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Clifford Chance


UK nationalisation: The law and the cost

19 March 2018

Nationalisation is on the agenda in the UK. The Labour Party says that, if it wins the next general election, it will nationalise the railways, water and energy companies, the Royal Mail and possibly private finance initiative (PFI) companies.

This paper considers how, as a legal matter, nationalisation would work, and the legal constraints that may limit a Government’s ability to nationalise for less than full market value.

Nationalisation for less than full market value will, almost inevitably, trigger compensation claims by investors. The investors likely to have the best chance of launching a successful claim are those based in a jurisdiction that is party to an investment treaty with the UK, including, for example, China, Hong Kong and Singapore. Investors who do not benefit from investment treaty protection, including UK investors, would have a potential claim under the Human Rights Act 1998 and/or the European Convention on Human Rights, but these claims are likely to face greater challenges. However, UK and other investors may benefit collaterally by virtue of another investor bringing a successful investment treaty claim. The UK Government may not want to pay higher compensation to a foreign investor than to a UK pension fund. Hence the final result may be that there is little practical choice but to offer the higher value to all.

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UK nationalisation: The law and the cost

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