The Sole Effects Doctrine, Police Powers and Indirect Expropriation under International Law

Abstract

Indirect expropriation claims under international law are increasingly being seen as a threat to States' abilities to control property within their territory. The inconsistent manner in which these claims are being dealt with means that uncertainty prevails in this area for investors and States alike. This article considers the two main theories that have been proposed to resolve these problems: the sole effects doctrine and the police powers doctrine. It is argued that the sole effects approach should be preferred as not only is it more consistent with pre-existing law in this field, but it also appropriately balances investor and State rights. Adoption of the sole effects doctrine would lead to greater uniformity and predictability in the decisions made by tribunals in expropriation claims.