Expropriation is a legal term referring to the act of a government seizing or confiscating private property without the consent of the owner, usually for public use or national interest.

This action is authorized under the principle of eminent domain, which grants governments the power to acquire privately owned assets in exchange for fair compensation. Expropriation can occur in various forms, including direct confiscation or the imposition of regulatory measures that devalue or restrict the use of the property. Regardless of the method employed, the key characteristic of expropriation is the involuntary transfer of ownership or control, often resulting in significant financial implications for the affected party. In the context of capital markets, expropriation poses a considerable risk to investors, particularly those investing in foreign markets or industries where governments exert significant control. While expropriation is generally carried out by emerging or unstable economies, it can also occur in developed nations during times of political or economic turmoil. It is crucial for investors to carefully assess the risk of expropriation before committing their capital, as it can have a substantial impact on the viability and profitability of an investment. Expropriation often arises in sectors such as natural resources, utilities, or infrastructure, where governments may seek to assert control over key assets to further their national interests. This may involve taking over privately owned oil fields, mines, transportation networks, or other critical facilities. From a legal perspective, expropriation must comply with the principles of national and international law, which typically require the payment of fair and prompt compensation to affected parties. However, the determination of "fair" compensation can be a contentious issue, and disputes over valuation and compensation terms are not uncommon. To mitigate the risk of expropriation, investors can undertake comprehensive due diligence and carefully evaluate the political and regulatory environment of the target investment. This assessment may include an analysis of historical expropriation instances, the legal framework surrounding property rights, the stability of the local government, and any bilateral investment treaties or international agreements in place to protect foreign investors. In conclusion, expropriation represents a significant risk for investors, particularly those participating in capital markets characterized by political volatility or government interventions. A solid understanding of expropriation, its potential consequences, and the appropriate risk mitigation strategies is crucial for any investor seeking sustainable returns in an ever-changing global investment landscape. Eulerpool.com is dedicated to providing comprehensive and up-to-date information on a wide range of financial topics, including this glossary, to empower investors with the knowledge required to make informed investment decisions.