Nationalization is the seizure of privately owned property and its transfer to public ownership. As a result of nationalization, not individual objects of property rights, but entire sectors of the economy become the property of the state. History knows numerous cases of nationalization (Nationalization of the property of the Suez Canal, nationalization carried out by the USSR in the 1920-1940s, countries of Eastern Europe and Asia, as well as developing states in the 1960-1970s of the 20th century actively nationalized foreign property after they gained independence). At the same time, nationalization in developing countries served the goals of achieving true economic independence.

The main documents that form the legal basis for nationalization:

1. Declaration on the Establishment of a New International Economic Order, 1974
2. Declaration of Principles of International Law concerning Friendly Co-operative Relations among States in accordance with the UN Charter 1970
3. UN General Assembly Resolution No. 1805 on national sovereignty over natural resources
4. Charter of Economic Rights and Responsibilities of States 1974.

Nationalization as a measure for the confiscation of property should be distinguished from confiscation (this is a measure of punishment of an individual nature), expropriation (this is a measure for the transfer of individual objects into state ownership) and requisition (this is a measure for the temporary confiscation of property in emergency circumstances). Requisition may not entail a transfer of ownership.

Each state, by virtue of its sovereignty, has the exclusive right to determine the procedure for acquiring, the nature and content of property rights.

International law recognizes the possibility of any state to carry out nationalization, but does not in any way regulate the conditions for its implementation. They (the conditions) are always determined by the state that conducts it. In international agreements, the state may stipulate the obligation of non-nationalization, which, however, does not mean that such nationalization cannot occur in any case. As a rule, in the case of nationalization of property in respect of which the state has given such obligations, accelerated or increased payment of compensation is carried out. As a rule, the obligation of non-nationalization is stipulated in international agreements on the protection and promotion of international investment. These agreements are designed to protect the interests of foreign investors in terms of investments made by them in the economy of the recipient state. Typically, such agreements provide guarantees based on the principle of reciprocity.

27. Nationalization of property is an exception to the principle of inviolability of private property rights. Nationalization should be understood as the forced alienation of objects of private property rights in favor of the state based on social necessity and with taking into account national interests. Nationalization leads to the nationalization of property that was privately owned, in particular previously privatized property. It may concern the property of both foreign and national legal entities and individuals. In international practice, there are various forms of nationalization, which cover redemption, voluntary transfer, acquisition by the state of a controlling stake in a private company, acquisition of property by court decision, etc.

28. Nationalization should be distinguished from reprivatization, requisition and confiscation of property, since all of them are forms of forced seizure of property from the owner. Under the terms of reprivatization, it allows for the re-sale of previously privatized property to a new private owner, while nationalization involves the transfer of private property into state ownership. Reprivatization is also sometimes understood as the return to private ownership of property that previously belonged to private capital and was nationalized.

Requisition means the forced alienation of property from the owner for the purpose of public necessity in the event of a natural disaster, accident, epidemic, epizootic and other emergency circumstances, subject to preliminary and full compensation for its value (see Part 1 of Article 353 Civil Code of Ukraine). In contrast to nationalization, the law provides for the right of the person who owned the property to demand its return after the end of the emergency, if possible, and the restoration of ownership of it (see part. From Article 353 Civil Code of Ukraine).

Confiscation differs from nationalization in that it is a sanction applicable to a specific person for committing an offense, and also in that the confiscated property becomes the property of the state free of charge (see Part 1 of Article 354 Civil Code of Ukraine).

29. The main issue in private international law regarding nationalization has become the extraterritorial recognition and execution of acts of nationalization on the territory of a foreign state. Historically, the problem of the extraterritorial effect of such acts abroad became especially acute after the October events in Russia in 1917. The forced deprivation of foreign owners of their property on the territory of the former Russian Empire (including the nationalization of banks, insurance companies, industrial enterprises, etc.) and the early termination of contracts with investors without any compensation led to a number of property claims in foreign courts before the Soviet state . Other well-known historical examples were the nationalization of the Suez Canal by the Egyptian government in 1956, the nationalization of American enterprises in Cuba in 1959-1960. and oil industry in Venezuela in 1976

30. When deciding the issue of ownership of property that has been the subject of nationalization, foreign courts usually take into account the location of such property at the time of adoption of the state’s regulatory act on nationalization.

Thus, English courts recognize that ownership of property passes to the state that issued the nationalization act if such property was within the jurisdiction of the relevant state at the time such an act was adopted, even if this property was subsequently transported to England and is located there the time of consideration of the claim.

