Does the Hull Formula reflect contemporary customary international law?

When it comes to the expropriation of property and the relative remedies that are to be available to foreign parties, two conflicting theories have arisen. The first of these theories was formulated by Cordell Hull and later came to be known as the Hull Formula. A holistically different and opposing theory to the Hull theory being the Calvo Doctrine. The aim of this essay is to determine whether the Hull formula was able to find a place in private international law or was triumphed by the Calvo Doctrine. 

The crux of the Hull Formula established that when property is expropriated there should be a prompt, adequate and effective”[1] level of compensation awarded to the owner of the property. On the other hand, the Calvo Doctrine, named after the Argentine jurist Carlos Calvo, holds that as opposed to having an international standard by which compensation should be paid, compensation for expropriation should be in line with that which is available in the subject country.[2] Notably, the Calvo Doctrine gained prominence and favour in Latin American countries.[3] Countries preferring this doctrine have held that it can be justified on the ground that the foreign investor was not being discriminated against in comparison to domestic investors as both would receive the same treatment.[4]

The question then arises as to why there was this divergence of opinion as to the preference between these two doctrines. The answer comes in the characteristics of these countries. It has been noted that those countries that are keen to attract foreign investment have tended to favour the Hull Formula as this is most attractive for foreign investors; to the contrary capital-exporting countries have tended to favour the narrower Calvo Doctrine as this would prevent money from leaving the jurisdiction.[5]

These conflicting ideologies have proved difficult in relation to implementing an ideal standard in into customary international law. In 1974, the United Nations Charter of Economic Rights and duties of States attempted to determine a stronger formula, however the signatories were unable to agree as to whether to adopt the Hull Formula or the Calvo Doctrine. However, this stale situation in relation to a lack of a unilateral decision has not stopped progress too much. It has been noted that several thousand bilateral treaties have been signed that have since adopted the Hull Formula and this has been done by those countries who have been keen to attract foreign investment and have appreciated the need to protect foreign investors in order to achieve this attraction.[6]

Overall, whilst the international community has been unable to achieve unanimous approval of either the Hull Formula or the Calvo Doctrine, the continuing emergence of bilateral treaties favouring the Hull Formula could change the global opinion.

[1] M. H. Mendelson, ‘What Price Expropriation? Compensation for Expropriation: The Case Law’ (1985) 79 Am. J. Int'l L. 414, 414.
[2] Andrew Paul Newcombe & LluĂ­s Paradell, Law and Practice of International Investment Treaties: Standards of Treatment, (Kluwer Law International, 2009), 13.
[3] Ibid.
[4] Stephen M Schwebel, ‘Investor-State Disputes and the Development of International Law: The Influence of Bilateral Investment Treaties on Customary International Law’ (2004) 98 Am. Soc'y Int'l. L. Proc. 27, 27
[5] Oscar Schachter, ‘Editorial Comment: Compensation for Expropriation’, (1984) 78 Am. J. Int'l L. 121, 129.

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