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of the Charter of the United Nations and hinders the development of in- and immediate payment, the right to effect the programs
ternational co-operation and the maintenance of peace. of reform they desire. 77
8. Foreign investment agreements freely entered into by or between
sovereign States shall be observed in good faith; States and international RESTATEMENT, SECOND, FOREIGN RELATIONS LAW
organizations shall strictly and conscientiously respect the sovereignty of OF THE UNITED STATES (1965)
peoples and nations over their natural wealth and resources in ac- 5 187. Just Compensation Defined
cordance with the Charter and the principles set forth in the present Just compensation as required by 8 186 must be
resolution.. .. 73 (a) adequate in amount, as indicated in 5 188,
(b) paid with reasonable promptness, as indicated in 5 189, and
c. New Developments. Many publicists continue to in- (c) paid in a form that is effectively realizable by the alien, to the
sist that adequate, prompt, and effective compensation be fullest extent that the circumstances permit, as indicated in 5 190.
made for expropriated property. 74 However, considera- 5 188. Adequacy of Compensation
ble opinion seeks to modify the orthodox compensation (1) Compensation, to be adequate in amount within the meaning of
"rule" in the modem foreign wealth deprivation context. 5 187, must be in an amount that is reasonable under the circum-
A large number of Eastern European publicists suggest stances, as measured by the international standard ofjustice indicated
that compensation for claims be fmed by "new criteria," in 5 165. Under ordinary conditions, including the following, the
amount must be equivalent to the full value of the property taken,
and many Western writers are similarly persuaded. 75 Sir together with interest to the date of payment
Hersch Lauterpacht has made the following observation: (a) if the property was acquired or brought into the jurisdiction of
the state by the alien for use in a business enterprise that the alien was
The rule is clearly established that a State is bound to respect the
property of aliens. This rule is qualified, but not abolished . . . [A] speci!ically authorized to establish or acquire by a concession, con-
tract, license, or other authorization of the state, or that the alien es-
modification must be recognized in cases in which fundamental changes tablished or acquired in reasonable reliance on conduct of the state
in the political system and economic structure of the State or far-reach- designed to encourage investment by aliens in the economy of the
ing reforms entail interference, on a large scale, with private property. In
such cases, neither the principle of absolute respect for alien private state,
property nor rigid equality with the dispowssed nationals offer a (b) if the property is an operating enterprise that is taken for opera-
tion by the state as a going concern,
satisfactory solution of the difficulty. It is probable that, consistent with (c) if the taking is pursuant to a program under which property
legal principle, such solution must be sought in the granting of partial
held under similar circumstances by nationals of the state is not taken,
compensation.76
or
(d) if the taking is mongful under international law as stated in 5
7-15. Adequacy of Compensation. In essence, the pri-
185.
mary focus of the controversy with respect to the duty to pay (2) In the absence of the conditions specified in Subsection (I), com-
compensation has not been whether there exists a duty pensation must nevertheless be equivalent to full value unless special
under international law to pay some compensation-a circumstances make such requirement unreasonable.
proposition for which there is broad support-but rather Comment .. .
b. Meaning of full value. The full value swed in this Section
the amount and form of the compensation. The key in-
means fair market value if ascertainable. Iffair market value is not ascer-
quiry is what is "just" or "appropriate" or "adequate" tainable, it means the fair value as reasonably determined in the light of
compensation under the circumstances. Even accepting the international standard ofjustice sWed in 5 165. So far as practica-
the proposition that compensation must be adequate, ble, full value must be determined as of the time of taking, unaffected
prompt, and effective, there exists substantial room for by the taking, by other related takings, or by conduct attributable to the
disagreement concerning the precise meaning of these taking state and having the effect of depressing the value of the property
in anticipation of the taking. This does not require, however, disregard
terms. Moreover, it is clear that "adequate," "prompt,"
of the effect on market values of the state's general power to regulate
and "effective" are interrelated. For example, undue the use of property or the conduct of business operations.
delay in payment or payment that cannot be translated
5 189. Promptness of Compensation
into a usable economic benefit to the dispossessed alien Payment with reasonable promptness, within the meaning of 5 187,
can have an impact on the "adequacy" of the compensa- means payment as soon as is reasonable under the circumstances in
tion arrangements. Finally, it has been urged that the re- the light of the international standard of justice smed in 5 165.
quirement for adequate, prompt, and effective compensa- 5 190. Effectiveness of Compensation
tion should be mitigated when the taking is pursuant to a (1) Compensation, to be in'effectively realizable form, within the
broad program of economic and social reform as opposed meaning of 5 187, must be in the form of cash or property readily
convertible into cash. If not in the currency of the state of which the
to an individual expropriation. Failure to do so would
alien was a national at the time of the taking, the cash paid must be
deny to poorer states, which could not afford to make full convertible into such currency and withdrawable, either before or
after conversion, to the temtory of the state of the alien's nationality,
except as indicated in Subsection (2).
73. G.A. Res. 1803, 17 U.N. GAOR, Supp. 17, Doc. No. A15217
at 15-16 (1962). (2) Such conversion and withdrawal may be delayed to the minimum
extent necessary to assure the availability of foreign exchange for
74. See, e.g., Cheng, Expropriation in International Law, 21 Solici-
tor 98 (1954), and Brandon, Legal Aspects of Private Foreign Invest- goods and services essential to the health and welfare of the people of
ment, 18 Fed. B.J. 298 (1958). the taking state.
75. See, for example, Katzarov, The Validiv of the Act of Na-
tionalization in International Law, 22 Mod. L. Rev. 639, 647 (1959). 77. See Garcia-Amador, International Respomibiliry: Fourth Re-
76. 1 L. Oppenheim, International Low 318 (H.Lauterpacht ed. port, [I9591 2 Y.B. Int7 L. Comm. 1, 7, 23-24, U.N. Doc. No. A/CN
1948) [hereinafter cited as 1 Oppenheim]. 4/119 (1959).