Nationalization, Expropriation, and Confiscationфы as the Grounds for Termination of Property Rights by the Will of the State: A Comparative Analysis

Kutovoi Nikita Sergeevich Lawyer; Nikita Sergeevich Kutovoy's Law Office 195160, Russia, Saint Petersburg, Sverdlovskaya nab., 44, litera D, floor 4, office 414 nk@kutovoi.ru Other publications by this author

The issues of forced termination of State property rights have always been at the center of legal discourse. In the context of modern geopolitical challenges, the problem of nationalization of property of foreign individuals and companies is of particular importance. For example, in 2022, the Republic of Crimea adopted a regulatory act providing for the transfer to state ownership of the property of persons associated with unfriendly countries. This regulation has become the subject of legal debate, as it affects the constitutional guarantees of property rights and requires a clear distinction between nationalization, confiscation and other forms of seizure of property.

This article uses a comparative legal method to identify the similarities and differences between nationalization, expropriation and confiscation in various legal systems. The formal legal method is also used to analyze the norms of Russian and international legislation, the historical and legal method to study the evolution of the institutions under consideration, and the doctrinal analysis in order to assess the positions of leading researchers.

The problem of nationalization, expropriation, and confiscation has been actively studied both in pre-revolutionary, Soviet, and modern Russian jurisprudence. Among the leading researchers on this topic are: G. F. Shershenevich, V. M. Nechaev, L. A. Lunts, A. N. Makarov, A.V. Asoskov, V. V. Vitryansky, S. A. Stepanov, and others. These studies allow for an in-depth analysis of the institutions under consideration, but so far there is no single concept combining nationalization, expropriation and confiscation within the framework of a common mechanism for the compulsory termination of property rights.

This article provides a comparative analysis of nationalization, expropriation and confiscation, identifies their legal features, suggests author definitions and examines the problems of systematization of these concepts in Russian legislation.

Nationalization is a process of compulsory seizure of private property in favor of the State with the obligatory provision of fair compensation. In Russian legislation, this institution is provided for in paragraph 2 of Article 235 of the Civil Code of the Russian Federation, but the detailed procedure for nationalization is not specified in the law. In international law, nationalization is recognized as a legitimate way to terminate property rights, subject to certain conditions.

Key characteristics of nationalization:

1. The initiative of the state power. Nationalization is carried out by decision of state authorities, which underlines its public–legal nature.

2. Legislative basis. The nationalization process is carried out on the basis of a special law or a regulatory act adopted in accordance with the established procedure. This ensures legal certainty and predictability of the procedure.

3. The general nature of the seizure. Nationalization is aimed at seizing property in the interests of society and the State, and not as a sanction for an offense. This distinguishes it from confiscation, which is punitive in nature.

4. Retribution. One of the key signs of nationalization is the mandatory provision of fair and proportionate compensation to the owner for the seized property. Nationalization is considered illegal without compensation ^[1].

In international law, the right of a State to nationalize is based on its sovereignty. UN General Assembly Resolution 1803 (XVII) of December 14, 1962 confirms that nationalization should be carried out on legitimate and non-discriminatory grounds, for socially useful purposes, with prompt payment of fair compensation to the private owner. This is aimed at establishing a balance between public and private interests ^[2].

Russian legal doctrine emphasizes the need to develop a special law regulating the nationalization procedure. This will ensure the protection of the rights of owners and define clear mechanisms for the seizure of property in the public interest ^[3].

The term "expropriation" does not have a clear legal definition in Russian legislation, but it is actively discussed in legal science. The classical works of G. F. Shershenevich define expropriation as the forced retaliatory alienation of property for public purposes ^[4]. In contrast to him, V. M. Nechaev considered expropriation more broadly, including both retaliatory and gratuitous seizure of property ^[5].

During the Soviet period, the term "expropriation" acquired special significance and was used to refer to large-scale seizures of property carried out by the state as part of the socialist reconstruction of society. Unlike nationalization, which involved the transfer of property to state ownership with certain legal procedures, expropriation was often forced and gratuitous ^[6]. However, this term is not widely used in modern Russian law.

