How to approach expropriation risk as a controversial component of country risk in investment arbitration

Abstract Country risk premium is one of the principal factors that affects the value of investments and is based on the assumption that investments located in an unstable country are worth less than similar investments in a stable country. Tribunals impose a discount rate called a country risk premium in accordance with this by assessing the economic and political risks of the host country where the investment is being made. This article discusses whether a state can take advantage of its own unlawful acts that aggravate political risks in order to raise its country risk premium and thus the discount rate on the value of investments.