1. Modern trade and MITs (eg GATT, the North American Free Trade Agreement—NAFTA, the Energy Charter Treaty—ECT, and the 1998 draft of the Multilateral Agreement on Investment—MAI) allow Member States to impose otherwise objectionable trade and investment measures to protect human, animal or plant life or health. See section III below.
2. Dupuy, P. M./Leben, Ch., UN Accord Multilateral sur l'investissement (Paris: Pedone 1999); for an informed post-mortem: Henderson, David, The MAI Affair: A Story and its Lessons, (London: Royal Institute of Int'l Affairs, 1999); Graham, Edward M., National Treatment of Foreign Investment: Exceptions and Conditions (1998) 31 Cornell Int'l LJ 599.
3. See Bridges Weekly Trade News Digest, 5 July 1999: ‘Canada proposes to NAFTA ministers to narrow investor-state provision.’
4. Walde, , ‘Requiem for New International Economic Order’, in Hafner, G. et al. (eds.), Liber Amicorum I. Seidl-Hohenveldern, 771 (The Hague, Kluwer Int'l., 1998); Neff, S., Friends but No Allies: Economic Liberalism and the Law of Nations, (New York, Columbia UP, 1990) 178–98.
5. D. Henderson, Wincott Lecture, Anti-Liberalism 2000 on: <www.iea.org.uk>.
6. Walde, ‘Sustainable Development and the 1994 Energy Charter Treaty: Between Pseudo-Action and the Management of Environmental Risk,’ in F. Weiss, et al. (eds.), 223 (1998) above, n. 4.
7. See below nn. 99–103 and accompanying text.
8. Abouchar, Juli, ‘Environmental Laws as Expropriation under NAFTA’ (1999); 8 RECIEL 209–15; Wagner, J. Martin, ‘International Investment, expropriation and environmental protection’, 29 Golden Gate U L Rev 465 (1999); Mann, H. and Moltke, K. von, NAFTAs chapter XI and the Environment (Winnipeg: Intl Institute for Sustainable Development, 1999), 39–40; Soloway, J., ‘Environmental Regulation as Expropriation’ (1999) 33 Can Bus LJ 92.
9. One of the latest tribunals to be faced with the question was the Iran-US Claims Tribunal, on which see, Kolo, A., Between Legitimate Regulation and Taking of Foreign-Owned Property under International Law with Particular Reference to the Jurisprudence of the Iran-US Claims Tribunal (Ph.D. dissertation, CPMLP, Dundee, 1994); G. Aldrich, The Jurisprudence of the Iran-US Claims Tribunal (1996); Brower, C. and Brueschke, J., The Iran-United States Claims Tribunal (The Hague, Martinus Nijhoff, 1998).
10. eg R. Higgins, ‘The Taking of Property by the State: Recent Developments in International Law’ 176 RDC-Collected Courses (1982-III) 259; B. Weston, ‘Constructive Taking Under International Law: A Modest Foray into the Problem of “Creeping Expropriation”’, (1975) 16 Virg, J. Int'l. L. 103; R. Dolzer; ‘Indirect Expropriationn of Alien Property’, 1 ICSID-Rev./FILJ (1986) 41. UNCTAD has published a small study on ’ in its existing series on international investment agreements (2000).
11. T. Waelde, ‘International Treaties and Regulatory Risk in Infrastructure Investment’, (2000) 34 JWT 1–61; Rose-Ackerman, S. and Rossi, J., ‘Disentangling Deregulatory Takings’, (2000) 86 Virginia LRev 1441, 1451.
12. As liberalisation continues, it is likely that issues such as public health regulation (eg the various food-related crises) and taxation—especially environmentally motivated taxes, labour and social legislation (which may be used by governments as measures to regulate foreign investment), competition and intellectual property law could come under closer legal scrutiny and raise similar challenges of ‘regulatory taking’ as are now being raised by environmental measures. An Oct 2001 colloquium at NYU Law School on this topic should lead to publication in 2002.
13. Waelde, T. T. and Wouters, P., ‘State Responsibility in a Liberalised World’, in (1996) 27 Neth.YbklntlL, 143–94.
14. Dolzer, R. and Stevens, M., Bilateral Investment Treaties, (Dordrecht, Kluwer/Nijhoff, 1995);Salacuse, J., ‘The Energy Charter Treaty and Bilateral Investment Treaty Regimes’, in: Waelde, T. (ed.) The Energy Charter Treaty (Kluwer, 1996); Vandevelde, K., ‘The Political Economy of Bilateral Investment Treaties’, 92 (1998), AJIL 621.
15. For a similar argument on the asserted tension between human rights and WTO law: Hoe Lim, ‘Trade and Human Rights’, JWT (2001, forthcoming).
16. Bilateral treaties are less in the public eye than multilateral negotiations; as a result, BITs are negotiated under less environmental pressure. Multilateral treaties also have a more policy and public-relations-orientated character and as a result contemporary attitudes enter more easily than in the—at least hitherto—more technical treaties where familiarity and interest is restricted to very few specialists in the ministries of the major economies.
17. On the challenge of managing the relationship by reciprocal interpretative approximation of both environmental and economic treaties: Brand, Ronald, ‘Sustaining the Development of International Trade and Environmental Law’ (1997) 21 Vermont Law Review 823–72; H. Lim (2001, op. cit); Waelde (1998, in: F. Weiss, op. cit.; Myers v. Canada award on the merits (including separate opinion by B. Schwartz, <www.naftaclaims.com>; <www.appletonlaw.com>. J. Cameron in ICLQ 2001; G. Marceau in JWT, 2001.
18. Bamberge, C., Linehan, J., and Waelde, T., ‘Energy Charter Treaty in 2000’ (2000) 18 JENRL 331.
19. ‘Investments … shall not be nationalised, expropriated or subjected to a measure … having effect equivalent to nationalisation except where such expropriation is ’accompanied by the payment of prompt, adequate and effective compensation.’
20. Happ, R., Schiedsverfahren zwischen Staaten und Investoren nach Artikel 26 Energiechartavertrag (Frankfurt, Peter Lang, 2000).
21. Hermann, L., NAFTA, and the Energy Charter Treaty (1997) 15 JENRL 129, 148. On the overall NAFTA investment arbitration mechanism: R. Dearden, ‘Arbitration of Expropriation Disputes between an Investor and the State and the NAFTA’ (1995) 29 JWT 113–127; R. Zedalis, ‘Claims by Individuals in International Economic Law: NAFTA Developments’ (1996) 7 Am.
