Vanderbilt Journal of Transnational Law


Errol P. Mendes

First Page



The Canadian National Energy Program provides insight into the critical global debate on the expropriation of alien investors' property. Sovereign states can no longer expropriate by forced and outright transfers of an alien's assets without any compensation. States which expropriate in this manner face massive retaliation from the powerful capital-exporting countries through, inter alia, the cutting of trade and commercial ties, the freezing of assets, retaliatory diplomatic moves, and court action in the home state of the investors. The principles of international law and policy concerning expropriation are gradually evolving through diplomatic negotiations, international and domestic courts and tribunals, resolutions at the General Assembly of the United Nations, and through state practice. Although sovereign states must understand and comply with these principles of international law, disguised or creeping expropriation will become more appealing to both developed and developing countries. The use of taxation powers and the voluntary takeover of foreign investment of state enterprises, especially in revenue-rich sectors of industries, will be especially attractive to countries like Canada which face massive national budget deficits. Pressure to depress the value of foreign investment before a public sector takeover will be enormous in countries in which the public purse does not contain the reserves needed for voluntary takeover of foreign-controlled firms. Added to these factors is the inevitability of expropriation of foreign interests in resource industries due to the benefits of national control over energy resources in an energy-starved world. Expropriation will not be a phenomenon limited to developing countries. Many sovereign states will seek to undertake some form of expropriation that falls short of violating their international legal obligations.