The Expropriation Exception

AuthorErnesto Sanchez
Pages151-161
151
THE E XPR OP R I AT ON EX CE P T IO N
§ 11.1 INTRODUCTION
e Fifth Amendment to the U.S. Constitution explicitly prohibits the taking of private prop-
erty “for public use, without just compensation.”1 Extensive case law has consequently developed
regarding the propriety of physical occupations of private property (or expulsion of its owners
or leaseholders through the power of eminent domain) by U.S. governmental authorities, legal
exactions and conditions on the development of such property, development permit denials, and
the appropriateness of compensation awarded.2
Perhaps unsurprisingly, then, given the importance the Framers of the Constitution attached
to the sanctity of private property, the FSIA also allows for legal action in certain circum-
stances where foreign sovereign entities expropriate private property in violation of interna-
tional law, which the statute’s legislative history has dened to include “nationalization[s] and
expropriation[s] of property without payment of the prompt and adequate compensation required by
international law.”3 Today, however, the greatest benet of this expropriation exception is how
it enables investors to seek redress for not being protected from a serious political risk—a loss
of property due to foreign states’ macroeconomic and social policies (e.g., economic regulations,
infrastructure development programs), political instability (e.g., civil unrest, overthrows of gov-
ernments), and other nonmarket factors.4
1. U.S . C. amend. V (also known as the Takings Clause).
2. See, e.g., generally Kelo v. City of New London, 545 U.S. 469 (2005) (upheld city’s condemnation of investment
and owner-occupied residential properties for major mixed-use redevelopment project; there was no basis for nding
that economic development was not a valid public purpose or for requiring that public benets were reasonably certain
to accrue); Lingle v. Chevron U.S.A. Inc., 544 U.S. 578 (2005) (allegation that regulation failed to substantially advance
a legitimate state interest did not state viable claim under Takings Clause); Tahoe-Sierra Preservation Council, Inc. v.
Tahoe Regional Planning Agency, 535 U.S. 302 (2002) (rejecting regulatory takings challenge to temporary morato-
rium on development around Lake Tahoe, emphasizing narrowness of regulatory takings rules); Palazzolo v. Rhode
Island, 533 U.S. 606 (2001) (owner’s awareness of a regulatory restriction at the time she purchased the property was
very relevant, but not necessarily dispositive, factor in regulatory takings analysis); Lucas v. South Carolina Coastal
Commission, 505 U.S. 1003 (1992) (regulation that deprives owner of all economically benecial uses of land consti-
tutes taking unless the proscribed use interests were not part of title to begin with; “total takings” analysis thus entails
consideration of (1) degree of harm to public lands or adjacent property posed by regulated activities; (2) social value
of such activities; and (3) the relative ease with which measures by claimant or government can avoid alleged harms);
Penn Central Transportation Co. v. New York City, 438 U.S. 104 (1978) (New York City landmarks preservation law
preventing use of air space above Grand Central (Railway) Terminal did not eect unlawful taking because (1) law did
not interfere with present uses of the building and allowed owner to continue making prot from and earning reason-
able return on investment in building; (2) law did not necessarily prohibit occupancy of any air space above building
since law contained procedures for gaining permission for some construction in air space; and (3) law did not deny all
use of owner’s preexisting air rights, since transferable development rights program allowed owner to transfer develop-
ment rights foreclosed from use); United States v. Causby, 328 U.S. 256 (1946) (holding that low military overights
constituted intrusion so immediate and direct as to subtract from property owner’s full enjoyment and use of property,
detracting from property’s value).
3. House Report at 6618.
4. For an extensive description of problems posed by political risk and a detailed discussion of how to mitigate these
problems’ eects, see generally I B  P K, T F T: T P O P K
F S I ().
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