Common use of Direct Expropriation Clause in Contracts

Direct Expropriation. 1. In determining the amount for compensation in case of expropriation, the competent authority of each Party shall follow the provisions of this Article. 2. Each Party shall not nationalize or expropriate investments of investors of the other Party, except: a) For a public purpose or necessity or when justified as social interest; b) In a non-discriminatory manner; c) On payment of effective compensation (1), according to paragraphs 2 to 4; and d) In accordance with due process of law. 3. The compensation shall: a) Be paid without undue delay; b) Be equivalent to the fair market value of the expropriated investment, immediately before the expropriating measure has taken place ("expropriation date"); c) Not reflect any change in the market value due to the knowledge of the intention to expropriate, before the expropriation date; and d) Be completely payable and transferable, according to Article 10. 4. The compensation to be paid shall not be inferior to the fair market value on the expropriation date, plus interests at a rate determined according to market criteria accrued since the expropriation date until the date of payment, according to the legislation of the Host State. 5. For greater certainty, this Article only provides for direct expropriation, where an investment is nationalized or otherwise directly expropriated through formal transfer of title or ownership rights, and does not cover indirect expropriation. (1) For the avoidance of doubt, where Brazil is the expropriating Party, compensation for the expropriation of property that is not performing its social function may be provided in the form of debt bonds, in accordance with its laws and regulations, and nothing in this Agreement shall give rise to the interpretation that such form of compensation is inconsistent with this Agreement.