As it becomes clear the Labour Party is on course to win the next general election, greater attention is being paid to their intended programme for government. Despite the current leadership disowning policies from the 2017 and 2019 manifesto, the Labour Party remains committed to expropriation in a limited number of areas: renationalising the railways, publicly controlling aspects of energy, and reforming planning laws to obtain land for housing and prison building programmes. Moreover, considering the on-going water pollution crisis, the Labour Party have pledged to expand the power of the water regulator, Ofwat, under the Water Industry Act 1991. However, there are growing calls from campaigners and public support for the renationalisation of Britain’s water industry. Therefore, it is not unfathomable that a future Labour government might also opt for a publicly controlled water sector if enough pressure is felt and enhanced regulation falls short in its aims – as some have suggested it will.

After decades of consensus around maintaining privatised industries and passive land, the concept of expropriation – albeit in limited circumstances – is a matter of serious political, policy, and public debate again. Consequently, this opens the door to constitutional questions at the intersection of expropriation, rights, and sovereignty. More specifically, whether a proactive expropriation agenda can survive assessments of its compatibility with the Right to Peaceful Enjoyment of Property (Article 1 Protocol 1 of the Convention [A1P1]) and overcome the supranational scrutiny of the European Court of Human Rights (ECtHR or the Court). By this, I do not mean a future Labour government’s decision to nationalise industries or acquire land for the public good will be prevented by the Court. The ECtHR has made it clear that member states have a wide margin of appreciation in determining whether a deprivation of property is in the public interest. Instead, the risk of delays to expropriation policies being implemented and curtailment of autonomous British decision-making stems from the ECtHR’s conditional and expansive requirement for compensation. The Court has suggested any interference with property will only comply with A1P1 if a ‘fair balance was struck between the demands of the general interest of the community and the requirements of the protection of the individual’s fundamental rights’. But what is material to the Court’s assessment of fair balance is the compensation terms member states offer property owners.

This post argues the ECtHR’s position in relation to compensation is at odds with the original framing of A1P1 and, specifically, treating compensation as a sovereign issue for member states. As I will explain, compensation is inextricably tied to domestic decisions that concern redistribution, the suitability of market value, and the determination of property value. Secondly, because of the ECtHR’s propensity to develop Convention rights through extrapolation it has moved towards a liberal construction of the Right to Peaceful Enjoyment of Property and compensation. As a result, the ECtHR can subject domestic expropriation-compensation schemes to a more rigorous and substantive compatibility standard. This risks reducing the decision-making ability of a democratically elected government, impedes the implementation of its legislative agenda, and risks incompatibility with A1P1 which, ultimately, hinders domestic policy.

Rejecting a Liberal Right to Peaceful Enjoyment of Property

The ECtHR has argued that A1P1 would be ‘largely illusory and ineffective’ if it did not guarantee a compensation scheme. However, when reflecting on the right’s drafting and negotiation process, specifically through the lens of the post-war Labour government, it is clear the entitlement was originally designed to be narrow and exclude the issue of compensation or, more precisely, expropriation being conditional on compensation.

Drafting and Negotiation Process

The original ECHR draft emanated from a pan-European, pro-federalist, and conservative group called the European Movement (EM). Heavily influencing this version were the EM’s ‘free enterprise’ British Conservative politician David Maxwell Fyfe and barrister Jonathan Harcourt. They proposed a set of liberal rights around 19^th century notions of laissez-faire, individual freedom, political liberty, and the rule of law – which aimed to preserve the ‘moral values’ and ‘democratic principles’ that were of ‘common heritage’ in Europe. This framing had specific implications for Fyfe and Harcourt’s understanding of the Right to Peaceful Enjoyment of Property. More specifically, they believed any expropriation or controls placed on property owners’ freedom, unless to prevent harm or injury, would amount to an inappropriate interference. As such, Fyfe and Harcourt sought to safeguard an individual’s private ownership and use of property or, in other words, their liberty.

In Fyfe’s view, even a democratically elected government could act in an arbitrary way towards private property. Indeed, as Marco Duranti has argued, with archival material supporting, one key motivator to create a ECHR for Fyfe and British Conservatives was their loathing of the post-war Labour government’s nationalisation programmes. Fyfe made his dislike of publicly owned industries known at the Council of Europe’s Consultative Assembly (representatives of all political parties from all members states). When justifying the EM’s draft Convention, Fyfe made inflammatory comments about the risk of Britain becoming a totalitarian state under the Labour Party – with their nationalisation of key industries risking free enterprise across Britain and the rest of Europe. He also accused the Labour government of executive overreach and anti-democratic methods that stifled debate about the validity of their public ownership policies.

