unctad.org | TAKING OF PROPERTY
TAKING OF PROPERTY
Book Information
UNCTAD Series on Issues in International Investment Agreements
Full Report ( 78 Pages, 179.0 KB )

Highlight

The taking of private assets by public authorities raises significant issues of international law, where such takings involve the assets of foreign private investors.

This paper examines the concept of "taking" in the context of international law and international investment agreements. The focus of the analysis is two-fold. First, different categories of takings are distinguished, addressing in particular the problem of the distinction between government measures that involve interference with the assets of foreign investors, yet do not require compensation, and those that do require compensation. Second, the requirements for a taking to be lawful are discussed, in particular the issue of the standard for compensation.

The paper highlights the challenges that remain when considering the takings clause in international investment agreements, and discusses policy options relative to defining a "taking" when drafting the clause. It also illustrates some drafting models. The takings clause aims at protecting foreign investors by establishing standards for the manner in which host States might take or otherwise interfere with their property rights. That is to say, it limits the right of States to take property by imposing certain requirements.

Under customary international law and typical international investment agreements, three principal requirements need to be satisfied before a taking can be considered to be lawful:

  • it should be for a public purpose;
  • it should not be discriminatory; and
  • compensation should be paid.

The first two requirements are generally accepted. As regards the third, it too is widely accepted in principle, but there is no universal agreement relating to the manner of assessment of the compensation due. The more recent bilateral investment treaties use the formula that the compensation must be prompt, adequate and effective, but, alternative formulas, such as just compensation, are also used. An emerging trend in international investment agreements that deserves attention is the development of a fourth requirement: due process.


Loading..

Please wait....