22. ‘no government can directly or indirectly nationalise or expropriate an investment of an investor of another party; or take a measure tantamount to nationalisation or expropriation … except… on payment of compensation’.
24. Sol Picciotto, ‘Linkages in international investment regulation: the antinomies of the draft multilateral agreement on Investment’ (1998) 19 in: U of Pennsylavnia J. of Int'l. Economic Law, 731.
25. D. Henderson, above (1999).
26. Mavroides, P., ‘Trade and environment after the shrimps-turtles litigation’ (2000) 34 JWT 73–88.
27. Similar to other forms of exercise of sovereignty, environmental sovereignty is also limited by customary international law and treaty commitments. Shine, C., ‘Environmental Protection Under the Energy Charter Treaty’, in Waelde (ed), The Energy Charter Treaty (1996), 520, 522–5; id., ‘Environmental Policies Towards Mining in Developing Countries’ (1992) 10 JENRL 327, 335–6.
28. Shine, in Waelde (ed.), (1996), above, n. 22, 537; Waelde, in Weiss, et al. (1998), above n. 6, 240–5; Axelrod, Regina, ‘The European Energy Charter Treaty’ (1996) 24 Energy Policy 497–505.
29. Waelde, in F. Weiss, (1998) op. cit., 240–5.
30. Esty, D., ‘Integrating Trade and Environmental Policy Making: First Steps in the NAFTA’, in Zaelke, et al. (eds.) Trade and Environment—Law, Economics and Policy, (Washington, Centre for Environmental Law (1993) 45, 50; Mall, B., ‘The Effects of NAFTA's Environmental Provisions on Mexican and Chilean Policy’, (1998) 32 Int'l. Law. 153, 154; Moreno, S. and Rubin, J. et al. ‘Free trade and the environment: The NAFTA, the NAAEC’ (1999) 12 Tulane Intl LJ 405, 458 (1999); separate opinion of arbitrator B. Schwartz in Myers v Canada NAFTA award of 12 Nov 2000, paras. 92–143.
31. Also note arts. 1106(2) and 1114 (1).
32. Among other things, the NAAEC created the institutional and administrative framework for the enforcement of domestic environmental law. Above all, it provided for significant public participation, including the right of legal action by private individuals and NGOs against a State party for failing to effectively enforce its environmental law (Arts. 14 and 15). Lucas, A., ‘The North American Agreement on Environmental Co-operation: International Environmental Jurisdiction over the Energy Sector’ (1998) 16 JENRL 84; Lopez, D., ‘Dispute Resolution Under NAFTA: Lessons from the Early Experience’ (1997) 32 Texas Int'l LJ 163, 184–92.
33. Lopez, Ibid. 168–9, 180–6.
34. Muchlinski, P., ‘Towards a Multilateral Investment Agreement (MAI)’, in F. Weiss, et al. (eds.) (1998), above, 428, 435–37.
37. Weiss, Friedl, ‘The GATT 1994: environmental sustainability of trade—environmental protection sustainable by trade’, in Ginther, K. (ed.), Sustainable development and good governance (Nijhoff, Dordrecht, 1995) 382.
38. Walde, and Ndi, , ‘Stabilising International Investment Commitments’ (1996) 31 Texas Int'l. LJ 215; Verhoosel, G., ‘Foreign Direct Investment and Legal Constraints on Domestic Environmental Policies (1998) 29 Law & Policy in Int'l. Bus. 451 (noting that ‘stricter enviromental standards as such are not likely to deter MNEs from investment, but uncertainty regarding changes in the regulatory framework are’).
39. Rose-Ackerman and Rossi, op. cit. 2001, above.
40. Buckley, R., ‘International Trade, Investment and Environmental Regulation’ (1993) 27(4) JWT 101, 117–18; Walde and Ndi, (1996), above n. 33.
41. This may take the form of environmentally motivated taxes, refusal by a government department to allow development or operation of the project on environmental grounds, denial of export licence to export mineral products mined in environmentally sensitive locations, or judicial decision imposing fines for past environmental liabilities. See Commonwealth of Australia v State of Tasmania (1983 ), vol. 46, ALR, 625 (prohibition against a hydro-electric project in a wilderness area), commented on in Pritchard, R. (ed.), Economic Development: Foreign Investment and the Law (Kluwer/IBA, London, 1996), 106; Murphyores v Commonwealth of Australia (1976), vol. 136, CLR 1 ((denial by the federal government to issue export licence for the export of rutile mined on an attractive island), in Ibid., 105; Mining Journal, 7 Feb, 1997, 106 ( a decision by the Ghanaian authorities to prohibit mining activities in woodland reclassified as forest reserve); Bennett, et al v. Spear, et al., decision of the US Supreme Court, 19 March 1997 (imposition of minimum water levels in reservoirs to protect two endangered fish species would adversely affect petitioners irrigation project), <http://supct.lawcornell.edu/supct/html/95-813.ZS.html>.
42. Paasivirta, E., ‘The Energy Charter Treaty and Investment Contracts’: Towards Security of Contracts, in Walde (ed.), (1996), above n. 12, 349, 360–62; Waelde and Ndi (1996) above n. 33.
43. See, eg, the extensive discussion of the Canadian Minister for Environment's explicit instruction to reserve domestic wastage processing industries ‘for Canadians in Canada’—even if environmentally more harmful than transportation to geographically close US locations in the award and separate opinion of the Myers v Canada (above) case or the perhaps even more suspect actions of a Mexican local government in undermining federally granted permits by dubious obstruction—dressed up as environmental permitting in: Metalclad v Mexico, ICSID tribunal (Lauterpacht, Civiletti, and Siqueiros) decision of 25 Aug 2000, <www.worldbank.org/icsid>.
