Volume 33 (2016) / Issue 5
For many years, there seemed to be little difference between lawful and unlawful expropriations because, in both cases, tribunals would set reparations at the fair market value of the investment before the expropriation took place. In this article, I explore the handling of expropriation risk used by tribunals in cases of unlawful measures (which I call confiscation risk) so that reparations fulfils the Chorzów objective to ‘wipe out all the consequences of the illegal act and re-establish the situation which would, in all probability, have existed if that act had not been committed’. I review five recent awards that have considered the issue of the exclusion of confiscation risk from the discount rate. Some tribunals have argued that confiscation risk should be extracted from country risk and excluded from the discount rate. New theoretical methods and estimation procedures will have to be devised to achieve that goal.
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