The Legal Implications of Nationalisation, Regarding Foreign-Owned Properties - Essay Example

Although contemporary and customary international law provides for the right for compensation to those foreign investors whose assets have been nationalized or expropriated by a host country, it has been noticed that the practical working of the law can be somewhat disheartening.

National governments, especially governments in the developing world, have been known to have tried to recover control of their own economy and to attempt to do that which will appear to be for their benefit by trying to nationalize, take or expropriate foreign-owned business and property. The expansion of Western economies since the nineteenth century has resulted in an outflow of capital for investment into the developing world. However, with the formation of national governments after the granting of independence to the former colonies, the foreign business ownership arrangements came under pressure, with the nationalization measures that had been taken by the former Soviet Union serving as an example for the newly independent states.

It has to be appreciated that although certain countries may feel that nationalization or expropriation may serve in their best interest, the taking of foreign-owned property by a host country poses a very significant risk to continued foreign investment. Not only is nationalization, or the taking of private assets by public authorities, a deterrent to continued foreign investment, but it also raises significant issues in international law as foreign private investors seek the backing of their governments. Thus, it is important that any decision about nationalization, expropriation, or the taking of foreign-owned property be a well-considered decision that takes into account all the consequences of such acts. Expropriation is not just about removing an owner’s title to a property and it is possible for national governments to use measures that result in “indirect expropriation” to impose limits on the utility of a foreign-owned property to its owner.