44. Modern MITs classify expropriation to include: ‘measures having effect equivalent to nationalisation’ (Art.13(l) ECT); ‘direct or indirect nationalis(ation) or … measure tantamount to nationalisation’ (Art. 110 NAFTA); ‘nationalise directly or indirectly an investment … or measures having equivalent effect’—see Section IV of the MAI preceded by a reference to a right to be protected from unreasonable and discriminatory regulation; Art. 11 of the 1985 MIGA Convention; the Commentary to Art. 3 of the OECD Draft Convention on Protection of Foreign Property of 1967 defines creeping nationalisation as measures otherwise lawful ‘applied in such a way as to deprive ultimately the alien of the enjoyment or value of his property, without any specific act being identifiable as outright deprivation. As instances may be quoted excessive or arbitrary taxation; prohibition of dividend distribution coupled with compulsory loans; imposition of administrators; prohibition of dismissal of staff; refusal of access to raw materials or of essential export or import licenses’; see also, the US Restatement (third) Foreign Relations Law of the US (1987) Sec. 712 (g); generally P. Norton, ‘Back to the Future: Expropriation and the Energy Charter Treaty’, in ‘Investment Arbitration Under the Energy Charter Treaty’ above n. 12, 365.
45. Waelde, T., ‘Investment Arbitration Under the Energy Charter Treaty’, (1996) 12 Arbitration International 429.
46. The term ‘regulatory taking’ has as yet not been formally used in international treaty-making; but the evolution from traditional expropriation to modern forms ‘tantamount’, ‘equivalent to’ etc—see the references to the ECT, MAI and NAFTA language above–suggests that modern MITs have clearly added ‘regulatory takings’ as a non-conventional and modern form of expropriation to their list of compensable actions of government for which the treaty affords protection.
47. First naturally, in the United States, and particularly so in the natural resources industries (oil and gas, mining) and land development. Graf, M., ‘Application of Takings Law to the Regulation of Unpatented Mining Claims’ (1997) 24 Ecol. L.Q. 57; Percival, R. et al. , Environmental Regulation: Law, Science and Policy (Boston: Little, Brown & Co., 1996), 995–1038; G. Laitos, ‘Regulation of Natural Resource Use and Development in Light of the “New”’ Takings Clause' (1998) 34 Rocky Mt. Min. L. Inst. 1–1; Id., ‘Judicial Protection of Private Property in Natural Resources: The American Experience’, (1996) 14 JENRL) 262; Lisker, M., ‘Regulatory Takings and the Denominator Problem’ (1996) 27 Rutgers LJ. 663; Rose-Ackerman and Rossi (1999), above. Barton, B., Canadian Law of Mining (Calgary: Canadian Institute of Resources Law, 1993), 169–91 and Dearden (above, p. 119) on Canadian experience; Pritchard (ed), (1996) above, on Australian cases.
48. Verhoosel, (1998), above; Zedalis, (1996), above; D. Schneiderman, ‘NAFTA's Taking Rule: American Constitutionalism Comes to Canada’ (1996) 46 Univ. Toronto LJ 499; Weiler, Todd, ‘Regulatory Reform Obligations in International Law’ (2000) 34 JWT 71–94.
49. Azinian (Nov 99, decided, with ICSID); Metalclad, decided (with ICSID); Ethyl (jurisdiction accepted and then settled); SD Myers v Canada (Final Award Nov 2001); California-MTBs (Methanex v US) (pending); Pope-Talbot, (as of Jan 2001 still pending) with the current state of play on: <www.naftaclaims.com> for other cases under the ICSID Convention—ie various Argentine infrastructure cases: <www.worldbank.org/icsid>.
50. Rose-Ackerman and Rossi, op. cit. above, 2000 provide an up to date survey with extensive references.
51. On the influence of the most authoritative and respected legal culture on other legal cultures: Watson, Alan, Society and Legal Change (Edinburgh: Scottish Academic Press, 1977).
52. Putnam, Robert D., ‘Diplomacy and domestic politics: the logic of two-level games’, (1988) 42 International Organisation 427–60; Olson, Mancur, Power and Prosperity (New York: Basic Books, 2000).
53. Stephan, P., ‘Barbarians Inside the Gate: Public Choice Theory and International Law’ (1995) 10 Am Univ J. of Int'l Law & Policy, 745; Rossi, J., ‘Public Choice Theory and the Fragmented Web of the Contemporary Administrative State’ (1998) 96 Mich LRev. 1746; Petersmann, EU, ‘National Constitutions and International Economic Law’, in Meinhard, Hilf and Ernst-Ulrich, Petersmann, National Constitutions and International Economic Law, (Kluwer Deventer, 1993), 1.
54. Streit, Manfred and Wohlgemuth, Michael, ‘The Market Economy and the State: Hayek and ordoliberal conceptions’, in Koslowski, P. (ed.), The Theory of Capitalism in the German Economic Tradition (Springer-Verlag, 2000), 224–71—also in cepmlp internet journal: <www.cepmlp.org/journal>; T. Waelde, ‘Law, Contract & Reputation in International Business: What works’, in: cepmlp internet journal, <www.cepmlp.org/journal>
55. Graf, Michael, ‘Application of Takings Law to the Regulation of Unpatented Mining Claims’ (1997) 24 Ecology Law Quarterly 57.
56. This proposition is made with reference to an analogy drawn from domestic court decisions and the opinion of commentators on those cases, eg contrast the majority with the dissenting opinions in: Lucas v South Carolina Coastal Council, 112 SCt 2886 (1992); Dolan v City of Tigard, 114 SCt 2309 (1994); Eastern Enterprises v APFEL, Commissioner of Social Security et al., US Supreme Court decision of 25 June, 1998, <caselaw.findlaw.com/scripts/getcas...court=/data/us/000/97%2D42.htlm>; Nollan v California Coastal Commission, 483 US 825 (1987); Keystone Bituminous Coal Association v DeBenedictis, 480 US 470 (1987); Raymond, L., ‘The Ethics of Compensation: Takings, Utility and Justice’ (1996) 23 Ecol. LQ 577; Byrne, J., ‘Ten Arguments for the Abolition of the Regulatory Takings Doctrine’ (1995) 22 Ecol. L.Q 89; contrast in particular: Epstein, R., ‘Lucas v South Carolina Coastal Council: A Tangled Web of Expectations’ (1993) 45 Stan. L. Rev. 1371, with R. Lazarus, ‘Putting the Correct “Spin” on Lucas’, in ibid, 1411. In the context of international arbitral awards such as those issued by the Iran-US Claims Tribunal, the differences in approach may be discerned by contrasting the decisions of Judges Lagergren and Virally on one hand, and those issued by other members of theTribunal, on the other. One will discover that in general terms, the former two were more reluctant to find expropriation than the other members. See Aldrich, G., The Jurisprudence of the Iran-US Claims Tribunal (1996), 182–4.