A textbook example of such a position could be the decision in the case Luther v. Sagor. This case involved the issue of ownership of timber that originally belonged to the plaintiff, a private company created under the laws of the Russian Empire, and which was seized by the Soviet state by virtue of a decree on the nationalization of property belonging to industrial and commercial enterprises. Some of this wood was subsequently transported to England and there sold to the defendant by a Soviet trade representative. The plaintiff claimed damages on the basis that title to the property still belonged to him.

The Court of Appeal ruled in favor of the defendant. The English judges noted that since the legal location of the property at the time the decree was issued was Russia, accordingly, it is Russian legislation that should determine the legality of the transfer of ownership of the property in this case. The law of the state carrying out nationalization should not be taken into account by the court only if it is so contrary to the principles of justice that it is completely incompatible with the fundamentals of public policy in England. In this case, the political or economic expediency of nationalization should not be taken into account by the court.

However, in the decision in the case Re Russian Bank of Foreign Trade The English court did not take into account the Soviet decree on nationalization, since the relevant property at the time of its adoption was located in England. The fact that this property was in the possession of a Russian citizen at the time of nationalization was recognized as having no significance for resolving this conflict of laws issue.

According to this practice, the English doctrine of private international law formulated the principle according to which if the property was outside the territorial jurisdiction of a foreign state at the time of issuance of the nationalization act and if it is not in the possession of such a state at the time of the trial, the court recognizes the right of private ownership of the relevant property.

31. In the modern world, the legality of nationalization of any, including foreign, property, as a rule, is recognized subject to the principles of legality, non-discrimination, compensation, and also if it is carried out on the basis of public need. The principle of legality means that nationalization should occur exclusively on the grounds, on the conditions and in the manner provided for by current legislation. Non-discrimination stipulates that nationalization cannot be characterized as a preventive measure, as a measure of punishment for individuals or their categories, or carried out selectively, taking into account the “nationality” of capital. The principle of compensation is interpreted as the unconditional duty of the state to pay a foreign person appropriate compensation for the value of nationalized property. The main motive for carrying out nationalization, as a rule, is the need to satisfy the state’s needs for strategic products, if another way to satisfy them is impossible or this requires too much time, human and financial resources.

32. At the international level, to determine the eligibility criteria for compensation paid by the state, the so-called. "Hull Formula", which was first enshrined during an exchange of notes between the US Secretary of State K. Hall and the Government of Mexico. According to this formula, compensation must be prompt, adequate and effective. Speed ​​means payment of compensation without delay and preferentially before nationalization takes place. The adequacy of compensation involves determining its amount according to the fair market value of the property that is being nationalized. Effective compensation is one that is paid in the currency in which the investment was made, or in a freely convertible currency, at the request of the investor, with free transfer outside the state, carries out nationalization.

33. The right of a state to nationalize is usually considered as part of its state sovereignty and is enshrined in a number of international documents. So, in Charter of Economic Rights and Responsibilities of States 1974 It is established that every state has the right to nationalize, confiscate or transfer foreign property and in this case, appropriate compensation must be paid by the state that takes such measures. In the event that the issue of compensation is in dispute, it must be settled in accordance with the law of the state that carries out the nationalization and its courts, unless all interested states voluntarily and by mutual consent agree on other peaceful means of settlement (see paragraphs. With) clause 2 art. 2). In the Declaration on the Establishment of a New International Economic Order of 1974. also provides for the right of nationalization, which is an expression of the inalienable sovereignty of this state (see paragraphs. e) item 4). A similar right is recorded in UN General Assembly Resolution No. 1805 “On National Sovereignty over Natural Resources.”

34. 6 In Ukraine, nationalization of property is permitted subject to compliance with the relevant requirements. Article 41 Constitution provides that the forced alienation of objects of private property rights can be applied only as an exception based on public necessity, on the basis and in the manner established by law, and subject to preliminary and full compensation for their value. The forced alienation of such objects with subsequent compensation for their value is permitted only under conditions of martial law or a state of emergency.

At the legislative level, the legal basis for nationalization is laid down by the recently adopted Law of Ukraine "On the transfer, forced alienation or seizure of property under the legal regime of martial law or a state of emergency" 2012 The law provides for preliminary or subsequent full compensation of the value of property in the event of its forced alienation.

