Venezuela: Heinz sells tomato plant facing expropriation to governmentVenezuela plans to nationalize two industriesExpropriation occurs when a host government interferes with a foreign investor's fundamental ownership rights. This can take the form of a direct seizure of assets or it can be through a series of discriminatory actions, which is called "creeping expropriation."To help illustrate expropriation risk, Aon's political risk experts have compiled the following sampling of actual claims. They are real-life examples of the types of political risk losses companies face today, and they demonstrate the value of political risk insurance. The names, exact dates and precise locations cannot be disclosed because private market political risk policies have a confidentiality clause.US watch manufacturer - PhilippinesSelective legislation was introduced against the insured. The manufacturer was required to raise salaries, which eliminated the profit and the reason for setting up such a facility in that country. This was a "creeping expropriation" claim for $37 million.Hotel company - EgyptThe Egyptian government confiscated a hotel property, saying it was on holy ground. The government operates the hotel today.Catering company - ArgentinaCaught up in Argentina's recent economic woes, a U.S. company's dollar-denominated certificates of deposit were "pesified" (converted to the Argentina currency) and then access to them was severely restricted. Underwriters agreed that this amounted to expropriation by Argentine government.Timber concession - EcuadorGovernment cancelled a U.S. company's lumbering concession, then granted it to a third party, the nephew of the president of Ecuador.European oil company - Central AsiaA joint venture invested many millions in a company to source sub-soil minerals. Before the company could start trading, the local government joint venture partners withdrew and canceled the contracts with the European partners, causing the Europeans to lose several million dollars.Power project - IndiaThe newly elected government of the state of Maharashtra in India unilaterally cancelled the contract for a $2.8 billionelectric power generation plant to be built and owned by a consortium. Even after the new negotiations led to a revised deal, local press continued to criticize the arrangement as too generous for the foreign investor. Disputes between the power purchaser and the consortium resurfaced two years later, leading to the termination of the project.Arbitration is pending.Additional info from Answers.comIn 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 thepresident 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.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. In1960, 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.From http://www.wfu.edu/~palmitar/Law&Valuation/Papers/2001/Smith.htm In Banco Nacional De Cuba v. Chase Manhattan Bank, the court awarded Chase only the net asset value (book value) of its bank branches that were expropriated and did not take into account a going concern premium. The second circuit reasoned that an award of "lost" future earnings would not be proper because of the state of the Cuban economy at the time. The court stated that no potential buyer would have paid Chase a premium in anticipation of its future Cuban earnings after the revolution.From: http://www.highbeam.com/doc/1G1-91068517.html South American Business Information Date: September 5, 2002 Mexico, Sep 3, 2002 (El Financeiro/SABI via COMTEX) One year after the expropriation of 27 of Mexico's 60 sugar refineries, GAM (Grupo Azucarero Mexico) is reiterating its position of looking for legal restitution of its five plants, or restitution from the federal government. The government organs responsible say that they are still in the process of evaluating the assets. GAMI Investments, which has a 14.7% share in GAM, has made a formal demand for restitution, citing an article of NAFTA. GAM was the sugar company which had the least amount of debt of the four companies ...BUSINESS WEEK OCTOBER 10, 2005 Chávez' Oil-Fueled Revolution It seems there's no stopping Venezuelan President Hugo Chávez. He's already curbing the power of the big oil companies
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