Expropriation

Reviewed by Anjaneyulu | Updated on Aug 27, 2020

Introduction

Expropriation is taking over of private property or assets by the government for compensation only when it is for a public purpose. This may be eminent domain powers exercised.

Expropriation is the government's action of taking over a property against the owner's wishes, theoretically to be used for the benefit of the public at large. Properties are most often expropriated to build highways, railroads, airports, or other infrastructure projects.

Understanding in Indian Context

Expropriation refers to the direct acquisition by passing an act of a state or the indirect appropriation of foreign investment by interfering with the opportunities of the host state to which an individual, as an investor, may have the right.

Such conduct may give rise to an actionable claim by a foreign investor against the host state where there is a legitimate and subsisting Bilateral Investment Treaty ("BIT") or Bilateral Investment Protection Agreement ("BIPA") between the host state and the state of nationality of the foreign investor.

Legislative Authority in India

The government passed several laws to acquire land from private individuals. The Land Acquisition Act, 1894 ("LAQ Act 1894") is prominent among these. The lack of adequate safeguards for landowners contributed to the passage of the Land Acquisition, Rehabilitation and Resettlement Act 2013 ("LARR Act"), which repealed the LAQ Act 1894.

The government upon assuming office in 2014, the LARR Act was widely criticized on the ground that it restricts the right of the government to acquire property for public purposes and was therefore expected to harm the nation's development.

The government came up with the Right to Fair Compensation and Accountability in Land Acquisition, Rehabilitation and Resettlement (Second Amendment) Bill, 2015 ("Bill") in light of this context.

The India Model BIT, 2016, is a product of India's significantly altered attitude towards BIT disputes. In the event of a violation of the underlying BIT, the 2003 Indian model BIT was designed to protect investors by providing easy and fast access to the dispute resolution process.

However, the 2016 Model BIT adopted by the Indian government as a result of the significant number of claims launched by foreign investors is substantially different and drafted in a manner that benefits the host state (in this case the Indian government). Hence, under the 2016 India Model BIT, investors will now have to exhaust all local remedies before going to international arbitration.