Sep 4, 2014


Source: Google
One major fear every foreign investor has is the stability of government in the investment destination  and the  security of investments. Many times, investors have been short changed due to National policies that take away their wealth by the governments of the investment state.

As part of the efforts to provide an enabling environment that is conducive to the growth and development of industries, inflow of foreign direct investment (fdi), shield existing investments from unfair competition, and stimulate the expansion of domestic production capacity; the federal government of Nigeria has developed a package of incentives for various sectors of the economy. These incentives, it is hoped, will help revive the economy, accelerate growth and development and reduce poverty.

Expropriation or “wealth deprivation” could take different forms: it could be direct where an investment is nationalized or otherwise directly expropriated through formal transfer of title or outright physical seizure. Expropriation or deprivation of property could also occur through interference by a state in the use of that property or with the enjoyment of the benefits even where the property is not seized and the legal title to the property is not affected.

Section 25 of the Nigerian Investment Promotion Act  guarantees against expropriation of foreign investments, it provides that:
(1) Subject to subsections (2) and (3) of this section-
(a) No enterprise shall be nationalized or expropriated by any Government of the Federation; and
(b) No person who owns, whether wholly or in part, the capital of any enterprise shall be compelled by law to surrender his interest in the capital to any other person.

(2) There shall be no acquisition of an enterprise to which this Act applies by the Federal Government, unless the acquisition is in the national interest or for a public purpose and under a law which makes provision for-
(a)   Payment of fair and adequate compensation; and
(b)  A right of access to the courts for the determination of the investor's interest or right and the amount of compensation to which he is entitled.
(3) Any compensation payable under this section shall be paid without undue delay,and authorisation for its repatriation in convertible currency shall where applicable, be issued.

Criteria for determining indirect expropriation
i)                    The degree of interference with the property right,

There is broad support for the proposition that the interference has to be substantial in order to constitute expropriation, i.e. when it deprives the foreign investor of fundamental rights of ownership, or when it interferes with the investment for a significant period of time. Several international tribunals have found that a regulation may constitute expropriation when it substantially impairs the investor’s economic rights, i.e. ownership, use, enjoyment or management of the business, by rendering them useless.
Source: Google

 ii)                  the character of governmental measures, i.e. the purpose and the context of the governmental measure,
A very significant factor in characterizing a government measure as falling within the expropriation sphere or not, is whether the measure refers to the State’s right to promote a recognised “social purpose” or the “general welfare” by regulation. “The existence of generally recognised considerations of the public health, safety, morals or welfare will normally lead to a conclusion that there has been no ‘taking’”. “Non-discriminatory measures related to anti-trust, consumer protection, securities, environmental protection, land planning are non-compensable takings since they are regarded as essential to the functioning of the state”.

 iii)                 the interference of the measure with reasonable and investment-backed expectations.
Another criterion identified is whether the governmental measure affects the investor’s reasonable expectations. In these cases the investor has to prove that his/her investment was based on a state of affairs that did not include the challenged regulatory regime. The claim must be objectively reasonable and not based entirely upon the investor’s subjective expectations.

However, international law also sets circumstances for the legitimacy of expropriation of foreign investors‘assets. Essentially, it would appear that under international law, foreign investors should only be deprived of their property rights for a public purpose, in a non-discriminatory way, on the condition that there is payment of compensation and upon the basis of due process.

Adedunmade Onibokun Esq
Adedunmade Onibokun is a legal practitioner, publisher and blogger. He holds an LLM in International Business Law from the University of Bradford and publishes the Nigerian law blog Legalnaija.


Post a Comment

Blog Archive

LCA_YAN Moot Competition


The Nigerian blawg

Disclaimer:- Posts and comments by the publishers of this blog do not constitute legal advice or create an attorney-client relationship.

Follow by Email

Advertise your property

Property Listings

  • SALE-4bedroom duplex With 3 living rooms. Located at Opic Harmony Estate. Asking 80m Title Global C of O/ consent in progress. 08055424566
  • FOR SALE 8bedroom duplex 2 living rooms With 2 rooms BQ N150m Located off CMD Road Magodo Registered Title Contact 08055424566
  • Property for Rent – New Building, 4 unit luxury 2 bedroom flat available at Rafiu Ipaye Street, Ijesha, Surulere. Ground floor back flat- 700k per anum, First floor back flat – 750k per anum, 2nd floor back flat – 750k, 2nd floor front flat – 800k. Service charge - 75k per anum. Refundable caution – 70k. Call 08055424566 for details.
  • Property For Sale!!! A fenced and gated uncompleted 3 bedroom site on a full plot of land is available for sale at Igbetu via Awoyaya, behind Mayfair Gardepn Estate, Ibeju-Lekki, Lagos for sale. Price is N20million and Title Documents include, Family Receipt,  Deed of Assignment and Global C of O. Contact 08055424566 for more information
  • PROPERTY FOR SALE!!!!!!!!  A 5 Bedroom Duplex with 2 room BQ formerly used for a Nursery & Primary school is available for sale in Iyana Ipaja, Lagos  Building contains 9 CLASSROOMS, 2 OFFICE SPACES, 1 LARGE RECEPTION, 8 TOILETS, 5 BATHROOMS, KITCHEN,PLAY AREA. The seller's title is a certificate of Occupancy and the asking price is 35 million Naira.  Contact 08055424566 for more details 
  • List your property for rent or sale here



Email *

Message *

Powered by Blogger.