Posted in Finance, Accounting and Economics Terms, Total Reads: 106
Expropriation is the process where the government acquires a private property which would be useful for the people of the area even if the owner of the private property is not willing to give its assets with some promised compensation. This act of expropriation is more prevalent in International Markets. Investors and lenders in international arena face the challenge of expropriation especially in countries with unstable govt. or developing countries.
The point of concern is that they may not get appropriate compensation or even a compensation at all. So there are international laws and regulation to protect the interest of investors. A bilateral Investment treaty (BIT) is entered between two nations to protect its nationals from expropriation of their projects when investing in each other country.
The famous Vodafone Indian govt. controversy regarding retrospective tax proposal was claimed by Vodafone as an unjust expropriation.
Expropriation can also be done when a private entity is authorized by the government to acquire another private property. The famous Tata Nano Singur controversy is a good example. The West Bengal govt. authorized Tata Motors to acquire land in Singur district to build its factory in the name of public improvement projects which was opposed by many activists.