57. The evolving nature of environmental risks (which changes as a result of new scientific knowledge and greater awareness of the risks for mankind) and the need to take into account such new norms and standards in the planning and implementation of development projects, is acknowledged by Petersmann, in: Meinhard Hilf and Petersmann (1993), above (‘If the Treaty was to operate for decades into the future, it could not operate on the basis of environmental norms as though they were frozen in time when the Treaty was entered into … Environmental concerns are live and continuing concerns whenever the project under which they arise may have been inaugurated. It matters little that an undertaking has been commenced under a treaty of 1950, if in fact that undertaking continues in operation in the year 2000’); also Fredin v Sweden (1991) 13 EHRR 784, at para. 46 (stressing the changing attitude towards restricting exploitation of gravel); Lucas v South Carolina Coastal Council, above at 2901 (where the court acknowledged the fact that ‘changed circumstances or new knowledge may make what was previously permissible no longer so’); Pennsylvania Coal Co. v Mahon, 260 US 393 (1922), dissenting opinion of Justice Brandeis (‘[land] uses, once harmless, may, owing to changed conditions, seriously threaten the public welfare’); Euclid v Ambler Co., 272 US 365, 387 (1926); Dolan v City of Tigard, above, (dissenting opinion of Stevens J). See also the analysis of the—relative—binding value of ‘stabilisation clauses’ by Waelde and Ndi (above) which concludes by the suggestion of a necessary balancing between contract-reinforced legitimate expectations on one hand and the need to respect the evolution of environmental standards in line with scientific understanding of risk and risk management techniques; Higgins, Rosalyn, Problems and Process (Clarendon Press, Oxford, 1994), 142.
58. Dolan v City ofTigard, above (‘One of the principal purposes of the Takings clause is “to bar government from forcing some people alone to bear public burdens which, in all fairness and justice, should be borne by the public as a whole”’); referring to Armstrong v US, 364 US 40 at 49; Nollan v California Coastal Commission, 483 US 825 at 835 n. 4 (1987); Eastern Enterprises v Epfel, et al., (1998), above at p. 7 of 19; Pumpelly v Green Bay Co., 80 US (13 Wall) 166 (1987) at 177–7;; Laitos, G, ‘Judicial Protection of Private Property in Natural Resources: The American Experience’ (1996) 14 JENRL 262, 293–94.
59. Pennsylvania Coal Co. v Mahon, 260 US 393 (1922), dissenting opinion of Brandeis J.
60. Yergin, D. and Stanislaw, J., The Commanding Heights (Simon & Schuster: New York, 1999; Strange, Susan, The Retreat of the State: The Diffusion of Power in the World Economy, (Cambridge: CUP, 1996).
61. ‘Market failure’ is considered to occur when due to externalities or lack of competition the market is considered, from an economic perspective, not to function as it is expected to do. In a wider sense, market failure is generally invoked when markets do not produce the results desired from a social or ideological perspective. But rare is the reference to market failure which then sets out to demonstrate persuasively that another, typically State-based command-and-control method, will achieve the same or better results at less cost. So ‘market failure’ needs to be set against the contrast of ‘State failure’.
62. For a more extensive analysis: Waelde, T., ‘Multilateral Investment Agreements in the Year 2000’, Contribution to Melanges Philippe Kahn (ed.) Charles, Leben et al. , (Paris: Pedone, 2000); earlier version published in: 1 (1999) Business Law International 50–79; an excellent monograph on this topic can be expected from Todd Weiler, University of Toronto.
63. See Rose-Ackerman and Rossi, 2000, op. cit. above, also with references to the German concept of ‘special sacrifice’ (‘Sonderopfer’, BVERFGE 367 (1968); Rossi (1998) op. cit. above. For doctrinal writings: Epstein, R., Takings: Private Property and the Power of Eminent Domain (Harvard: Harvard UP, 1985); Michelman, F., ‘Property, Uutility and Fairness: Comments on the Ethical Foundations of Just Compensation Law’ (1967) 80 Harv L Rev (1967) 1163; for a comparative survey of constitutional provisions (though not their actual interpretative and application practice): Van der Walt, Reducing Regulatory Risk in infrastructure by requiring compensation for regulatory takings, (World Bank Rome 1999 conference), <www.worldbank.org/riskconference>.
64. In Connolly v Pension Benefit Guaranty Corpn., 475 US 211 at 224, the court said the definition of a taking was not controlled by ‘any set “formula”, but was dependent on ad hoc, factual inquiries into the circumstances of each particular case’. Papamichalopoulos v Greece, (1993) 16 EHRR 440, concurring opinion of Mr Pellonpaa, Ibid. 454 at 455. A similar approach seems to have been adopted by the Iran-US Claims Tribunal on q.v.); Brower, C. and Brueschke, J., The Iran-United States Claims Tribunal (The Hague: Martinus Nijhoff, 1998), 376–441. Rose-Ackerman and Rossi (2000) op. cit. criticise the “ad-hocery” of US courts’ takings' jurisprudence.
65. See Penn Central Transport Co. v New York City, 438 US 104 (1978); Keystone Bituminous Coal Ass'n., v DeBenedictis (1987), above; Hodel v Irving, 107 S-Ct 2076 (1987); Eastern Enterprises v. Epfel, et al., (1998), above; Kaiser Aetna v US 444 US 164 (1979); Connolly v Pension Benefit Guaranty Corpn., 475 US 211 (1986); Babbit, Secretary of the Interior, et al. v Yopee-Youpee, Supreme Court of the US decision of 21 Jan 1997, <http://caselaw.findlaw.com/cgi-bin/getcase.pl?court=us&vol=000&invol/=U9701015>
66. While it is not easy to identify a clear ‘intention’ of a social organisation such as a governmental body, formal statements of the responsible Minister or a series of circumstances pointing to the protectionist intent being the main motivator for a policy can be taken to indicate the ‘intention’—see on this in particular the award and separate opinion of B. Schwartz in the Myers v Canada case, above. A formal statement of the Minister, disregard of technical advice by the environmental civil servants and a series of lobbying actions relating to governmental action were here seen as indicating a manifest protectionist intention of government. On evidence of organisational ‘intention’ by e-mail: K. Auletta, ‘Microsoft and Its Enemies’, 2001 at p.
