The Guarantee of Inviolability and Its Limits
Under the Georgian investment law, an investment in Georgia is fully and unconditionally protected by the legislation in force. Expropriation is admissible only in the cases directly established by law, by a court decision or in a state of urgent necessity defined by organic law, and only with appropriate compensation. A decision on the expropriation of an investment, as well as the terms of compensation, may be appealed in a Georgian court unless the parties have agreed otherwise or an international treaty of Georgia provides otherwise — and that last clause is precisely where international agreements on the protection of investments enter the picture.
The inviolability guarantee is remarkable in that it simultaneously defines the limits of state action and the legal stability of the investor. Expropriation outside the cases directly established by law is prohibited, and the institute of urgent necessity is defined by organic law, which means that an administrative decision as such is not a sufficient basis. The terms of compensation and the calculation of the amount are likewise subject to judicial control, so the investor has two separate directions of a dispute — the legality of the expropriation and the amount of the compensation, each with its own evidentiary basis and its own procedural path.
Bilateral investment treaties and multilateral conventions create an additional layer of protection: under many of them an investor may submit a dispute directly to international arbitration instead of national courts. The concrete mechanism, however, depends on the text of each treaty, so the analysis of the applicable agreement is always the first step in planning a claim, together with an examination of consent to arbitration, the scope of protected investments and the available remedies.
The Compensation Standard on Expropriation
The compensation paid to the investor must correspond to the real market value of the expropriated investment at the very moment the expropriation took place. It must be paid without any delay and must include the loss the investor suffered from the moment of expropriation until the payment of the compensation amount. A foreign investor has the right to convert the compensation in a banking institution at the market rate and to transfer it abroad freely and without hindrance.
The law thus combines three elements: an objective valuation of the asset, promptness of payment and compensation for the loss covering the entire waiting period. In international practice it is precisely these three elements that become the usual battlegrounds of a dispute, because the determination of the market value and the fact of delay are matters of separate proof in every case, often supported by valuation experts.