- Leuven Global Governance series
Chapter 2: From compensation to indirect takings
The long debate on the payment of compensation for the expropriation of aliens was based on historical and ideological differences between capital-exporting and capital-importing states. According to developed countries, an international minimum standard stressing the need for a prompt, adequate and effective compensation was required in cases of expropriation of foreign property, guaranteeing the full value of the lost investment. Developing and communist states, as well as those countries that gained their independence from colonial rule in the aftermath of the Second World War, proposed national treatment as a minimum and maximum standard requiring appropriate compensation, to be determined by the expropriating state, in conformity with its municipal law. In practice, this meant the payment of a compensation that would range from the full value of the taken property to none, depending on each particular case. While these two views collided at the UN General Assembly, significant changes in international economy and politics gradually reshaped state policies, legislation and practice on the protection of aliens. The collapse of communism and the progressive liberalisation of national and international economies led erstwhile statist-orientated countries to desire foreign investment. For this purpose, they enacted investment codes and concluded international agreements that promote and protect foreign investment in the traditional terms advanced by capital-exporting states. Both the national and international treatment standards were included in these treaties. The exclusive standard of national treatment, advocated diplomatically by second- and third-world countries, was thus conventionally defeated.
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