67. Agins v Tiburon, 447 US 255 (1980); Nollan v California Coastal Commission, above; Lucas v South Carolina Coastal Commission, above, Stevens v City of Cannon Beach, 114 SCt 332 (1994); Ehrlich v City of Culver, 12 Cal. 4th 854 (1996).
69. Such regulatory standards are not only relevant for a ‘regulatory taking’—ie an action ‘tantamount to expropriation’, but also other breaches of regulatory conduct duties under MITs— see: Todd Weiler, ‘Regulatory Reform Obligations in International Law’ 34 (2000); ‘Investor-State Arbitration Under the NAFTA: Remedies for Poor Regulatory Treatment’ 6 (2000) International Trade Law and Regulation, 84–92 and ‘The Ethyl Arbitration: First of Its Kind and a Harbinger of Things to Come’ 10 (2000) American Review of International Arbitration (under publication); T. Waelde, JWT (April 2000), op. cit. above.
69. So the ‘Sonderopfer’ (Special sacrifice—similar to the French concept of ‘rupture d'egalite devant les charges publiques’) concept of the German Constitutional court, also aplied by the European Court of Justice (First Instance) in the Dorsch case, 93 AJIL 685, 687 (1999). US jurisprudence has already dealt with difficult situations where only one part of a property is rendered useless raising the issue of ‘partial expropriation’, see: Rose-Ackerman and Rossi, op. cit. (2000) above.
70. Agins v Tiburon, 447 US 225, 260 (1980).
71. Fredin v Sweden (1991) 13 EHRR 784.
72. Pine Valley Developments Ltd & Ors. v Ireland (1992), 14 EHRR 319; Silva, Matos E, LDA & Ors. v Portugal (1997) 24 EHRR 573.
73. Keystone Bituminous Coal Assn., above.
74. Lucas v California Coastal Commission, above; Dolan v City of Tigard, above.
75. Tsomtsos & Others v Greece, and Katikaridis & Others v Greece, decision of the ECHR on 15 Nov 1996, summarised in Bulletin of Legal Developments (13 Jan 1997). 9.
76. Muchlinski, P., Multinational Enterprises and the Law (Oxford: Blackwell, 1995) 504; Schrijver, N., Sovereignty Over Natural Resources: Balancing Rights and Duties (Cambridge: CUP, 1997), 344–6.
77. (1994) 18 EHRR 440, para. 39. Earlier in the case, the European Commission of Human Rights ruled that ‘national authorities are in principle in a better position than the international judge to appreciate what is “in the public interest”, and that, under the European Convention on Human Rights, it is for the authorities to make the first assessment both of the existence of a problem of public concern warranting deprivation of possession and of the remedial action to be taken. Accordingly, they enjoy a wide margin of appreciation’, at para. 112; The National Provincial Building Society, etal. v U.K. (1998) 25 EHRR 127, at para. 80; GasundDosier-undFordertechnik v Netherlands (1995) 20 EHRR 403, at para. 60; The Trustees of the Late Duke of Westminster's Estate v UK (1983) 5 EHRR 440 at 456.
78. T. Weiler, ‘When to compensate for a regulatory taking: Employing a sound science standard in interpretation of NAFTA’, Art. 1110 (2) (Manuscript 2000).
79. See the Handyside case, in which the European Court of Human Rights stated that what ‘necessary in a democratic society’ means is that ‘every formality, condition, restriction or penalty imposed in this sphere must be proportionate to the legitimate aim pursued’, Judgment of 7 Dec 1976 Ser. A, no. 24, referred to by Higgins (1994) Problems and Process, 235.
80. 438 US 104, 127 (1978).
81. 107 SCt 3141 at 3149–50 (1987). The reasonable relationship test has been adopted by many other state courts. See Morosoff, ‘Take My Beach Please!: Nollan v California Coastal Commission and a Rational-Nexus Constitutional Analysis of Development Exactions’ (1989) 69 B U L Rev 823.
82. G. Alexander, ‘Takings, Narratives, and Power’ (1988) 88 Col L Rev 1752, 1764–7.
83. Nollan, above, at 3152–4 (Brennan J Dissenting).
84. Alexander, (1988), above, 1768. See also Penn Central, above, at 124–5.
85. In the court's opinion, ‘it is difficult to see why recreational visitors trampling along petitioner's floodplan easement are sufficiently related to the city's legitimate interest in reducing flooding problems along Fanno Creek and the city has not attempted to make any individualised determination to support this part of its request’, at p. 9 of 20.
86. In classic communitarian words, Stevens J argued that, ‘in our changing world one thing is certain: uncertainty will characterise predictions about the impact of new urban developments on the risks of floods, earthquakes, traffic congestion, or environmental harms. When there is doubt concerning the magnitude of those impacts, the public interest in averting them must outweigh the private interest of the commercial entrepreneur. If the government can demonstrate that the condition it has imposed in a land-use permit are rational, a strong presumption of validity should attach to those conditions. The burden of demonstrating that those conditions have unreasonably impaired the economic value of the proposed improvement belongs squarely on the shoulders of the party challenging the state action's constitutionality.’
87. The Late Duke of Westminster case, above at 546.
88. Political scientists and economists have long recognised and relied on the public choice doctrine to explain the dynamics of political behaviour in which individuals use their voting power to secure from the collective decision-making process some personal advantages for either themselves or for the vested interest they represent rather than for the general public. See, Ogus, A., Regulation Legal Form and Economic Theory, (Oxford: Clarendon Press, 1994); E. Ilhange, ‘Does Interest Group Theory Justify More Intrusive Judicial Review?, 101 Yale LJ (1991) 31; Laitos, (1996), supra, 281–83.; Taking Back Takings: A Coasean Approach to Regulation (1993) 106 Harv. L. Rev. 914, n. 104 and accompanying text; contrast with Treanor, W., ‘The Original Understanding of the Takings Clause and the Political Process’ (1995) 95 Col L Rev 782, 855–87 in which he argues that the court should only intervene in exceptional cases such as where the taking was discriminatory against a minority or politically weaker group otherwise it is up to the political process to decide.
