in relation to foreigners.
According to Resolution No. 1803 (XVII), discrimination between citizens and foreigners may be considered unlawful in light of the expression that nationalization must be based on grounds that have been recognized as superior to purely individual and private interests, both domestic and foreign.444 However, it is not entirely clear to what extent the condition of non-discrimination can be derived from the provisions of international law related non-specifically to the treatment of foreign property.445
The International Covenant on Economic, Social and Cultural Rights foresees that developing countries can determine, with respect for human rights and their national economy, to what extent foreigners will be guaranteed the economic rights recognized in this Covenant.446 This deviation from the principle of non-discrimination, however, was not continued in legal instruments concerning regulation of foreign investments. The Inter-Arab agreement on the mutual promotion and protection of investments explicitly guarantees “non-discriminatory treatment”, whereas the Investment Agreement of the Organization of Islamic Conference stipulates that expropriation will take place “without discrimination”.447 Similarly, the ASEAN Investment Agreement, NAFTA, and the Energy Charter Treaty refer to the non-discriminatory basis of expropriation. Most of bilateral investment agreements also explicitly refer to full non-discriminatory treatment: foreign investors benefit from treatment no less favourable than that granted to the citizens or enterprises in the host country or the investments of citizens or companies of any third country, if the latter is more favourable to the investor (the most-favoured-nation clause).448
Case law provides examples of the prohibition of discrimination. In the case of BP v. Libya, the arbiter G. Lagergren stated that Libya had broken “public international law” because the expropriation was “arbitrary and discriminatory”.449 In the Amoco ruling, the Iran-United States Claims Tribunal found that in customary international law, discrimination in the field of expropriation is generally considered to be forbidden.450
The principle of non-discrimination has also been included in various guidelines for foreign investments: e.g. ICC guidelines call for “the avoidance of unreasonable and discriminatory measures”.451
3.5.4.3 The requirement to pay compensation
Resolution No. 1803 (XVII) regarding permanent sovereignty over natural resources confirms the duty to pay compensation in the event of expropriation and nationalization, stating that “the owner shall be paid appropriate compensation”.452 UNCTAD resolutions No. 88 (XII) and 3171 (XXVIII) have made efforts to deny this obligation and recognize the payment of compensation for a discretionary, not absolute condition; however, there has been no significant continuation of these initiatives.453
The regulations of the United Nations Code of Conduct on multinational corporations regarding the fact that the state has the right to expropriate the property of multinational corporations for the payment of adequate compensation, in accordance with the applicable rules and principles, can be interpreted accordingly.454
Treaty law extensively recognizes the duty to pay compensation. Article 1 of Protocol I455 to the European Convention for the Protection of Human Rights and Fundamental Freedoms456 explicitly does not provide for such an obligation, but the expression “in accordance with the general principles of international law” may be broadly interpreted as being in favour of this obligation, at least for non-citizens. The unambiguous obligation to compensate can be found in Article 21 (2) of the American Convention on Human Rights (1969),457 as well as in a number of multilateral investment agreements and in most bilateral investment treaties.458
The International Court of Justice confirmed obligation to compensate in the dispute on the temple of Preah Vihear (Cambodia v. Thailand, 1962). Arbitration rulings BP v. Libia,459 Texaco,460 Liamco,461 and Aminoil462 expressly recognize this obligation.463 The Iran-United States Claims Tribunal has recognized in its jurisprudence that both under international customary law treated as lex generalis and in accordance with the treaty on the reciprocal relations between Iran and the USA of 1955 as lex specialis, compensation is due.464 In the judgment American International Group Inc. v. Iran (1983),465 this Tribunal explicitly stated that the principle of public international law is that even in the event of legal nationalization, the former owner of a nationalized property is usually entitled to compensation for the loss of value of the seized property.466 In its judgment in the Ebrahimi case (1994), the Tribunal reiterated that international law undoubtedly defined the duty to compensate for the property taken over.467
The ICC Guidelines,468 the Draft United Nations Code of Conduct on Transnational Corporations,469 and the World Bank Guidelines470 require the payment of compensation in the event of expropriation or nationalization.
3.5.4.4 The requirement to maintain the compensation standards
A number of Western states have consistently maintained the position that compensation should be in line with the triple standard, being prompt, appropriate, and effective, which was confirmed by the debate on the Declaration on permanent sovereignty, the Declaration for the Establishment of a New International Economic Order, as well as the Charter of Economic Rights and Duties of States. In its traditional form, this standard meant that if a restoration to the previous state (restitutio in integrum) was not possible, compensation was to be made by paying the sum corresponding to damnum emergens and lucrum cessans, and the payment was to be “prompt, adequate and effective” (the so-called Hull formula).471 The developing countries, on the other hand, have consistently denied the existence of a generally accepted practice in this area. The pursuit of consensus resulted in the adoption of the appropriate compensation formula contained in Resolution No. 1803 (XVII),472 with intentional ambiguity that was repeated in the Charter of Economic Rights and Duties of States.473 Thus the supporters of the triple standard, as well as advocates of the new doctrines referring to the “ability to pay”, “excess profits”, as well as “unjust enrichment” were able to use this term in their favour.
The Draft United Nations Code of Conduct on Transnational Corporations leaves all options open, ensuring that “the State adopting those measures should pay adequate compensation taking into account its own laws and regulations and all the circumstances which the State may deem relevant”.474
Several multilateral treaties refer to the issue of the compensation standard. Importantly, when it comes to the moment of payment, the traditional wording “fast” or “immediately” is sometimes replaced by the words “without undue delay” (in the Draft OECD Convention on the protection of foreign property475) and by “without delay” (in the ASEAN Investment Treaty476). The Inter-Arab Investment Agreement on mutual support and investment protection stipulates that compensation must be paid within a period not exceeding one year from the date on which the expropriation decision became final.477 The Investment Agreement of the Organization of the Islamic Conference requires a “prompt payment”.478 Also NAFTA uses the traditional term “without delay”.479 The Energy Charter Treaty provides that expropriation should be combined with the payment of prompt compensation.480
The draft OECD Convention on the Protection of Foreign Property stipulates that the measure of expropriation should be combined with the payment of “just compensation”.481 Such compensation should represent the real value of the property affected by expropriation and should be transferable to the extent necessary to be effective for the eligible party. Also the American Convention of 1969 on the protection of human rights refers to the concept of “just compensation”.482 The Inter-Arab
