Armenia Strengthens Investor Protection Against Expropriation

Armenia’s draft Law on Investments introduces a strengthened legal framework to protect investors against both direct and indirect expropriation.

The draft prohibits unlawful expropriation, including cases where legal grounds are formally invoked but are used as a pretext to deprive an investor of property, and guarantees investors the right to adequate compensation under the law and applicable international agreements.

Under the proposed legislation, direct expropriation may take place only in limited circumstances, including for overriding public interest or during a state of emergency or martial law, and must comply with the applicable legal procedures. Compensation for lawful expropriation, unlawful direct expropriation, and indirect expropriation is to be provided in addition to other legal requirements and procedures and must be prompt, non-discriminatory, effective, and based on the fair market value of the investment.

Where fair market value cannot be determined, compensation must take into account relevant factors, including the nature and duration of the investment, replacement value, book value, and goodwill. The draft also provides that compensation may include interest, while lost profits and other damages are generally excluded unless otherwise provided by law or agreement.