Petroleum Business Review

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 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, change the terms, or directly take the investment. This is why international petroleum disputes and arbitration practices have addressed such risk. For this purpose, the concept of property and compensable property rights under international law are significant. 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 analyzes the relevant international arbitral awards in petroleum jurisprudence.