Expropriation is when a government takes private property away from its owner(s).
National laws of expropriation
Expropriation is legal in just about every country, but most developed countries have laws providing for some sort of compensation. For example:
...Nor shall private property be taken for public use, without just compensation. - Constitution of the United States of America, Amendment V
Private property may only be expropriated in the public interest, by or pursuant to a a law; such law shall provide for the type and amount of compensation. Compensation shall be determined with due regard to the public interest and the interests of the interested parties. - Basic Law for the Federal Republic of Germany, Article 14, Section 3
Private property may be taken for public use upon just compensation therefor. - Japanese Constitution, Article 29, Section 3
No one may be arbitrarily deprived of his or her property unless on the basis of decision by a court of law. Property can be forcibly alienated for state needs only on condition of a preliminary and equal compensation. - Constitution of the Russian Federation, Article 35, Section 3
The main exceptions are in communist and authoritarian countries that do not recognize strong property rights; these situations require application of a different system of law.
International laws of expropriation
When a government expropriates the local property of foreigners, international law applies in addition to the local law. Unfortunately for the foreigners, international law is much murkier and much harder to enforce than the black-letter provisions of constitutions.
Traditionally, European countries recognized a customary rule that expropriation of foreigners' assets must be accompanied by compensation. This was fairly widely accepted until the USSR announced, shortly after its formation, that it was not going to follow the rule; instead, it would assert domain over any assets held within its borders regardless of where the holder came from. This inspired a number of banana republics in Latin America to follow suit.
In 1938, after Mexico decided to lean in the Soviet direction by "redistributing" land, the United States protested, claiming that there was an international rule requiring "prompt, adequate and effective compensation." This is now known as the Hull Rule, named for the then-U.S. Secretary of State, and it is the wording that most developed countries prefer.
The Hull Rule was never liked by the Third World, however. Many poorer countries worked to undermine it: the major manifestation of this conflict is the Charter of Economic Rights and Duties of States, passed by the General Assembly of the United Nations in 1974. The Charter provides that "appropriate compensation should be paid," but that in the event of a dispute, "it shall be settled under the domestic law of the nationalizing State and by its tribunals." An overwhelming majority of states (120-6) passed the Charter, with only the wealthiest states dissenting or abstaining.
After major expropriations in Cuba and Iran, among other countries, it became more commonplace for businesses to insist on a proper treaty prohibiting expropriation or providing compensation before they would put forward an investment overseas. Today, there are thousands of such treaties between various pairs of countries. Since treaties are generally considered to be positive law, they provide a stronger form of protection against the threat of being nationalized against one's own will.
- Vagts et al., Transnational Business Problems (3d ed., Foundation 2003)