Expropriation (Meaning and Explanation)

We explain what an expropriation or nationalization is and what assets can be expropriated. Also, what is compensation for expropriation.

The town of San Román de Sau was expropriated for the construction of a reservoir. — An expropriation is carried out for reasons of national interest, such as the construction of a reservoir.

What is an expropriation?

An expropriation (sometimes also called nationalization) is a legal and administrative process through which The private ownership of a movable or immovable property is forcibly transferred to the State, which generates compensation in exchange or compensation in favor of the previous owner. In simpler terms, it is a forced purchase made by the State, through some public administration entity, of an asset that is considered of national interest.

The expropriations are procedures contemplated and regulated by law which constitute an intermediate figure between the purchase and sale of private law and confiscation by the State. An asset can be expropriated for exploitation by the State or by third parties, or to be used for some public good project. Generally, an expropriation is carried out for reasons of force majeure, i.e. when the damage to the individual rights of a few is compensated by the benefit of a significant majority or even for the survival of society.

The term “expropriation” comes from Latin voices ex– (“outwards”), pro (“in favor”) and privatus (“private”), and as a legal figure it had its formal origins in the Napoleonic codes of the 19th century, in which Napoleon himself put an end to the power of the State, inherited from the absolute monarchies of the Old Regime, to take ownership of properties without adequate compensation. Since then, expropriation has been a figure used by States to fulfill priority public projects or control assets considered of social interest.

Expropriatable assets and subjects of expropriation

The assets that may (or may not) be subject to expropriation are expressed in each country in the laws that is, in the National Constitution and the codes related to the matter. However, in general terms, all movable or immovable property that is within the national territory and under the legal jurisdiction of the State, can be subjected to an expropriation process.

For their part, the subjects involved in the expropriation are, fundamentally, three:

The expropriator that is, who initiates the expropriation process, and which is exclusively the State: the government, the autonomous community or municipality, as appropriate in the established administrative order.
The expropriated that is, the former owner of the expropriated property, which is generally a natural or legal person outside the State. This person will receive compensation in exchange for losing ownership of the expropriated property.
The beneficiary that is, the natural or legal person who, representing the public or social interest, will receive the rights of use and control of the expropriated property. This person may or may not be the same expropriating person.

Effects of an expropriation

Once the expropriation process has taken place, the following legal effects occur:

Property rights are transferred of the expropriated property from the expropriated property to the beneficiary.
Property rights can also be extinguished of the expropriated property to be used for public use.
The right to compensation is born of expropriation by the State.

Compensation for expropriation

Although expropriation is forced and is among the powers of the State, the counterpart of this process is the compensation that the expropriated party must receive. The terms of this compensation must be made explicit in the relevant laws, but in general it is:

Comprehensive That is, it must leave the expropriated person unharmed, giving him the appropriate amount of money so that his assets are not diminished after the expropriation.
fair that is, it must correspond to the exact value of the expropriated property, without prejudice or benefit of the expropriated property, for which it must take into account the current, integral, historical and objective value of the expropriated property.
Unique that is, it must be received only once.
Previous that is, it must be received before the transfer of ownership of the asset to the beneficiary is carried out.
in money that is, it must be paid in cash and not in other assets, promissory notes or other types of securities.

You may be interested: Private International Law

Examples of expropriation

Some examples of expropriations may be:

The forced purchase of houses and land in a city to dedicate them to the construction of a public transportation system that will benefit the city's citizens in the future.
The expropriation of an electrical company that is at risk of bankruptcy and that could leave the entire country without electricity.
The purchase of vacant land for the construction of schools, sports spaces and other spaces dedicated to the community.

Expropriation in Mexico

According to the Political Constitution of the United Mexican Statesthe expropriation procedure is subject to the provisions of the Expropriation Law where this legal figure is defined and the possible causes of its application are also established, the exact mechanisms according to which the procedure must occur and the terms in which the corresponding compensation must occur.

There, expropriation is conceived as the total or partial deprivation of the property right of a natural or legal person over an asset considered to be of public interest, always in accordance with the guidelines established in the rest of the article.

In said law The State is granted the power to expropriate those assets of supreme economic importance such as mines, oil or water deposits, among others, as well as those considered of social interest to the community. This law arose, among other things, to allow the liberal governments of the 19th century to exercise some control over properties traditionally held by the Catholic Church.

Finally, Mexican laws also contemplate a Right of reversion, that is, the possibility for a person from whom property has previously been expropriated, to request its return to its power of forcibly purchased goods, as long as two to five years have passed since the expropriation took place and the good has not been destined for a cause of social good or public utility.