Based on doctrinal research and comparative analysis, two approaches to understanding expropriation can be distinguished:

– In a broad approach, expropriation is understood as a general phenomenon of forced seizure of property by the state from the owner, regardless of its form, grounds and legal consequences. In this case, nationalization, requisition, and confiscation are considered types of expropriation that differ in purpose and conditions. This approach is useful for comparative analysis of different legal systems, as it allows us to identify common principles and differences in the regulation of these institutions.

– With a narrow approach to understanding expropriation, its meaning is limited, reducing it to one of two types: nationalization – expropriation, in which property becomes state property, or requisition – expropriation, in which property is seized temporarily and for a fee for use for public purposes ^[7]. With this approach, confiscation (gratuitous seizure of property) is not considered a type of expropriation.

Comparative analysis shows that expropriation is regulated differently in different countries.

In the United States, the principle of fair compensation for expropriation is enshrined in the Fifth Amendment to the U.S. Constitution, which states: "No one should be... deprived of property without due process of law; private property should not be seized for public use without fair remuneration." This constitutional provision means that the U.S. government can seize private property for public needs, such as building roads, schools, or other infrastructure. However, according to the Fifth Amendment, the owner has the right to receive fair compensation for the seized property (the case of the U.S. Supreme Court "Kelo v. City of New London", 2005). The concept of "fair compensation" in the United States is interpreted quite broadly and includes not only the market value of property, but also others losses that the owner may incur as a result of expropriation ^[8]. In the event of a dispute over the amount of compensation, the court makes a decision based on the evidence provided and expert opinions.

In the countries of the European Union, the principle of fair compensation for expropriation is also fundamental and is enshrined in various legal acts, such as Protocol No. 1 to the European Convention for the Protection of Human Rights and Fundamental Freedoms (Ratified by Federal Law No. 54-FZ of March 30, 1998), Article 1 of which states: "Every natural or legal person A legal entity has the right to respect its property. No one may be deprived of their property except in the public interest and under the conditions stipulated by law and the general principles of international law." The Charter of Fundamental Rights of the European Union, which, in article 17, enshrines the right of everyone to own, use, dispose of their property and receive fair compensation in the event of its seizure in the public interest. EU legislation governing expropriation usually stipulates that compensation must be "fair and adequate", which means that it must correspond to the market value of the property and take into account other losses that the owner may suffer as a result of expropriation.

In Venezuela, under President Hugo Chavez, large enterprises in the oil and gas, telecommunications and other industries were nationalized. Many foreign investors, whose assets were expropriated, appealed to international arbitrations, claiming that the expropriation was illegal and demanded compensation ^[9].

A similar situation has developed in Bolivia, where President Evo Morales also pursued a policy of nationalizing natural resources and strategic industries. Expropriation was often accompanied by statements about the need to protect national interests and redistribute wealth, however, many owners, both local and foreign, were deprived of their property without fair compensation, which also led to international litigation ^[10].

International expropriation lawsuits in Venezuela and Bolivia have often been based on violations of investment protection treaties, which provide for the obligation of the State to pay adequate compensation in the event of expropriation. However, even in cases where courts have declared expropriation illegal or awarded compensation, enforcement of judgments has often been difficult due to the unwillingness of the Governments of these countries to recognize and enforce the decisions of international courts.

After the unification of Germany in 1990, one of the key issues was the fate of the property that was expropriated during the existence of the GDR. In relation to such assets, a number of legislative acts have been adopted aimed at restoring ownership rights and compensating losses to former owners.

In general, the process of returning and compensating expropriated assets in Germany can be described as follows:

– Return of property in kind: in many cases, property that was expropriated in the GDR was returned to its former owners. This primarily concerned real estate, land, businesses, and other assets that could be identified and returned without significant damage to the current owners or public interests.

– Compensation for the value of property: in cases where the return of property in kind was impossible or impractical, compensation was paid to the former owners. The amount of compensation was determined based on the valuation of the property at the time of expropriation, taking into account inflation and other factors.

– Special cases: in some cases, for example, when the property was substantially rebuilt or used for public needs, the issue of return or compensation was decided individually, taking into account the interests of all interested parties.

