Expropriation

Expropriation is the act of removing control from the owner of an item of property. The term is used to both refer to acts by a government or by any group of people.

It is commonly referred to as the act of removing property from an owner especially by public authority - for example, expropriated the property owners who lived in the path of the new highway.

It is sometimes used in the context of redistribution - for example, taking wealth from the rich to feed the poor.

Expropriation is one of the political risks involved with Foreign Direct Investment. It is characterized by confiscation of the foreign asset, and a pittance payment. This payment is sometimes a formality, and may not represent an acceptable reparation, because the transaction is not one to which the owners, as forced sellers, have freely consented. Moreover, adding to the complaints of the owners, the competition of any other buyers is excluded. Finally, the expropriated business is quite frequently a successful and established one, rather than one that is still highly risky or even failing. Such expropriation thus deprives the owners of their reasonable expectations of reliable returns from such a proven business. Individuals who have had their foreign property expropriated may have trouble seeking recourse in U.S. courts due to the Act of State Doctrine.

Conversely, acts of expropriation may be warranted for a variety of reasons, peculiar to the local governmental entity. Sometimes, for instance, the expropriated business owners pay little or no attention to the host country's assertion that royalty payments are too small relative to the resources being extracted from the host country. Some host country political complaints may relate to the treatment of its nationals as employees of the business. At other times, the host government may judge that strategic decisions about the business entity are simply wrong-headed and ill-advised, as applied to the host country, however right they may seem to the owners. Such judgments may also occur when the business entity fails to include the host country's interests and concerns, legitimate or not, as matters of ordinary consultation and effective participation in the operational plans of the business entity.

As a result of both direct and indirect expropriation, a just compensation must be paid. The characteristic of this compensation is defined by Hull as "prompt, adequate and effective", known as The Hull Formula.

See also

• Eminent domain
• Redistribution
• Theft
• Nationalization