35. Guarantees for foreign investors in the event of nationalization of property are usually established in national legislation and in bilateral agreements on the promotion and mutual protection of investments. Yes, Art. 9 Foreign Investment Regime Law of 1996 stipulates that foreign investments in Ukraine are not subject to nationalization. According to Art. 5 Agreements between the Government of Ukraine and the Government of the State of Israel on mutual assistance and protection of investments 2010 d., the investments of investors of the other Contracting Party will not be nationalized except for the public purposes of the internal needs of the host Contracting Party and in accordance with certain conditions.

A serious obstacle to foreign investment is the problem of nationalization of the property of foreign private individuals. Modern international law recognizes the inadmissibility of the nationalization of the property of a foreign state and the legality of the nationalization of foreign private property. Nationalization is the right of every sovereign state. The conditions and grounds for nationalization are established in domestic law. From the point of view of its legal nature, nationalization is an act of sovereign state power, a socio-economic measure of a general nature, and not a punishment of individuals. Modern law and practice establishes the unconditional obligation of the state to pay a foreign person prompt, effective and adequate compensation in the event of nationalization of its property.

In 1962, the UN General Assembly adopted the Resolution on the Permanent Sovereignty of States over Natural Resources, which states: “Nationalization, expropriation or requisition shall be necessitated by public utility needs, security purposes or undertaken in the national interest recognized as overriding individual or private interests, both local and foreign... The owner must be paid... compensation in accordance with the current legislation of the state taking such measures by virtue of its sovereignty and in accordance with international law."

In 1974, the General Assembly adopted the Charter on the Economic Rights and Responsibilities of States: “Every State has the right:

• (a) regulate and exercise authority over foreign investments within national jurisdiction in accordance with its laws and regulations and in accordance with its national objectives and priorities. No state should be forced to provide preferential treatment to foreign investment...
• (c) nationalize, confiscate or transfer foreign property... in such cases, appropriate compensation must be paid by the State taking such measures... In the event that any controversy arises regarding the payment of compensation, it must be resolved in accordance with the domestic laws of the country carrying out nationalization, and in its courts."

The European Energy Charter (1991) does not directly establish the right of the host state to nationalize the property of a foreign investor, but emphasizes the state’s sovereignty over energy resources: “The contracting parties recognize state sovereignty and sovereign rights to energy resources. They confirm that the latter must be exercised in accordance with international law and depending on them... The Agreement should in no way call into question the laws in force in the state systems of the contracting parties regarding property ownership of energy resources."

Under the UK-People's Republic of China Investment Promotion and Reciprocal Protection Agreement (1986), foreign investments can be nationalized for "domestic public or social purposes" and for reasonable compensation. Compensation must be based on the real value of the confiscated capital, include interest, be made without delay, be effectively implemented and be freely transferable. The affected company shall have the right, under the law of the State making the confiscation, to apply to a judicial or other independent authority or to that State to examine its case and to assess its capital.

The Agreement between Russia and Spain on the Promotion and Mutual Protection of Investments (1990) establishes that nationalization, expropriation or any other measures with similar consequences in relation to investments of investors of the other Party should be taken only in the public interest in accordance with current legislation. Such measures must not be discriminatory. The party taking such measures will pay the investor or his legal successor, without undue delay, appropriate compensation in freely convertible currency (Article 6).

At one time, the nationalization carried out in Russia after the October Revolution was recognized by other states in accordance with bilateral international agreements - treaties between the USSR and Germany (1922), USA (1933), Norway (1959), Sweden (1941 and 1964), Denmark (1964), Great Britain (1968). The principle of mutual offset of financial and property claims that arose before May 9, 1945 is the basis of the Agreement between Russia and France on the final settlement of mutual financial and property claims (1997).

The French side undertook not to present or support claims relating to claims for loans and bonds, interests and assets in respect of which French persons were deprived of ownership or possession, claims for debts of the tsarist government and the government of the USSR. Russia, for its part, pledged not to make claims for damage caused during the intervention of 1918-1922, claims for assets in France and transferred gold (including Kolchak gold).

To compensate for the claims, Russia had to pay France a certain amount by 2000. The funds received must be distributed in France to French individuals and legal entities in accordance with French law. Accordingly, French holders of bonds on Russian loans and persons whose property was nationalized in Russia without payment of compensation should have corresponding relations with the French government, not Russia.

Modern Russian legislation retains the right of the Russian Federation to nationalization, but establishes the principle of prompt, adequate and effective compensation in favor of the foreign owner. Payment of compensation is made in the currency in which the investment was made, or in any other currency at the request of the investor. Russian law must be applied to nationalization disputes, and the disputes themselves are considered by Russian law enforcement agencies. Naturally, foreign investors have a sharply negative attitude towards such establishments of our national law and their reluctance to risk their capital by investing in the Russian economy. The right of the Russian state to nationalization is a serious obstacle to the influx of foreign investment.