Confiscation, as one of the grounds for the termination of property rights at the will of the State, is a sanction for a committed offense and is gratuitous. Unlike nationalization and expropriation, which may pursue the goals of public benefit or compensation, confiscation is punitive in nature, aimed at punishing the perpetrator ^[11].

The main features defining the confiscation process:

1. The basis for confiscation is the commission of a crime or other offense established by a judicial act that has entered into legal force. Confiscation can be applied both in the framework of criminal proceedings and in cases of administrative offenses provided for by the Administrative Code of the Russian Federation.

2. Confiscation is carried out without paying any compensation to the owner of the seized property. This distinguishes it from expropriation, in which the owner is compensated for the seized property.

3. Confiscation is carried out solely on the basis of a judicial act, which guarantees the observance of the rights of the owner and the legality of the procedure for the seizure of property. The decision on confiscation must be motivated and based on evidence of a person's guilt in committing an offense.

Comparative analysis of legal institutions

The analysis shows that nationalization is a type of expropriation, and confiscation is an independent institution aimed at the repressive seizure of property.

The lack of a clear legislative definition of expropriation leads to terminological confusion. For example, Resolution No. 2085-6/14 of the State Council of the Republic of Crimea dated April 30, 2014 stipulates the termination of property rights without compensation for owners associated with unfriendly countries. This mechanism is not a classic nationalization, but it also does not fall under confiscation, as it is not directly related to the offense.

In addition, the legislation does not take into account the fate of encumbrances during the transfer of ownership to the State. The issue of maintaining liens and lease rights requires clarification, especially in cases of forced seizure of property ^[12].

The legal mechanisms considered differ in terms of grounds, retribution, and goals. Nationalization is retaliatory, while confiscation is punitive and gratuitous. Expropriation can cover both mechanisms, which requires clear legislative regulation.

In order to eliminate legal uncertainty and ensure balanced regulation of issues of nationalization, expropriation and confiscation, it is necessary to introduce the following amendments to legislation::

1. The consolidation of a clear definition of expropriation as a generic concept in the Civil Code of the Russian Federation. This will eliminate terminological confusion and clearly distinguish between nationalization, requisition, confiscation and other grounds for the termination of private property rights by the will of the State. A legislative formulation is needed that reflects key principles such as the basis for withdrawal, the possibility of compensation, and the purpose (social necessity, sanction, and the like).

2. Unification of legal regulation at the federal level. Currently, the norms governing the seizure of property are contained in various legislative acts (the Civil Code of the Russian Federation, the Budget Code, individual laws and by-laws), and may also exist at the level of subjects of the Russian Federation (for example, the Republic of Crimea). A comprehensive federal law is required that:

‑ establish uniform basic rules for the compulsory seizure of property;

‑ determine the procedure for making appropriate decisions and judicial control;

‑ regulates compensation issues in detail, where applicable, including the methodology of damage assessment;

‑ it will ensure a balance between the interests of the state, society and private owners.

3. Development of a detailed nationalization procedure. The introduction of a special law on nationalization will establish clear rules for the procedure, including:

‑ the grounds for nationalization, their exhaustive list;

‑ a mechanism for notifying owners and the possibility of judicial appeal;

‑ criteria for fair compensation, including the procedure for assessing seized property.

4. Settlement of the fate of encumbrances during the transfer of ownership to the state. It is important to determine whether mortgages, leases, liens, and other encumbrances are retained during nationalization or expropriation, as well as how third-party losses are compensated.

Expected results of the reforms:

‑ Increasing the predictability of law enforcement practice and reducing the number of disputes.

‑ Protecting the interests of private owners, including foreign investors, which will increase the investment attractiveness of the country.

‑ Reducing the risks of abuse during the forced seizure of property.

‑ Bringing national legislation into line with international standards, such as the principles of the European Convention on Human Rights.

These measures will create a transparent and predictable system for regulating property seizures, ensuring a balance between public and private interests, and will also help attract private investment to the Russian Federation, including from foreign investors, ensuring a more dynamic development of the country.