Legal Analysis of Indirect Expropriation Claim Under Korea-Us Fta

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WRITING SAMPLE
Kiho Kim
101 Cherry Ave.
Bethpage, NY 11714
(070) 8624-1462

The attached writing sample is an excerpt from a research paper submitted for the international business transaction course of Hofstra School of Law. This research paper addresses potential controversies arising from the investment provisions of KOR-US FTA, particularly focusing on indirect expropriation claims under KOR-US FTA. The beginning chapter provides a brief history of expropriation provisions in bilateral investment treaty. The second chapter discusses indirect expropriation provisions of the NAFTA Chapter 11 and the relevant case law. The final chapter analyzes detailed criteria to review indirect expropriation claims in the context of KOR-US FTA.

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LEGAL ANAYSIS OF INDIRECT EXPROPRIATION CLAIMS
UNDER KOR-US FTA
Kiho Kim

TABLE OF CONTENTS

I

INTRODUCTION............................................................................................................... 1

II

HISTORY OF INVESTMENT TREATIES AND EXPROPRIATION……………… 2

III

COMPARISON: NAFTA AND U.S. TAKING JURISPRUDENCE…………………. 4

IV

NEW TREATY TEXT: INDIRECT EXPROPRIATION UNDER KOR-US FTA....... 8 A.

Textual improvements of KOR-US FTA indirect expropriation provisions………....8

B.

Criteria determining whether an indirect expropriation has occurred………………12 1.
2.

Interference of the measure with reasonable investment-backed expectation..16

3.
V

Degree of interference with the property right………………………………..12

Character of governmental measures………………………………………....18

CONCLUSION.......................................................................................................................19

1

I

INTRODUCTION

On June 30, 2007, the United States and the Republic of Korea signed the U.S.-Korea Free Trade Agreement (“KOR-US FTA”). After 4 years of a long delay caused by political oppositions against the ratification, Congress finally approved the agreement on October 12, 2011, and Korea’s National Assembly subsequently approved it on November 22, 2011. The United States and Korea completed their review of the measures both sides had taken to implement the FTA and exchanged diplomatic notes on February 21 agreeing to bring the agreement into force on March 15, 2012.

Like other FTAs that the United State has already concluded, KOR-US FTA covers a wide range of subjects that have plagued the trading relationship for decades and these subjects are reflected in the final text of the agreement. With respect to the subject of investment, the KOR-US FTA Chapter 11 governs the admission and protection of foreign investments in host countries. Specifically, this Chapter provides several provisions prescribing the government from expropriating foreign investments directly or indirectly without awarding foreign investors “prompt, adequate, and effective” compensation.

However, there is growing concern in both countries that considerable ambiguity over the standard for determining an indirect expropriation may make legitimate governmental regulations susceptible to foreign investors’ relentless legal challenges. A series of controversial NAFTA Tribunal decisions have also heightened such a concern. Furthermore, the incorporation of the investor-state dispute (ISD) mechanism in KOR-US FTA opened the door for foreign investors to bring an expropriation claim without procedural difficulty against the host country’s regulatory measures that may affect their investments, because the ISD procedure effectively 2

eliminated complicated procedural hurdles that foreign investors would have to overcome if they filed the claim in international or domestic courts.

To mitigate difficulty caused by blurred distinctions between an indirect expropriation and a government action that does not trigger a compensation obligation, this Article will attempt to shed light on the interpretation of indirect expropriation in the context of...
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