Chapter 7: The applicable standard
International case-law has traditionally answered the threshold question of indirect takings applying an effects rule, supplemented by the substantial and permanent deprivation standard. This rule recognises a restricted police-powers exception, and the principle of respect for legitimate expectations. International tribunals have generally avoided assessing the intentions of the host-states adopting the challenged measures. As a consequence, the police-powers doctrine has rarely been followed by judges and arbitrators at the moment of identifying the boundaries between non-compensable state measures and compensable indirect expropriations. Capital-exporting states in North America and Europe upheld the effects rule when its application was restricted to Latin American, Asian and African countries. Now that any host-state can see its regulatory policy challenged by an expropriation claim, this rule has fallen into disfavour. National treatment, as an absolute maximum standard, is currently suggested to decision-makers settling investment disputes arising out of last-generation US and Canadian BITs and EIAs. Supported by its main historical adversary, the Calvo doctrine threatens again the international minimum standard of treatment on which the protection against expropriation is based. In this new version of the old doctrine, the national treatment conventionally promoted as a maximum standard is not that of just any country. The expropriation clause of these BITs and EIAs is linked to a particular domestic case-law: the US regulatory takings doctrine.
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