Compensation in Case of Expropriation of Private Property Under the ASEAN Economic Community

Abstract

Generally speaking, expropriation of private property and its associated issues of compensation within the ASEAN context are governed by three groups of law, namely 1) general international law, 2) bilateral investment treaties and 3) multilateral investment agreements.

With respect to general international law, there is no universally recognized principle of international law applicable to foreign direct investment (FDIs). While the developed countries, which are mainly the home states and their investors, adhere to the minimum standards of international justice (MSIJ) which proclaims that there shall be no expropriation except for public purpose and against just compensation which is prompt, adequate and effective, the developing countries which are mainly the host states subscribe to the Calvo Doctrine (CD) which adheres to national treatment, whereby national standards are supreme. In their eyes, whatever the host state has done to its own citizens, the foreign investors shall be treated the same.

As a result, these is no certainly as to which principle of general international law the host state shall apply to the FDIs.

Accordingly, many ASEAN Member States, including Thailand, have turned to bilateral investment treaties (BITs), which are agreements between the home and the host states, for the promotion and protection of their investments. Thailand has concluded BITs with six ASEAN countries including Laos, Myanmar, Vietnam, Cambodia, Indonesia and Philippines.

The ASEAN Member States also conclude many ASEAN Instruments, which are multilateral treaties, pertaining to FDIs, such as ASEAN Comprehensive Investment Agreement.

Since the three groups of law are applicable to the FDIs at the same time and since there is no rule of international law decides which kind of law prevails in the case of conflict, uncertainly still persists. This must await future development of international law.