The Importance Of Expropriation
This requires an evaluation of whether the measure interfered with the investment backed expectations, particularly when they are created by assurances of the government. The tribunal in Methanex found that the lack of commitments on the part of the host State to the investor was decisive, as there were no legitimate expectations created by assurances on behalf of the State. The same issues discussed in Section 3.2 apply to legitimate expectations in the context of expropriation, and do thus not need to be reiterated …show more content…
However, as discussed in Section 3.2, this argument could be limited in that it is not reasonable to expect unrestricted water access in a water scarce region, or for a government not to act when it is party to human rights treaties.
Indeed, there could be criticism with applying the police power to a water grab because this would be placing the risks associated with water variability on the investor. However, section 4.3 will discuss that the contrary of having the state pay for a poorly managed investment would be more unfair, as environmental variability should be part of the investor’s risk assessment.
If the applicable BIT is belongs to the older generation, the tribunal has the choice between the doctrine and it is possible that the tribunal may follow the sole effects approach, which would solely look at the decreased profitability and determine an expropriation, or a proportionality test, which could also be difficult given the difference it would make whether the host government waited until public opposition was massive or not. At what point this threshold is met is unclear, but it still holds that a host government is not empowered to reallocate the water resources before a drought occurs and the local users are negatively