Nationalizing, Expropriation, and Privatization

Theories Relating to Taking of Foreign Property

Traditional Theory

Probition of all takings

Modern-Traditional Theory

Prompt, adeuate and effective compensation for all takings

Non Western Theories of Taking

State has sovereign right ahead to take of foreign investor

Nationalization

taking an entire industry

Expropriation

taking a single company

Guarding Against Political Risk

Political Risk Insurance

Governement

OPIC

MIGA

Private

Insurance syndicates

Resolving Investment Disputes with Foreign Nations

Foreign Sovereign Inmunities Act

State is inmune for suit except when

Preparation for Privatization

Creation of an Independent Government

Preparation of a Legal System for Privatization

Clearing of any expropriation claims

Developing of property rights and contract law

Methods of Distribution

Assets are transferred to a new entity

Models of Privatization

Sale of Noncontrolling Interests

Patial Sale

Advantage

Simple

Disadvantage

Depends upon perspective

Trade Sale

Advantage

Speedy and useful in small enterprises

Disadvantage

Backlash, requires capital infusion, conditions subsequent

The Sale to Employees

Advantages

Gives government employees a stake in the outcome, may bring in labor unions

Disadvantage

Management are owners, layoffs difficult

Concessions

BOTs

Build-Operate-Transfer

BOOs

Build-Operate-Own

Models in Combination

Joint Venture Privatiation

Mix of trade sale and non-controlling interest model

Shareholder Agreement