The Protection of Foreign Property Under Customary International Law

Boston College Law Review, Dec 1965

By Francis J. Nicholson S.J., Published on 04/01/65

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The Protection of Foreign Property Under Customary International Law

Francis J. Nicholson S.J., Th e Protection of Foreign Property Under Customary International Law The P rotection of Foreign Property Under Customar y International Law Francis J. Nicholson S.J. Follow this and additional works at: http://lawdigitalcommons.bc.edu/bclr Part of the Comparative and Foreign Law Commons, International Law Commons, International - Article 1 INDUSTRIAL AND COMMERCIAL LAW REVIEW VOLUME VI SPRING, 1965 No. 3 THE PROTECTION OF FOREIGN PROPERTY UNDER CUSTOMARY INTERNATIONAL LAW FRANCIS J. NICHOLSON, S. J. * I. INTRODUCTION A necessary condition for the development of the international trade and investment so essential for the progress of underdeveloped nations and for the continuing prosperity of more advanced nations like those of the Common Market and the United States is the security of property invested in foreign lands against such noncommercial risks as discrimination and confiscation. Over the years, as modern trade and investment began to develop, international law evolved certain principles which bound nations to safeguard the acquired property rights of foreigners, under the rubric of "The Responsibility of States for Injuries to Aliens." These legal rules provided by the law of nations clearly granted protection to the acquired rights of foreign businessmen and, for their violation, the receiving State was deemed delinquent and liable to reparation. A recent change in the political climate of the world, however, has had a substantial impact upon the security afforded foreign investment by traditional international law. Although this change has had no effect in the Common Market area, it is well to take note of it in order to clarify the present status of the law of State Responsibility. With the emergence of new nations with strongly nationalistic sentiments, the old alignment of colonial power and colony has largely ceased to exist. These new States wish to take their places among the nations of the world and, to that end, they desire to assume control of the exploitation of their natural resources which had formerly been at the disposition of the colonial powers. In many cases, however, the rights to these properties,are in the hands of foreign nationals who, understandably enough, are not anxious to relinquish them and the handsome profits which, in many cases, they entail, Another potential source of trouble lies in the situation where the newly independent nations are unable to ,carry out development programs because of a lack of capital. Hence they must turn to the older and more prosperous States for financial assistance. As a result, the old alignment of colonial power and colony has been replaced by that of capital-exporting State and capital-importing State. Naturally, the investors from the capital-exporting nations want some return from their outlay of capital, but their wish in this - regard has not always been respected by the capital-importing nations. This conflict of interests has. often marred the new relationship between capital-exporting State and capital-importing State. Under the influence of nationalistic sentiment, it is becoming increasingly common for the governments of capital-importing nations to expropriate or nationalize—the various terms used to describe this procedure do not seem to have any fixed meaning—the property of the nationals of the capital-exporting nations. These actions are usually complicated by the fact that the expropriating State is unable to compensate the expropriated owners. Immediately, therefore, there arises a clash between the property rights of the expropriated owners and the rights to sovereignty of the expropriating nation.' In some of the new nations, this political change has inevitably resulted in the rejection of the rules developed to protect foreign investment. It is argued that these rules were evolved to further the aims of colonialism and, today, do not qualify as international law. The effect, of course, has been a reduction in the flow of investment capital into these countries. The American businessman who is contemplating expansion in the Common Market, however, need not be wary of the effect of this new attitude upon his investment. The attack on the traditional rules of international law emanates from the under-deveIoped nations. None of the European Common Market countries can properly be regarded as under-developed. It seems clear, therefore, that traditional doctrine which, as it evolved, applied to investment in developed and underdeveloped nations, will continue to give protection to the acquired rights of foreign businessmen in the Common Market countries.' 1 This conflict has continued without solution, as can be seen in the text of the Dec. 14, 1962, Resolution of the United Nations General Assembly on "Permanent Sovereignty over Natural Resources." U.N. Gen. Ass. Off. Rec. 17th Sess., Plenary 1194 (A/Res/1803(XVII)) (1962), reprinted in 2 International Legal Materials 223 (1963 (...truncated)


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Francis J Nicholson S.J.. The Protection of Foreign Property Under Customary International Law, Boston College Law Review, 1965, Volume 6, Issue 3,