International private law: textbook Shevchuk Denis Aleksandrovich

6.3. Legal regulation of nationalization issues in private international law

Ownership of property can pass from one person to another as a result of the adoption of special state acts on the nationalization or privatization of property. Nationalization – This is a seizure of property located privately owned and transferred to state ownership. As a result, not individual objects, but entire sectors of the economy become the property of the state. Nationalization as a general measure of the state to implement socio-economic changes should be distinguished from expropriation, as a measure to transfer individual objects into state ownership, and from confiscation, as an individual punitive measure. Privatization- This a process inverse to nationalization, as a result of which state property is transferred to private ownership (see below)

Each state, by virtue of its sovereignty, has the exclusive right to determine the nature and content of property rights, establishing the procedure for its acquisition, transfer or loss. The implementation by the state of an act of nationalization should also be considered as one of the forms of manifestation of its sovereignty. Back in 1952, the UN General Assembly in its Resolution No. 626 “On the right to free exploitation of natural wealth and resources” confirmed the right of peoples to freely dispose of their natural wealth and resources and freely exploit them. This document contained a direct recommendation to all UN member states to refrain from any kind of actions aimed at limiting the sovereign rights of any country in relation to its natural resources. At the same time, the resolution did not contain any provisions preventing the state from implementing measures to nationalize foreign property or independently determining the conditions for such nationalization.

In 1974 in Declaration on the Establishment of a New International Economic Order The UN General Assembly reiterated that in order to protect its resources, “every State has the right to exercise effective control over them... including the right of nationalization or transfer of ownership to its citizens, which right is an expression of the full inherent sovereignty of that State. No State shall be subjected to economic, political or any other form of coercion to prevent the free and full exercise of this inalienable right.”

The question of the possibility of payment, forms and amount of compensation provided by the state to foreigners for nationalized property also falls within its exclusive competence. No international body, in the absence of a special agreement to the contrary, can dictate to such a country its terms or rules in this area. In 1973, the UN General Assembly, confirming this principle, adopted special Resolution No. 3171/XXXVIII on the right of liberated states to independently determine the forms and amount of compensation.

International law thus recognizes the right of any country to carry out nationalization. However, the state may stipulate in the relevant international agreements its obligation not to carry out measures against foreign investors for the forced withdrawal of their investments, including through nationalization, or to provide them, if carried out, with equivalent compensation without unreasonable delay. States usually assume such obligations on the basis of the principle of reciprocity and enshrine them in bilateral international treaties on the protection and promotion of investment.

The specific conditions, procedure and timing of nationalization in any state are determined by its internal legislation. However, the property in respect of which nationalization is carried out by a given country may be located not only on its territory, but also abroad (property of branches or representative offices created by legal entities resident in foreign countries, foreign bank deposits, etc.). In this regard, the problem of extraterritorial action of laws in nationalization acquires particular relevance.

Currently, the point of view that nationalization laws have extraterritorial effect has become quite widespread in doctrine, legislation and law enforcement practice. This means that the state that carried out nationalization must be recognized abroad as the owner of both the property that was located within its territory at the time of its implementation, and the property that was located abroad at that time.

Recognition of the extraterritorial effect of nationalization laws in the vast majority of states; occurs today due to the use of the conflict of laws link lex rei sitae, which, as already emphasized above, is basic in determining the moments of emergence and transfer of ownership of property. Therefore, in the event of relevant disputes, the courts are obliged, as a general rule, to be guided by the legislation of the state where the nationalization was carried out.

The situation, however, becomes somewhat more complicated when it comes to property located abroad at the time of nationalization. The judicial practice of many Western states in this case is based on the thesis that the acquisition of ownership of such property should also be carried out on the basis of the laws of the country of its location, and not the law of the state that carried out the nationalization. In accordance with this approach, practically all foreign financial assets and material assets belonging to nationalized enterprises are removed from the scope of nationalization laws.

In Russian legal doctrine there is a different point of view on this matter. In our country, it is almost generally accepted that the location of any part of the property of a nationalized enterprise abroad has no legal significance, since nationalization applies to all the property of the corresponding legal entity. As for the legal status of the property of foreign branches of nationalized enterprises, it should be established on the basis of their personal law (lex societatis), in accordance with which, as is known, the procedure for liquidation of legal entities and the consequences arising in connection with this are determined.