Author: bomuo

It is the taking by a state (or its organizations) of a right to property (such as a gas field) either as such, or by the permanent taking of the power of management or control. Is Expropriation lawful? As a matter of international law, expropriation is lawful as it is considered to be the lawful exercise of powers of government by a state. However this lawfulness is conditional upon prompt, adequate, and effective compensation being provided to those who lose the assets. Expropriation will be unlawful if no compensation is provided, or the expropriation is discriminatory, or if the relevant state entity has undertaken contractually not to expropriate. The significance of unlawful verses lawful expropriation is the measure of compensation payable by the state. If the expropriation is unlawful, then the party, which suffers the loss, is entitled to recover consequential loss in addition to the value of the asset expropriated. In the case of lawful expropriation, the harmed party is only entitled to the value of the asset. Oil and gas companies that work in risky regions are aware of a recent and worrying trend of international law which has evolved and which is that if the expropriation is conducted over the whole industry or resource for “socio-economic” objectives, then the measure of compensation will be determined by the viability of the economy of the nationalising state as a whole. Namely, the harmed party is only entitled to recover what the nationalising state can afford to pay, not the full value of the asset at the time of nationalisation. In addition deferred compensation payments have been accepted.