University of Tehran Public Law Studies Quarterly 2423-8120 51 3 2021 09 23 Compensation for Expropriation of Foreign Investments from the Perspective of Economic Analysis of Law Compensation for Expropriation of Foreign Investments from the Perspective of Economic Analysis of Law 865 884 79051 10.22059/jplsq.2020.299728.2366 FA Mohammadali Bahmaei Assistant Prof., Department of International Commercial Law, Faculty of Law, University of Shahid Beheshti, Tehran, Iran Hassan Faraj Mehrabi Ph.D. in Oil and Gas Law, Faculty of Law, University of Shahid Beheshti, Tehran, Iran and MA. in International Civil and Commercial Law (Advanced LL.M.), Faculty of Law, Leiden University, Leiden, Netherlands Journal Article 2020 03 19 This article discusses how the standard of compensation for expropriation of foreign investments employed by international investment tribunals can affect State parties’ preferences reflected in international investment agreements as well as the efficiency of these standards in light of an economic analysis of law. It is suggested that State parties to these agreements often pursue their own economic development as well as protecting their nationals who invest in the territory of the other contracting State. In so doing, the State parties try to diminish the externalities associated with their measures and decisions on foreign investors on the one hand, and to reduce the risk of investment in their territory for foreign investors, on the other. By comparing the standard of full reparation established in customary international law to the standard of prompt, adequate, and effective compensation due immediately before the expropriation, usually agreed upon in investment agreements, this article concludes that the former standard -i.e. the standard of full reparation- is not entirely compatible with the preferences of State parties to international investment agreements and, thus, cannot always be considered as an efficient standard. This article discusses how the standard of compensation for expropriation of foreign investments employed by international investment tribunals can affect State parties’ preferences reflected in international investment agreements as well as the efficiency of these standards in light of an economic analysis of law. It is suggested that State parties to these agreements often pursue their own economic development as well as protecting their nationals who invest in the territory of the other contracting State. In so doing, the State parties try to diminish the externalities associated with their measures and decisions on foreign investors on the one hand, and to reduce the risk of investment in their territory for foreign investors, on the other. By comparing the standard of full reparation established in customary international law to the standard of prompt, adequate, and effective compensation due immediately before the expropriation, usually agreed upon in investment agreements, this article concludes that the former standard -i.e. the standard of full reparation- is not entirely compatible with the preferences of State parties to international investment agreements and, thus, cannot always be considered as an efficient standard. https://jplsq.ut.ac.ir/article_79051_85f63d6aaf28b96e1530a7fcaaa41fa2.pdf