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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 Investment Agreement on mutual support and investment protection (1980) provides for “fair compensation”,⁴⁸³ whereas the Investment Agreement of the Organization of the Islamic Conference (1981) requires “adequate and effective compensation to the investor in accordance with the laws of the host state regulating such compensation”.⁴⁸⁴ The ASEAN Investment Agreement contains the term “prompt, adequate, and effective compensation”.⁴⁸⁵ The NAFTA specifies that such compensation shall be “equivalent to the fair market value of the expropriated investment immediately before the expropriation took place (‘date of expropriation’) and shall not reflect any change in value occurring because the intended expropriation had become known earlier. Valuation criteria shall include going concern value, asset value including declared tax value of tangible property, and other criteria, as appropriate, to determine fair market value”. Moreover, the compensation will be “fully realizable” and “freely transferable” in any currency from the host country.⁴⁸⁶ The Energy Charter Treaty uses the standard of “quick, appropriate and effective” compensation.⁴⁸⁷

      However, the Amoco ruling clearly states that the future capitalization of income that may be generated by such activity after the transfer of ownership as a result of expropriation (lucrum cessans – the judgment concerning compensation for “goodwill and commercial prospects”) should not be taken into account when assessing the compensation due for the legal takeover of property.⁴⁸⁸ In the case of Ebrahimi (1994), the court pointed out that the extra remuneration for lucrum cessans is dependent on the prior characterization of the takeover as unlawful.⁴⁸⁹ In some cases, such as Phillips Petroleum (1989), the Tribunal did not differentiate the compensation, but applied the uniform standard provided for in the Treaty on mutual relations and interpreted it as a requirement for compensation representing the “full equivalent of the property taken”.⁴⁹⁰

      The ICC guidelines contain the “without undue delay” formula,⁴⁹¹ while the Draft United Nations Code of Conduct on Transnational Corporations does not include this element. The World Bank Guidelines equate the terms “prompt” and “without delay”, but accept that if the state is affected by exceptional circumstances, the compensation may be paid within a period which shall be as short as possible and which shall in no case exceed five years from the date of acquisition, provided that reasonable market interest is applied to deferred payments in the same currency.⁴⁹²

      With regard to the requirement of “adequacy” or “full value” of compensation, ICC guidelines use the term “just compensation”.⁴⁹³ The Draft United Nations Code of Conduct on Transnational Corporations uses the term “adequate compensation… in accordance with the applicable legal rules and principles”. The World Bank refers to the traditional formula “appropriate” in the sense of market value. The guidelines contain detailed rules on how to determine the market value of the investment in a reasonable manner.⁴⁹⁴

      Regarding the requirement for the effectiveness of the compensation, the ICC guidelines contain only the word “effective” in the compensation clause.⁴⁹⁵ The World Bank Guidelines amount to effective indemnity payable in “the currency brought in by the investor where it remains convertible, in another currency designated as freely usable by the International Monetary Fund or in any other currency accepted by the inwestor”.⁴⁹⁶

3.5.4.5 The requirement to perform a reliable procedure

      Although it is universally accepted that expropriation must take place on the basis of reliable procedure,⁴⁹⁷ none of the resolutions regarding

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