expropriation

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noun

The act of taking quick and forcible possession of: confiscation, seizure. See give/take/reciprocity.

The taking of private property for public use or in the public interest. The taking of U.S. industry situated in a foreign country, by a foreign government.

Expropriation is the act of a government taking private property; eminent domain is the legal term describing the government's right to do so. In the United States, this right is granted, indirectly, by the Fifth Amendment to the Constitution, which states, in part, that "private property [shall not] be taken for public use, without just compensation." The courts have interpreted this clause's limitation of the power to expropriate as implying the existence of the power itself.

Two well-known cases of the U.S. government's expropriating private property occurred during labor troubles after World War II. In the spring of 1946, President Harry S. Truman found it necessary to seize control of the nation's railroads to postpone an imminent strike. He justified this action by declaring that the welfare of the country was at stake. Five days after the president's action, the workers went on strike for three days, until union and management reached an agreement. Truman hastened the agreement by threatening to draft all railway employees who refused to go back to work.

In 1952, faced with an impending strike by steelworkers, President Truman signed Executive Order No. 10340, 17 Fed. Reg. 3139, expropriating eighty-eight steel mills across the country. Again, the president defended his action by declaring that the welfare of the country was at stake. He supported this argument by stressing the demands of the war in Korea. He believed that a steel strike would endanger the lives of U.S. soldiers. This time, Truman's action caused a constitutional crisis that went to the U.S. Supreme Court. In Youngstown Sheet & Tube Co. v. Sawyer, 343 U.S. 579, 72 S. Ct. 863, 96 L. Ed. 1153 (1952), the Supreme Court ruled 6-3 that the president did not have the power to take private property to settle a labor dispute. The steelworkers' strike began the same day as the ruling and lasted seven weeks.

International law recognizes the right of countries to seize private property to further national welfare, but it requires that both citizens and aliens be treated in the same manner. The issue of just compensation in return for expropriated property differs from country to country. The United States and most Western countries maintain that the expropriating country should pay prompt, adequate, and effective compensation.

U.S. businesses were expropriated by the governments of both Cuba and Chile during socialist movements in those foreign countries. In May 1959, after Fidel Castro took over the Cuban government, the seizure of many large U.S. properties began. Before the revolution, U.S. corporations had controlled most of Cuba's resources and over half of its sugar production. In 1960, the first shipment of Soviet oil arrived in Cuba. Under the advice of the U.S. Treasury Department, U.S. oil companies on the island refused to refine it. These refineries were then taken over by the Cuban government. The expropriation of U.S. property in Cuba and Cuba's alliance with the Soviet Union eventually led to the United States' breaking off all diplomatic relations and instituting an embargo.

In 1971, the Chilean people elected a socialist president, Salvador Allende. Soon afterward, the Chilean government began to expropriate U.S. businesses located in Chile. The primary U.S. business in Chile at this time was copper mining. When U.S.-owned mines were seized, in most cases, their owners were provided with adequate and prompt compensation. The El Teniente mine of the Kennecott Company was seized by the government for a much higher price than the book value. In 1970, government control over the industrial sector in Chile had been at 10 percent. One year after the election of President Allende, it was at 40 percent. By 1973, private banks; U.S. copper mines; the steel, cement, and coal industries; and all other vital areas of industry were in the hands of the Chilean state.

In both Cuba and Chile, the seized properties remain under the control of the foreign government.

See: Presidential Powers.

The taking over of private property by a government, often without fair compensation but usually with a legal assertion that the government has a right to do so.

The act of removing property from an owner.

Investopedia Says:
Typically, expropriation refers to the action of a government taking away a private business from its owners. This mainly occurs in countries where property laws are not concrete and well defined. Expropriation also occurs when there are legal implications.