89. Pine Valley, above, European Commission of Human Right's Opinion, at para. 79 where the commission held that ‘the question of proportionality which is inherent in the convention, requires the commission to determine whether, whilst recognising the wide margin of appreciation afforded to States in the planning field, a fair balance was struck between the general interest of the community and the protection of the private individual's rights.’ For discussion of the principle under European Union laws as well as comparative Member States' laws see, Schwarze, J., European Administrative Law (London: Sweet & Maxwell, 1992) 677–866; Youngs, R., English, French and German Comparative Law (London: Cavendish publishing Ltd, 1998) 100–2.
90. Hentrich v France (1994) 18 EHRR 440; Matos E Silva, LDA & Ors. v Portugal (1997) 24 EHRR 573; Sporrong & Lonnroth v Sweden (1983) 5 EHRR 35 at para. 73; Agosi v UK (1987) 9 EHRR, at para. 62. These cases reflect the German ‘Sonderopfer’ (special sacrifice) concept, above.
91. (1996) 21 EHRR 250, at para. 77–8; Matos Silva, above, at para. 92.
92. Pine Valley Developments Ltd & Ors. v Ireland (1992) 14 EHRR 319, para. 59; Mellacher v Austria (1990) 12 EHRR 391, para. 57; Fredin v Sweden (1991) 13 EHRR 784, para. 51.
93. See Geradin, D., ‘Free Trade and Environmental Protection in an Integrated Market: A Survey of the Case Law of the United States Supreme Court and the European Court of Justice’, (1993) 2 J. Trans'l. L. & Pol. 141.
94. Ibid. 181; Weiler, T., ‘Regulatory Reform Obligations under International Law’, 24 JWT 71 (2000).
95. <www.wto.org/wto/dispute/58abr.doc.>; see also, The Economist (17 Oct 1998), 124; Qureshi, Asif, ‘WTO: Extraterritorial Shrimps, NGOs and the WTO Appellate Body’ (1999) 48 ICLQ 199; eg P. Mavroides (2000) 34 JWT 73–88 discussing the shrimp-turtle cases; on proportionality as a general principle in EU law: Usher, J., General Principles of EC Law (London, 1998, 37).
96. See also, US-restrictions on imports of Tuna from EEC & Netherlands (Tuna-Dolphin II) DS29/R at para. 5.35; US-restrictions on imports of Tuna from Mexico, BISD 39th Supp. 155 (1993) (Tuna-Dolphin I) at para. 5.28; Thailand Cigarettes case (1991) 30 ILM 1122; also Gasoline Standards Appeal case, 35 ILM (1996) 603.
97. Case 120/78, Rewe-Zentral AG v Bundesmonopolverwaltung fur Branntwein, 1979 ECR 649, at 662 (‘Cassis de Dijon’), where the court stated: ‘Obstacles to movement within the Community resulting from disparities between national laws relating to the marketing of the products in question must be accepted in so far as those provisions may be recognised as being necessary in order to satisfy mandatory requirements relating in particular to the effectiveness of fiscal supervision, the protection of public health, the fairness of commercial transactions and the defense of the consumer.’ Weiler, J., The EU, the WTO and the NAFTA, OUP 2000, 201.
98. See in particular, Case 302/86, Commission v Kingdom of Denmark, 1988 ECR 4607 (‘Danish Bottles Case’); Case 2/90, Commission v Kingdom of Belgium (1993) 1 CMLR 365; Geradin, (1993), above, 181–90.
99. Dean Milk Co. v City of Madison, 340 US 349 (1951). The extent of the burden that will be tolerated depends ‘on the nature of the local interest involved, and whether it could be promoted as well as with a lesser impact on interstate activities’. Pike v Bruce Church, Inc. 397 US 137, 142 (1970); Minnesota v Clover Leaf Creamery Co., 449 US 456 (1981); Geradin, (1993), above, 152–4.
100. Dean Milk case, above.
103. This was also the argument in the WTO Reformulated Gasoline case, above. Here, the Appellate Body observed that a finding of ‘arbitrary or unjustifiable discrimination’ may be ‘taken into account in determining the presence of a “disguised restriction” on international trade’.
104. Muchlinski, (1995), above, 505. E. Graham (1998) 31 Cornell Int'l LJ 599 (1998) above. The Myers v Canada NAFTA case, above, relies mainly on discrimination as a separate cause of action as distinct from expropriation.
105. The question of damages—and differences between compensation for expropriation and damages for breach of duties such as discrimination or fair and equitable treatment—is not treated here, see: separate opinion of B. Schwartz in Myers v Canada.
106. The jurisprudence of the Iran-US Claims Tribunal suggests a recognition of this modern conception of property as ‘rights’ rather than ‘things’ under international law. See, Amoco International Finance Corpn. v Iran, 15 Iran-USCTR 189, 220; Phillips Petroleum Co. v.Iran, 21 Iran-USCTR 79, 106; Starrett Housing Corp. v Iran, 4 Iran—USCTR 122, 156–7. Brower and Brueschke, (1998), above, 372—5. Modern BITs and MITs also define property in its broader sense to include not just tangible property, but also contractual rights, such as concessions and licence to exploit natural resources. R. Dolzer and M. Stevens, Bilateral Investment Treaties (1995) 25–6; Zedalis, (1996) above, 123–A. A similar position is said to be obtainable under the ICSID Convention, see Fedex NV v Venezuela, 37 ILM (1998) in which the arbitral tribunal held that the scope of Art. 25 of the ICSID Convention is broad enough to cover the promissory notes in dispute as they are evidence of a loan and therefore qualify as an ‘investment’ under the Convention. C. Schreuer, ‘Commentary on the ICSID Convention’ (1996) 11 ICSID Rev./FILJ (1996) 318. In the NAFTA case Pope-Talbot v Canada, the arbitral tribunal, in an interim award, considered access to the US market as a protected property right: <www.naftaclaims.com> Interim award of 26 June 2000.
107. In the Myers v Canada case (above), the tribunal found manifest discrimination and protectionist purpose. The government had, against advice from its own environmental experts, imposed an export ban on the export of PCB-waste by Myers Canada to its—geographically very conveniently located and efficient—disposal facilities in order to favour an environmentally less advantageous Canadian competitor.
108. For instance, as reflected in BP v Libya, 53 ILR 329. See O. Schachter, ‘General courses in Public International Law’, 179 RDC-Collected Courses (1982-V) 21.
109. Walde and Wouters (1996), above, 148–9.
110. McKean, Equality and Discrimination Under International Law (1983); E. W. Vierdag, The Concept of Discrimination in International Law (1973); Dine, J. and Watt, B. (eds), Discrimination Law (London, 1996); Schwarze (1992), above, ch. 4.
