In the case of indirect expropriation, the foreign investor retains ownership of the property, but waives the right to earn income from the investment. The national government does not confiscate property absolutely, but acquires the right to retain all the products of the commercialization of the property. To better understand the difference between the two types of expropriation, consider the following example. Investor A is a national of country X and owns land in country Y. Expropriation can be classified as direct or indirect. Direct expropriation refers to cases where the government takes possession of it and transfers ownership from the current owner. This is the most common type of expropriation, in which the government forces the sale of private property for public use. Courts will first determine whether the expropriation has taken place before assessing whether it meets the conditions for legal expropriation.25 In the United States, a doctrine known as the « eminent domain » provides the legal basis for expropriation. U.S. courts have accepted the doctrine as a guiding power, suggesting that it is implicit in the Fifth Amendment`s compensation clause.
According to this reasoning, the wording of the amendment implies that property cannot be expropriated without adequate compensation, that property can indeed be seized. Alternatively, governments can indirectly expropriate property by depriving private owners of the value of their interests. In practice, indirect expropriation is difficult to identify. In this case, the Permanent Court of International Justice (PCIJ) concluded that in the event of an unlawful act (in this case, illegal expropriation): State expropriations are widespread around the world, usually accompanied by an agreement that owners should receive adequate compensation for the property they have lost. The few exceptions to the fair compensation agreement are mainly found in communist or socialist countries, where a government can expropriate not only land, but also domestic or foreign companies present in the country. In this section, we examine certain elements identified by the courts to determine whether the expropriation took place before moving on to the elements of legal expropriation. Another major justification for expropriation comes from the public health sector. It is generally accepted that events that threaten public health, such as toxic pollution of an area, warrant government action to relocate the affected population to the area, and part of this measure may logically lead the government to expropriate the property of relocated residents. In the case of direct expropriation, there is an open and intentional intention, expressed in a law, formal decree or material act, to deprive the owner of his property by transfer of ownership or total seizure. An example of this is the expropriation of four heavy oil clean-up projects by the Venezuelan government in 2007.
The right of the landowner to appropriate compensation for losses due to expropriation is recognized by international law and enjoys constitutional protection in many jurisdictions. In the United States, the Fifth Amendment to the Constitution provides that « no […] being deprived of life, liberty or property without due process; Nor can private property be stolen for public use without fair compensation. While this only limits the power of the federal government, the U.S. Supreme Court has ruled that the Fourteenth Amendment imposes a similar limit on the power of state governments. In the United Kingdom, there is a strong legal presumption that, if an Act of Parliament authorises the compulsory acquisition of private property, adequate compensation must be paid. However, this presumption has not been implemented because, in practice, Parliament has always provided for compensation in such laws. The question of what constitutes fair and equitable compensation is determined by a variety of factors, but the most common standard in the United Kingdom and the United States is the monetary equivalent of the owner`s loss. Most often, the government uses expropriation for infrastructure purposes. Common examples include roads, railways, utilities, parks, schools, or public health buildings. In Mexico`s 1938 oil expropriation, the U.S. government stated that the legality of expropriating property or assets depended on the payment of compensation.
The decision sparked an outcry over overly broad expropriation powers and prompted further action at the federal and state levels. B. A right of ownership as an object of expropriation The case of the Chorzów factory contains the rules of customary international law on the consequences of lawful or illegal expropriation.47 In the case of a legal expropriation, the investor is entitled to compensation only up to the amount of the losses suffered at the time of the expropriation (damnum emergens).48 Conversely, if an illegal expropriation takes place, The investor is entitled to full compensation,49 which includes not only losses but also lucrum cessans.50 Expropriations can be effected in two common law ways: In countries outside the jurisdiction of the Court of Human Rights, the international risk of expropriation may be higher. The risk of expropriation is also an international problem when governments have property in another country due to foreign investment in natural resources or for any other purpose. In this case, the country making the investment elsewhere wants to ensure that the host country makes no effort to seize the property. Individuals can challenge the expropriation of their property, but the results of historic decisions have been mixed. In many of these cases, courts (including the U.S. Supreme Court) have upheld the government`s right to force the sale of private property for the public good.