NATIONALIZATION A STUDY IN THE PROTECTION OF ALIEN PROPERTY IN INTERNATIONAL LAW by ISI FOIGHEL ASSISTANT PROFESSOR IN THE UNIVERSITY OF COPENHAGEN ATTORNEY-AT-LAW STEVENS & SONS LIMITED 119-120, CHANCERY LANE, LONDON, W. C. 2 NYT NORDISK FORLAG ARNOLD BUSCK COPENHAGEN 1957 Reprint from Acta Scandinavica Juris Centium 1080 Printed in Denmark TH E Q UESTIO N of the international concequences of nationaliza­ tion has got into the focus of the evolution of international law. The nationalization of the Suez Maritime Canal Company is only the last of a number of interferences with property which have attracted the attention of public world opinion and given rise to farreaching complications. In the discussion of this problem the classical prin­ ciples of European international law, based on the philosophy of liberalism and private capitalism, are wrestling with new points of view born of a different political and economic ideology. Strong nationalistic tendencies, too, have marked the theory and practice in the new states that have been liberated from the dependency of former days. Eager to realize fully the newborn independence, they want to free themselves of the bonds of foreign capital representing in their eyes colonialism and imperialism, and demonstrate their ability to utilize their resources independently. These new nations, earlier without a voice in the international society, now, as members of the United Nations on a equal footing with others, have gained a possibility of influencing the evolution of international law. The classical principles of adequate, prompt and effective com­ pensation for deprivation of property have met not only ideological opposition but also technical obstacles. The extensive nationaliza­ tions, comprising, not the property of a single individual, but whole sectors of the economic system of the country, of necessity must give rise to problems which cannot technically be solved on the basis of a few simple principles. In such cases the general rules of inter­ national law have given way to specific treaty arrangements in which a global account between the states has superseded individual settlements with the claimants concerned. Only the future may show what will be the outcome of the con­ flicting ideas and forces. Perhaps the classical ideas possess greater vital force than some are inclined to believe. Perhaps the new na­ tions some day will realize that there is an inconsistency between their need for investment of foreign capital and an ideology and policy discouraging such investment and increasing the price of it. In this book, Isi Foighel, Assistant Professor in the University of Copenhagen, has collected a comprehensive material suited to elucidate this problem. I want especially to point to the many treaties and national enactments which have been compiled and analyzed instructively, presenting the reader with a body of infor­ mation not to be found elsewhere in legal literature. I am convinced that this book will contribute to clarify the discussion and I take pleasure in commending it as an interesting study of one of the most ardent problems of modern international law. Copenhagen, A ugust 1957. A LF ROSS, L.L.D., Ph.D. Professor in the University of Copenhagen. CONTENTS PART I: BACKGROUND § 1. Introduction .. 11 § 2. What is nationalization?. 13 A. Is there a difference of fact between nationalization and other forms of public interference with property? .. .. 14 1. The traditional v iew ............................................................. ......14 2. Critical v a lu a tio n ...................................................................... ......16 3. The relation between expropriation and nationalization 20 B. Is the difference of fact between nationalization and other forms of public interference with property of any relevance in international la w ? ............................................................................21 § 3. What interests provide the motive for nationalization?.. 23 § 4. What interests provide the motive for a protest against nation­ alization? ............................................................................................... ......29 § 5. The character of international law .. 31 A. Differences between the national and the international communities .....................................................................................31 1. The objective d iffe re n c e ..................................................... ......31 2. The subjective d iffere n c e...........................................................32 3. The historical d iffe re n c e ..................................................... ......32 B. Differences between the national and the international legal systems ..................................................... ......32 1. Power .... ................... ................................................32 2. Reciprocity .. ................... ................................................33 3. Legal attitude.................................... ................................................33 4. Common interest of the states .. 33 C. The significance of these differences .. 34 § 6. Delimitation of the problem .. 35 PART II: LEGALITY § 7. Introduction 39 § 8. Sources .. 41 § 9. Starting point: The principle of territorial jurisdiction.. 42 § 10. Special rules regarding state property .. 44 § 11. Is the equality of aliens with the country’s own nationals essential for the fulfilment of the requirements of inter­ national law? .... .. ............................................ ......46 § 12. Is the equality of aliens with the country’s own nationals sufficient for the fulfilment of the requirements of inter­ national l a w ? ............................ ...................................................48 A. Treaty provisions concerning the protection of alien property ............................................................................................ 49 B. The maxim of vested rights .. 52 1. The traditional view ............................................................. ......52 2. Critical valuation ....................................................................53 C. The theory of the international minimum standard set by civilized s t a t e s .....................................................................................54 1. International resolutions, decisions, and treaties .. 54 2. The municipal law ...................................................................56 a. Austria .... 56 b. Bulgaria .... 57 c. Burma .... 57 d. China .... 58 e. Czechoslovakia 58 f. Egypt .... 59 g. France .... 60 h. Great Britain .. 61 i. Holland .............................................................................62 j. Hungary ............................................................................. 62 k. India .............................................................................63 1. I r a n ................... .........................................................................63 m. Jugoslavia .. 64 n. Mexico .... 64 o. New Zealand 65 p. Poland .... 65 q. Roumania .. 66 r. Scandinavia .. 67 s. Soviet Russia .. 68 t. Turkey .... 69 3. C o n c lu sio n ............................................ ....................................... 69 D. The international interests of the s t a t e s ..................................70 E. Must nationalization in defiance of contractual obliga­ tions be regarded as contrary to international law? .. 73 PART III: COMPENSATION § 13. Introduction 75 § 14. Does nationalization entail a liability in international law to pay compensaton? .. ..................................................... 75 A. Traditional views 75 B. Practice 77 1. Treaties .............................................................................. 77 2. What motives lead a nationalizing state to conclude treaties respecting compensation?................... 79 a. Force .................................... 79 b. Release of frozen accounts .. 80 c. Remission of debts .... 80 d. Commercial advantages . 81 3. Discussion 84 C. Conclusion 85 § 15. Form of compensation .... 88 A. Agreements in general terms 88 1. P ra c tic e ....................................................................................... 88 2. Critical valuation ............................................................. 89 B. Agreements providing for direct individual compensation 91 1. P rac tic e ...................................................................... .. 91 2. Critical valuation .............................................................. 93 C. Agreements providing for indirect individual compen­ sation ...................................................................... .. .. 94 1. P ra c tic e ...................................................................... 94 2. Critical valuation ............................................ 96 D. Agreements providing for global compensation . 97 1. P ra c tic e ............................ 97 2. Critical valuation .. 98 3. A problem of validity 98 § 16. For what property is compensation given? .. 102 A. Proprietary rights 102 B. Creditors’ claims 103 § 17. Who can raise a claim for compensation? . 104 A. What is it that decides the national character of the p r o p e r t y ? .............................................................................. 104 1. The property has no independent nationality . 104 2. The property has independent nationality .. .. 105 B. To whom must the property belong? 107 1. Physical