Under Korea-U.S.A FTA, neither Party may expropriate or nationalize a covered investment either directly or indirectly through measures equivalent to expropriation or nationalization, except for a public purpose, in a non-discriminatory manner, on payment of prompt, adequate, and effective compensation; and in accordance with due process of law and Minimum Standard of Treatment. One important conceptual problem has been the subject of litigation and debate in recent years, namely the kind of government acts that constitute expropriation and that are therefore subject to compensation. International law, however, does not delineate differences between legitimate non-compensable regulations and indirect expropriation. This inconsistency could lead to problems for both investment exporters and host countries. Investment exporting nations desire clear standards in the interests of their private investors, so that investors can be sure that the host country will treat their investment at least as well as it treats domestic firms. Private investors who fear that the host nation will attempt to slowly nationalize their will be less likely to invest. Likewise, host nations have an interest in establishing clear treaty guidelines so that they can avoid unnecessary litigation from private investors. An investor of a Party may submit to arbitration a claim that another Party has breached an obligation. An investor may also bring a claim on behalf of an enterprise of another Party that is a juridical person that the investor owns or controls directly or indirectly. These hypothetical investment dispute is not realistic at present. For now, Korea has not yet experienced with the disputes of investors v. signatory countries under FTA. It is, however, probable that Korea will face such disputes and the Korean government should be prepared for such investment disputes.
Therefore, this article attempts to study the relevant provisions of NAFTA which is similar to the Korea-U.S.A FTA in terms of investment disputes settlement relating to the indirect expropriation. While NAFTA prohibits direct and indirect expropriation, as well as measures tantamount to expropriation, NAFTA contains no express definition of what constitutes either one. This ambiguity has left room for much interpretive debate. The controversy surrounding NAFTA's expropriation provision derives from the history of NAFTA arbitrations interpreting the provision. Of the Thirty-three claims field under Chapter 11 of NAFTA, twenty-two were based on an alleged violation of article 1110, claiming that various government regulations constituted expropriation measures.