Nationalization And Expropriation Outline

Nationalization and Expropriation

1. Two Issues:

   1. (1) The right to take the property

      1. U.S. Resolution on Permanent Sovereignty Over Natural Resources

         1. “The right of peoples and nations to permanent sovereignty over their national wealth and resources must be exercised in the interest of their national development and of the well-being of the people of the State concerned.” Resolution on Permanent Sovereignty Over Natural Resources Art. 1 (CB 1079).

         2. “Nationalization, expropriation or requisitioning shall be based on grounds or reasons of public utility, security or the national interest which are recognized as overriding purely individual or private interests, both domestic and foreign. Resolution on Permanent Sovereignty Over Natural Resources Art. 4 (CB 1080).

            1. In such cases the owner shall be paid appropriate compensation. Resolution on Permanent Sovereignty Over Natural Resources Art. 4 (CB 1080).

      2. U.N. Declaration on the Establishment o a New International Economic Order

         1. “4. The new international economic order should be founded on full respect for the following principles:

            1. “(e) Full permanent sovereignty of every State over its natural resources and all economic activities. In order to safeguard these resources, each State is entitled to exercise effective control over them and their exploitation with means suitable to its own situation, including the right to nationalization or transfer of ownership to its nationals, this right being an expression of the full permanent sovereignty of the state.

            2. “(f) The right of all States, territories and peoples under foreign occupation, alien control and colonial domination or apartheid to restitution and full compensation for the exploitation and depletion of, and damages to, the natural resources and all other resources of those States, territories and people . . . .” (CB 1080).

      3. U.N. Charter of Economic Rights and Duties of States

         1. “Every State has and shall freely exercise full permanent sovereignty, including possession, use and disposal, over all its wealth, natural resources and economic activities.” U.N. Charter of Economic Rights and Duties of States Art. 2(1).

         2. “Each State has the right . . . [t]o nationalize, expropriate or transfer ownership of foreign property, in which case appropriate compensation should be paid by the State adopting such measures, taking into account its relevant laws and regulations and all circumstances that the State considers pertinent.” U.N. Charter of Economic Rights and Duties of States Art. 2(2)(c).

   2. (2) The payment of compensation

      1. The U.S. government has maintained in numerous statements that “prompt, adequate, and effective compensation” is required.

      2. However, international decisions have held that the appropriate standard is “appropriate compensation.” See, e.g., TOPCO-Libyan; Banco Nacional.

      3. NAFTA Article 1110 requires compensation at the “fair market value” immediately before the expropriation.

         1. Valuation is to consider the going concern value.

         2. Compensation must be paid “without delay and be fully realizable.”

2. Takings of Foreign Investments: Terminology

   1. Intervention: Government takes temporary control to achieve a certain goal and then returns the property to the owner

   2. Expropriation/nationalization: taking by the state either for the state to manage the asset itself or to hand over or sell to another entity

   3. Confiscation: taking without compensation

3. Takings: Legal Standards

   1. Right to take for a public purpose of in the public interest

   2. No expropriation without compensation (customary intl law)

   3. Compensation standard?

      1. UNGA Res. 1803 (Permanent sovereignty over natural resources): “appropriate compensation”

      2. UNGA 3201 (NIEO): right to restitution to the state for colonial exploitation

      3. UNGA 3281 (Charter of Economic Rights and Duties): “appropriate compensation…settled under the domestic law of the nationalizing state”

      4. US position:

         1. Hull formula: “prompt, adequate and effective compensation”

         2. Restatement: “just”

   4. Landmark Cases

      1. Texas Co/Calasiatic v. Libya (1977): R-J Dupuy: "appropriate compensation" is the "opinio juris communis" that reflected "the state of customary law existing in the field."

      2. Aminoil-Kuwait (1982): Reuter and Fitzmaurice: "appropriate compensation" as set forth in Resolution 1803 "codifies ... positive principles."

      3. Liamco v. Libya (1981): Sobhi Mahmassani: “equitable compensation”

4. Impediments to suing foreign states in the US:
   Definitions and Sources

   1. Sovereign immunity:

      1. No jurisdiction by courts over foreign state organs/entities

   2. Act of State doctrine:

      1. The courts of a state cannot sit in judgment of the acts of another state done on its territory

   3. Sources:

      1. Probably some customary law, some limited treaty provisions on certain subject matters

      2. In practice: rely on domestic common law and statutory provisions

      3. In the US: act of state doctrine (common law) and Foreign Sovereign Immunity Act (federal statute)

5. FSIA: General immunity rule – JURISDICTIONAL

   1. § 1330: Dist. Courts have jurisdiction over foreign states when there is no immunity under §§ 1605-1607

   2. § 1604: States have immunity except per §§ 1605-07

      1. Note: this statute does not supersede preexisting treaties!

6. FSIA: General exceptions to sovereign immunity – JURISDICTIONAL
   § 1605

   1. (a)(1): waiver

   2. (a)(2): commercial activity:

      1. commercial activity in the US

      2. act in the US in connection with a commercial activity elsewhere

      3. act and commercial activity elsewhere but direct effect in the US

   3. (a)(3): property taken in violation of intl law AND property is present in the US (or property exchanged for it, ie money)

      1. OR property owned or operated by an agency of the foreign state and that agency is engaged in commercial activity in the US (ie, state-owned airline carrier operating flights in the US?)

   4. (a)(5) money damages sought for personal injury or death or damages or loss to property occurring in the US and caused by torts of a foreign state

   5. (a)(6) arbitration agreement: ct...

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