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  • Print publication year: 2017
  • Online publication date: June 2018

11 - Compensation for Nationalisation of Foreign Investments


Compensation for nationalisation of foreign investment is a topic steeped in controversy. Opinions expressed as to the need for compensation have ranged from the payment of full compensation, a concept which includes consideration of future profits the investment would have made, to the payment of no compensation at all. The acuteness of the conflict was evidenced by the division that occurred within the academic and official quarters as to the statement of the rule on the standard of compensation in the American Law Institute's Restatement (Second) of the Foreign Relations Law of the United States and in the various awards of the Iran–US Claims Tribunal. The issue has remained dormant in more recent times, attention being shifted to issues such as the scope of taking and the meaning and extent of regulatory taking. Another feature is the attempt to shift the focus of the controversy by articulating standards of valuation. The topic will remain of great interest, despite the fact that there have been few spectacular nationalisations in recent times. The need for foreign investment and the inadequacy of foreign capital to supply this need keeps such activity dormant. Given this context, states will not seek to spoil their record of stability by engaging in any spectacular nationalisations. But, bouts of nationalism will occur in cyclical patterns in the history of nations. When the present philosophy of investment-led growth gives way to some other philosophy inimical to continued dependence on foreign investment, there will once more be hostility to foreign investment. Such hostility is all the more likely because many of the fund- and aid-giving organisations have imposed conditions which require the liberalisation of the entry of foreign investment as a requirement for the granting of such aid. When hostility to these measures gathers momentum, foreign investment may suffer and nationalisation may once more come into vogue. For these reasons, the issue of compensation for nationalisation, though dormant now, could become, once more, a hotly debated issue in the future. The relevance of the issue will continue as the notion of taking expands. Where expanded notions of taking become accepted, the compensation issue will again become significant.

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The International Law on Foreign Investment
  • Online ISBN: 9781316459959
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