111. It should however be noted that while discrimination in trade law mostly relates to the question of access to domestic markets, the concept is much more important in investment law because of the hostage status of the foreign investor. Zedalis, (1996), above, 129–31. ‘A foreign trader may have trouble in penetrating a market, but is not exposed to any significant risk. A foreign investor, on the other hand, is heavily exposed for the long-term to significant political and now regulatory risk, both in developing and developed countries. Discrimination is therefore a much more serious issue for an investor as compared to a trader.’
112. In Van Raalte v The Netherlands (1997) 24 EHRR 503, at para. 139, the court restated its long-established test of discrimination as ‘a difference in treatment … [that] has no objective and reasonable justification …’ See also, Pine Valley case, above, para. 10; Fredin v Sweden, above, 60.
113. The combined effect of Articles 1, 3 and 11 of the GATT also suggests that the discrimination prohibited is between like products (domestic and imported) as illustrated by the US-Taxes on Petroleum and Certain Imported Substances (Superfund) case, GATT, BISD 345/236. The reported facts of the Ethyl case suggest that the Canadian ban of imports of the MMT additive did not affect domestic manufacturers of the substance. If that was the case, then the law would probably have contravened the non-discrimination requirement under NAFTA in form and effect. Zedalis (1996), above 131.
114. 340 US 349 (1951); Carbone, Inc. v Clarkstown (1994), above, at 4–5 of 24.
115. Myers v Canada; Ethyl; above. On the relationship between discriminatory intent and impact see in particular the separate opinion by B. Schwartz in the Myers case.
116. 14 EHRR 319, para. 97; Van Raalte case, above, para. 139; Matos E Silva, et al. v Portugal, above (the court did not deem it necessary to address the question).
117. eg Fredin v Sweden, above, para. 61.
118. Papamichalopoulos & Others v Greece (1996) 21 EHRR 439, para. 36.
119. R. Lazarus, ‘Putting the Correct “Spin” on Lucas’ (1993) 45 Stan. L. Rev. 1411, n. 94 at 1427 (‘environmental laws often bar the most profitable use, but they only rarely eliminate all economic uses of property’).
120. Todd Weiler, ‘The Ethyl Arbitration’, above. The case has been withdrawn following the Canadian government's lifting of the ban, but after the ICSID tribunal accepted jurisdiction (1999) 38 ILM 700. The main reason for Canada's actions (both the imposition and the lifting of the ban) seems to have been the case that there was political pressure for a trade restriction by NGOs, but not enough and credible scientific evidence for justifying the ban.
126. See for a survey of this—Sun Belt Water—plus the Metalclad, Ethyl and Myers cases by Abouchar, Juli, ‘Environmental Laws as Expropriation under NAFTA’ (1999) 8 RECIEL 209–215, a Canadian pharmaceutical regulation affecting a Mexican company or a company which lost out in a tender for construction at the Toronto airport (claiming expropriation/regulatory taking of the right to a fair tender complying with the tender rules). We are grateful to references by Gary Horlick, Esq. Of the Washington DC Bar in June 1999 to these situations (rather than cases). Much of the NGO discussion of such cases confuses often excessive legal claims raised by a party in negotiations with a government or advocated when institituting a legal procedure with a definite award by an arbitration tribunal. An ICSID tribunal dismissed the Azinian claim against Mexico— <www.worldbank.org/icsid=—the company had claimed expropriation of a waste management contract and denial of justice in Mexico. The tribunal disagreed and considered the issue one of a normal commercial dispute between a Mexican municipality and a not very reputable US company.
127. Pennsylvania Coal Co. v Mahon, above, at 413. For an elaboration of this argument from an economic analysis perspective: Rose-Ackerman/Rossi, op. cit, (2000).
128. Rossi (1998), at 307–9.
129. ITT Industries, Inc. v Iran, et al. 2 Iran-USCTR 348; Tippets, Abbett, McCarthy, Stratton v TAMS-AFFA Consulting Engineers of Iran, et al. 6 Iran-USCTR 219; see generally, Brower and Brueschke (1998), above, 376–441; Aldrich, (1996), above, 171–218; Kolo, (1994), above, Chaps. 3 and 4. This concept—of regulatory expropriation—is in fact very similar to standard language in modern MITs concerning the general treatment duty of states, viz. Art. 10 (1) ECT: ‘no Contracting party shall in any way impair by unreasonable or discriminatory measures their (ie investments') management, maintenance, use, enjoyment or disposal.’ Almost identical Part IV 1.1 of the draft MAI (April 1998 version).
130. Agins v Tiburon, 447 US 255, 260. On the American position, see generally, Lisker, (1996), above.
131. 260 US 393 (1922); Whitney Benefits, Inc. v US, 926 F.2d 1169 (Fed. Cir.), cert, denied, 112 S Ct (1991); contrast with Keystone Bituminous cases, above, where the mining companies were required to leave about 2 per cent of all the coal they had title to unmined so as to be used to prevent subsidence. It was held this did not amount to a taking of the companies' mining rights. Justice Stevens tried to distinguish this case from Pennsylvania Coal by evaluating the purposes of each statute. He concluded that whereas the Kohler Act in Pennsylvania involved ‘a balance of the private economic interests of coal companies against the private interest of the surface owners’, the Subsidence Act in Keystone serves ‘important public interest’. 107 S Ct at 1242; Kmiec, D., ‘The Original Understanding of the Takings Clause is Neither Weak nor Obtuse’ (1988) 88 Col. L. Rev. 1630.
132. 112 S. Ct. 2886 (1992; see also, Keystone Bituminous case, above, at 1243–6; Miller v Schoene, 276 US 272 (1928).
133. Kaiser Aetna v US, 444 US 164 (1979); Loretto v TelePrompTer Manhattan CATV Corp., 458 S. 419 (1982); Nollan v California Coastal Commission, 483 US 825 (1987); Dolan v City of Tigard, 512 US 374 (1994).
134. 18 F.3d 1560, 1572 (Fed Cir 1994).
135. 28 F.3d 1171 (Fed Cir 1994).
