The Political Economy of Compensation for Nationalisation or Municipalisation: National, European and International Law and Practice, and the Implications for Potential (Re)nationalisation in the UK and Elsewhere

The potential cost of compensation is a significant factor in political decisions to nationalise or municipalise. The legal framework now includes not only national law, but also international treaties relating to investment and trade which provide for investor-state dispute settlement (ISDS) which may enable foreign investors to seek compensation through arbitration. These legal frameworks create expectations of clear and quantifiable entitlement, but actual practice shows rather an intensive bargaining process between governments and business interests, with varying contested valuation principles, contested positions on national and international law, and strategic use of law-suits and arbitration by either party. Since the 2017 election in the UK, when the Labour Party announced plans to renationalise water, energy, rail and postal companies, there has been a significant debate over the potential cost of these plans. Much of this discussion has concerned UK national law, which gives parliament more power of ‘eminent domain’ than commonly assumed, and allows for a wide range of factors in calculating compensation. (Helm 2018). The international treaties have historically been framed to protect investors from high income countries from expropriation of their investments in developing countries, and this is reflected in the great majority of cases being brought by such investors (Miles 2013, Wellhausen 2015). These treaties are now being used by various investors against some high income countries in western Europe, especially under the Energy Charter Treaty (ECT) – for example the case of Vattenfall vs Germany - and the prospect of ISDS cases has also become a large part of the debate in the UK over the potential cost of Labour Party nationalisation plans. (Clifford Chance 2018, Macquarie 2018) The paper will examine a number of cases of recent nationalisations, or proposed nationalisations, and legal challenges, and the political outcomes. Bibliography Clifford Chance 2018 UK Nationalisation: The Law And The Cost Macquarie Research 2018 UK utilities: nationalisation Miles K. 2013 The Origins of International Investment Law. CUP Wellhausen R. 2015 Recent Trends in Investor–State Dispute Settlement. Journal of International Dispute Settlement, 2016, 0, 1–19 doi: 10.1093/jnlids/idv038