention on the Law of Treaties. Likewise, the Tribunal will also take into account the norms of international law that may be applicable, in accordance with Article 38 of the Statute of the International Court of Justice, which is usually understood to codify international custom as a source of international law.
However, the Police Power that States have will be the limit to compensation and/or reparation, that is, the non-discriminatory measures of general application that governments normally take to regulate economic activity in their territories.
As a relatively recent practice, many countries are beginning to include in their investment treaties a series of provisions that are intended to clarify the scope of indirect expropriation.
The objective of this investigation will be to identify that fine line that determines the configuration of indirect expropriation in investment arbitration by measures, acts and/or decisions adopted by the States.