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We support the EU's wish to "make it clear that non-discriminatory measures taken for legitimate public purposes, such as to protect health or the environment, cannot be considered equivalent to an expropriation," and "to clarify that the simple fact that a measure has an impact on the economic value of the investment does not justify a claim that an indirect expropriation has occurred."
However, the provision of paragraph 3 of the CETA example: "...in the currency of the country of which the investor is a national or in any freely convertible currency accepted by the investor," opens the paying country to considerable risk, in that it effectively commits signatory states to uncontrolled hard-currency liabilities. The obligation to compensate expropriated properties of foreign residents in foreign currency is (a) discriminatory against own residents (who are generally required to accept the coin of the realm in settlement), and (b) severely destabilizing to foreign exchange policy in the event that compelling public interest requires expropriation of more property than can be covered by the strategic foreign currency reserve.
For smaller countries, who all else being equal will have higher foreign investment relative to the size of their economy, maintaining an adequate strategic currency reserve to buy out all foreign direct investment would impose a non-trivial real cost, which the country in question would have no legal means to recover from the principal beneficiaries (the foreign residents owning the properties in question).
Further, it is unclear what public purpose is served by shielding foreign investors from currency risk in the event of expropriation. In the ordinary course of business, people who invest in currencies outside their own must themselves bear the risk that said currencies depreciate or are deliberately devalued. Carving out an exemption (at public expense) from the ordinary currency risk assumed by any firm or individual doing business in a currency not his own seems hardly justified.
Similarly, the CETA language on indirect expropriation:
"c) the extent to which the measure or series of measures interferes with distinct, reasonable investment-backed expectations"
seems at odds with the EU's stated standpoints (above, "the simple fact that a measure has an impact on the economic value of the investment does not justify a claim that an indirect expropriation has occurred", and with regard to "legitimate expectations", "an investor cannot legitimately expect that the general regulatory and legal regime will not change").
We suggest that the CETA provisions on expropriation should not form the basis of TTIP language.
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