Quarterly Publication

Document Type : Original Article

Author

LL.B; LL.M in Private Law, LL.M in International Business Law (Shahid Beheshti University of Iran); LL.M in International Oil and Gas Law & Policy (CEPMLP, University of Dundee, UK); DPhil in Law (University of York, UK); Email: hamid.r.younesi@alumni.york.ac.uk

Abstract

The present article aims to examine the risk of host governments’ interference with the property of foreign investors (expropriation) in the petroleum industry. Host states have the police power to make regulatory changes. The ‘police power’ is defined as the inherent and plenary power of a sovereign to make all laws necessary and proper to preserve the public security, order, health, morality, and justice. It is a fundamental power essential to government, and it cannot be surrendered by the legislature or irrevocably transferred away from government. The government can interfere with the contract and change the contract terms or may even directly take the investment. This is the main reason for international petroleum disputes and international arbitration practice has addressed such risk. For this purpose, the concept of property and compensable property rights under international law are of great significance. Indeed, expropriation conveys a deprivation of a property owner of this property. This paper assesses the concept of expropriation, the international legal requirements for a lawful expropriation, and then, analyses the relevant international arbitral awards in petroleum jurisprudence.

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