A Study on the Indirect Expropriation in the Korea-China FTA- the “Tza Yap Shum vs. the Republic of Peru”Case‘s Implications -

The provisions on indirect expropriation in the International Investment Agreement are presented in various forms reflecting the domestic interests of the negotiating parties, but their judgment criteria are vague and varied, requiring individual and substantive judgment. In this article, 'Tza Yap Shum vs. The republic of peru’(ICSID Case No. ARB/07/6) where SUNAT's pre-prevention measures for Chinese investors, the Observance of Dew Process and taxation measures were problematic was analyzed. In particular, in the judgment of indirect expropriation, compliance with domestic legal procedures during execution of policies of investment-loving countries, indirect expropriation problems by taxation measures, and compliance of arbitrary character in the judgment of indirect expropriation were reviewed. As a result, it was concluded that the provisions concerning indirect expropriation in the Korea-China FTA were very vague. In addition, Article 12.9 of the Korea-China FTA stipulates that swift legal and administrative action is possible against expropriation, but it is questionable whether a prompt and fair review will be effectively guaranteed. On the basis of such a problem, In the second phase of follow-up negotiations, the Korean and Chinese authorities should consult on more effective standards for determining the indirect expropriation law. It would also be necessary to discuss in detail the procedures for settlement and compensation of disputes arising between investors and parties.