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8 J. Int'l Arb. 59 (1991)
Determining the Economic Value of Expropriated Income-Producing Property in International Arbitrations

handle is hein.kluwer/jia0008 and id is 57 raw text is: Determining the Economic Value of Expropriated
Income-Producing Property in International
William C. LIEBLICH*
For years, there has been intense debate concerning the compensation that
customary international law requires be paid when business property owned by
foreign investors is expropriated.' For the most part, this debate has centered on the
question of which legal standard-such as prompt, adequate and effective
compensation,      full  compensation,      partial   compensation,     appropriate
compensation, or equitable compensation- should be regarded as the customary
international law standard.2 Unfortunately, this attention to the question of legal
standards appears to have overshadowed the equally important subject of the
valuation methods that should be used to calculate the compensation required by the
appropriate standard.3
This relative inattention to valuation methods renders the discussion of legal
compensation standards almost entirely abstract. For example, if a tribunal decides
that it is required by international law to award a former owner of expropriated
property th& full value of that property, how should the tribunal go about
ascertaining that value? By the same token, if the tribunal applies a standard of
partial compensation, the tribunal must logically start with some measure of value
* Partner, Pierson Semmes and Bemis, Washington, D.C. The author has been involved in the representation
of Atlantic Richfield Company (Case No. 396), ARCO Exploration, Inc. (Case No. 20), and Sun Company, Inc.
(Case No. 21), before the Iran-United States Claims Tribunal.
For the purposes of this article, the term expropriation refers to any deprivation by a State of an investor's
property, whatever the purpose or cause of the deprivation. As events in Kuwait during the last year remind us,
business property that is destroyed or rendered useless by a State is no less taken from its owner than is property
that is formally expropriated for continued operation as a business. The methods for determining the property's
value should be the same regardless of the property's ultimate fate. Thus, the valuation methods advocated in this
article may appropriately be employed in a wider context than that of investment disputes. For example, the laws
of war require that compensation be paid to the owner of private property that is seized or requisitioned by a
belligerent occupant ofenemy territory. See 1907 Hague Convention Respecting the Laws and Customs of War on Land,
Annexed Regulations Articles 52-53. Where income-producing property is seized or requisitioned, the methods
advocated in this article may be used in determining the compensation due the property's owner. In addition, those
methods are as appropriate in cases of temporary deprivations of property as they are with respect to permanent
deprivations. See infra foomote 39.
2 See, e.g. Agora: What Price Expropriation?, 79 AJIL 414 (1985) (debate between M. H. Mendelson and
Professor Schachter over whether decisions of international tribunals support the so-called Hull Formula
requiring payment of prompt, adequate and effective compensation); Dolzer, New Foundations of the Law of
Expropriation of Alien Property, 75 AJIL 553 (1981).
' A notable exception to this general tendency is the four-volume series The Valuation of Nationalized Property
in International Law (R. Lillich, ed. 1972, 1973, 1975, 1987).
Copyright 0 2007 by Kluwer Law International. All rights reserved.
No claim asserted to original government works

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