Washington Law Review


If the underdeveloped nations of the world are to achieve their goal of a substantial increase in their standards of living, they must import private capital. Foreign investors, however, have recently shown a reluctance to invest abroad because of the increasing risk of uncompensated expropriation of their property. Several current proposals seek to reduce this risk by limiting the power of states to acquire alien property. This approach appears to be ineffective because of the reluctance of the underdeveloped nations to agree to abide by foreign standards of property treatment. After outlining the nature of the problem and analyzing the strengths and weaknesses of various plans and programs, this Note suggests a fundamentally new approach to the difficulties posed by expropriation. The basic thesis is that the flow of private capital can be increased by granting the underdeveloped nations wide latitude in acquiring foreign-owned property in exchange for an agreement to compensate the investor whose property has been expropriated. This scheme will grant the host nations their desired freedom from interference while developing their legal and economic systems. At the same time, it will provide the investor with a higher degree of probability of receiving adequate compensation following expropriation. This Note develops this thesis and concludes with a model treaty which incorporates specific desirable features.

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