136. Professor Blumm, in his article, ‘The End of Environmental Law? Libertarian Property, Natural Law, and the Just Compensation Clause in the Federal Circuit’ (1995) 25 Envt'l. Law 171, views the Florida Rock decision as ‘exposing all wetlands regulation, [and possibly] all environmental and land use regulation to compensation claims’, at 180. He also sees Loveladies Harbor's ‘ratification of property owner's ability to segment property into small parcels’ as likely to encourage landowners to ‘act strategically to create segments capable of taking advantage of Lucas' categorical rule.’, id at 189.
137. See, Murphyores v Commonwealth of Australia (1976), in Pritchard, (ed), Economic Development: Foreign Investment and the Law (London: Kluwer/IBA, 1996), 105–6; Manitoba Fisheries Ltd v R (1978) 6 WW R 498; British Columbia v Tener (1985) 1 SC 533 based on; Barton, B., Canadian Law of Mining (Calgary: Canadian Institute of Resources Law, 1993) 169–91.
138. (1995) 19 EHRR 368;. See also, Matos E. Silva case, (1997) 24 EHRR 573.
139. E. Paasivirta, ‘The Energy Charter Treaty and Investment Contracts: Towards Security of Contracts’, in Walde (ed.), (1996), above, 349; Walde, in Ibid. 294–7; Verhoosel, (1998), above.
140. As one commentator has noted, ‘Unlike our ancestors, we no longer count our wealth by looking first to our social property of land, farm, buildings. Instead our principal means of support consist of legal property: stocks, bonds, pensions, an assortment of rights granted by the activist welfare state.’ B. Ackerman, Private Property and the Constitution (1977), 166 quoted by Treanor, (1995), above, at 812; see also Ibid. 798–803. In a similar vein, Professor Grey has observed that: ‘Under the classical conception, actual dispossession was required before ownership rights were violated and property was taken. By contrast, modern lawyers—and multilateral treaties—are nominalists about “ownership”; they see property in resources as consisting of the infinitely divisible claims to possession, use, disposition, and profit that the people might have with respect to those things. ‘T. Grey, ‘The Malthusian Constitution’ (1986) 41 U Miami L Rev. 21 at 30, cited by Treanor, above, 812. On a similar position under international law, see Brower and Brueschke (1998), above, 372–5.
141. This was the decision of the recent ICSID-tribunal in the NAFTA ‘Azinian’ case against Mexico, above.
142. Daintith, T., (ed); The Legal Character of Petroleum Licences: A Comparative Study (CPMLS, University of Dundee & IB A, 1981).
143. Fatouros, A., Government Guarantees to Foreign Investors (New York, 1962), 69; Waelde and Ndi, (1996), above; Sornarajah (1994), above, 86–7.
144. Pyramids case, decision (in Excerpt) published in 16 YB Comm. Arb (1991) 16, 32, comments by Delaume and Craig, 8 ICSID-Rev/FILJ (1993) 231, 264; also: SPP v Arab Republic of Egypt, 8 ICSID Rev./FILJ (1993) 328.
145. Waelde and Ndi, (1996), above.
146. In Opel v EU Council (1997) All ER 97, the ECJ held that the principle of protection of legitimate expectation formed part of the Community legal order and which could be relied on by an economic operator to whom an institution had given justified hopes.
147. In Kate v Italy (1995) 19 EHRR 368, the court held that the conclusion of an agreement between the applicant and the Rome District Council, giving effect to approval of the claimant's land development proposal, cannot prevent the authorities from acting in the planning sphere. Perhaps what influenced that decision was the earlier finding by the Commission of Human Rights that the housing development agreement concluded with the applicant contained an exemption clause which explicitly reserved the authoritie' prerogatives with regard to regulating urban development. However, in Fredin v Sweden, there was an implicit suggestion by the court to the effect that, had the authorities given some assurances to the applicants that they would continue to mine the gravel pit for a longer period than provided by the regulation in question, that would have been taken into account in deciding the case. In fact it is widely accepted that the principle of legitimate expectation is a general principle of law under the European Union laws and Member States laws. See generally, Schwarze (1992), above ch. 6 esp. at 1114–53; Usher (1998) op. cit. 52 ff.
148. eg see, US v Winstar Corp. et al. 116 S. Ct. 2432 (1996) in which the US Supreme Court held that the government cannot escape from its contractual obligations by relying on changes in the regulatory regime; further discussion of the Winstar decision in Rose-Ackerman and Rossi (2000) above. Although the case is a domestic one nonetheless the reasoning is equally applicable to an international setting. The discussion of a divided court is reflective of the positions usually taken by international lawyers in the assessment of the legal validity of stabilisation provisions in investor-government agreements.
149. This seems to be the position taken by the ICJ in Gabˇikovo-Nagymaros (Hungary v Slovakia), 37 ILM (1998) 162, in which the Court held that there had not beeen a substantial change in scientific knowledge from the time the Treaty was signed in 1977 and 1989, when Hungary decided to suspend the project. Furthermore, the Court observed that even if there had been any change in scientific knowledge, Hungary was estopped from relying on it because of its conduct towards the project which indicated that it was still interested in seeing the project completed. This decision suggests that an investment agreement that was entered into 20 or 30 years ago might be viewed differently (from the environmental perspective) from a relatively more recent one.
150. Penn Central Transport Co. v New York City, 438 US 104, 124 (1979).
151. Laitos (1996), above, 288–90.
152. Van der Walt, The Constitutional Property Clause, Kenwyn South Africa (1997); Van der Walt, (1999) op. cit; Rose-Ackerman and Rossi (2000) at n. 46; European Court of Justice (First Instance) in the Dorsch case (1998), as cited above).
153. Mononghahela Navigation v US, 148 US 312 (1893); also Armstrong v US, 364 US 40 (1960).
154. See, the Australian cases quoted in Pritchard, 1996 (above); also Columbia v Tender, a Canadian case: 1985 ISCR 533 as discussed in Dearden, op. cit. at 118, 199.
155. Activities with particular environmental sensitivites thus justify a greater intervention by environmental regulation as such regulation specifies the inherent and implied obligations on property not to be injurious to the community—see the US Supreme Court, Mugler v Kansas 123 US 623, 665 (1887); Keystone Bituminous Coal v De Benedictis, 480 US 470 (488, 489 (1987). But then such regulation must conform with the essential standards of non-discrimination and fairness (both substantive and procedural).
156. T. Waelde, JWT April 2000 op. cit; and BusLaw International (1999) op. cit. above and the writings of Todd Weiler, op. cit.