Capital-Exporting and Capital-Importing Countries - Essay Example

The foreign investors were caught unawares and were deprived of all their investments without compensation when Russia refused to pay the stakeholders from the U.S., the U.K. and other countries. Similarly, Mexico nationalized all American interests in 1938 and refused to pay compensation to the property owners. Their stand, as capital importing countries was that when they initiated economic and social reforms both the nationals and foreign entities suffered or enjoyed equally and hence, there was no question of compensation especially when they had no sources or means or capacity to compensate the parties. On the other hand, capital-exporting countries insisted that they were entitled to a minimum standard of treatment which should not be just equal to the treatment given to the nationals.

Many equitable principles have evolved in the process each of which has been fairly argued for and against. The capital importing countries held the view that when foreign entities enter into their states they are supposed to merge their destiny along with nationals and work together for the country’s betterment and therefore cannot expect any better treatment than available to nationals. All these controversies had been due to the absence of settled international law prior to the world war period and during the immediate post-war period.

As a solution to the much-vexed issue, bilateral and multilateral treaties have come to stay as contracts with legal binding to address similar situations during their operating periods. This paper proposes to examine the views of the capital-exporting and capital importing countries in the matter of compensation payable for taking of the foreign investor’s (capital-exporting) properties by the host states (capital importing). Since there is no enactment of international law as such, only by the customary law and equitable principles, it can be decided whether an expropriation resorted to by the host state is justifiable or not.

With this perspective, this paper will examine the customary law and various instances of expropriations across the world and interpret them in the light of competing views of the parties involved.