With hostility towards the British government’s legislative agenda, along with other EM and European Conservatives, Fyfe offered Convention proposals that protected the right to property, and other civil and political rights, through codification and supranational oversight. This version went on to be used as a template for the first official draft presented to the Council of Europe’s Committee of Ministers (representatives of foreign ministers of government member states and the ultimate decision-making body).

When key figures of the Labour government’s Cabinet gained sight of the EM-inspired Convention they were aghast. Their overall view was that the proposal would create a rigid bill of rights, invite judicial activism, and inhibit the autonomy of government. On the specific issue of property, it was thought the primacy given to private interests was inconsistent with powers of economic control. Herbert Morrison, Leader of the House of Commons, argued the proposal would obstruct a planned economy, whilst William Jowitt, Lord Chancellor, described those responsible for the draft as starting from the point of a laissez-faire economy. Moreover, a Labour government representative at the Consultative Assembly described the entitlement to property as a ‘reactionary attempt’ to defend a system in which ‘a tiny handful of people own the means by which millions of others lived’. Labour’s Alice Bacon MP was more emphatic, claiming the British government would not tolerate a provision which prevented the state passing necessary laws that ensured property was used for the public interest. Lastly, there were general concerns about the impact of a supranational court enforcing the right to property.

With impatience building in the Labour government, Ernest Bevin, Foreign Secretary, cunningly insisted that Fyfe and other EM Conservatives be excluded from the preparation of the final ECHR text. With negotiations moving to government-only appointed experts and officials, representatives of the Labour government were successful in removing the Right to Peaceful Enjoyment of Property from the final draft.

Article 1 Protocol 1 Negotiations: The Issue of Compensation  

The decision to leave property entitlements out of the final ECHR text led to a separate protocol negotiation and an intense focus, by the Labour government, on the precise nature of the right.

The Belgian negotiators’ suggestion that expropriation and deprivation of property should be subject to fair compensation was fiercely contested (see Chapter 1, pages 24 – 28). Underpinning the idea of expropriation being conditional on adequate compensation was an ideological position that viewed the relationship between private property owners and the state as opposites. As a result, the two competing interests had to be balanced against one another. This balance could only be achieved by reference to the market or, in other words, private property owners receiving market value compensation. The desired effect of compensation was to leave the property owner in the same position they would have been in had they sold their asset in a private transaction and according to market value.

In his extensive historical account (see Chapter 15, pages 774 – 775) of the ECHR, A.W.B Simpson argued the Labour government had major concerns about such a proposal and its effect on, amongst other things, nationalisation of property. Moreover, the experience of codified property rights and compensation across constitutional systems of the British Empire also fed into Labour’s concerns about the unpredictable impact on domestic policies. Because of this, a revised version was submitted. It removed any mention of compensation, safeguarded sovereignty over domestic social policies, and prevented the issue of compensation being determined by supranational bodies. Jowitt made it clear he would not concede on the issue and cited the risk posed to the land valuation scheme created under the Town and Country Planning Act 1947 which radically reformed planning rules so new towns and homes could be built. With such pressure being put on negotiators by the Labour government, the varying proposals for compensation (guarantee of ‘compensation’, ‘fair compensation which shall be fixed in advance’, ‘such compensation as shall be determined in accordance with the conditions provided for by law’) were rejected and, ultimately, the matter was dropped.

Volumes 4 and 7 of the Travaux Préparatoires suggest this position was not arrived at easily and the Labour government had to weather resistance from other member states (also see Simpson’s account at pages 370 – 371, 687 – 693, and 705 – 717). For example, France, Ireland, Italy, and Turkey supported a looser definition of the right; whilst Belgium and Luxembourg favoured a general definition only if the court was able to develop jurisprudence. Despite this, with support from Greece, Norway, and the Netherlands the Labour government’s representatives held firm. They wanted to preserve the government’s ability to, amongst other things, expropriate property for the common good and design its own compensation scheme that aligned with its aims. Therefore, they sought to restrict the effect of A1P1 to formal protections for individuals; this included a lawful process and assurances that the entitlement would be protected without discrimination.

Overall, the omission of compensation from the final version of A1P1 made it clear that the state would have control over the issue; along with determining the necessity of expropriation in accordance with the general or public interest.

Compensation and Sovereignty

Is compensation a sovereign matter? The short answer is it should be. We can understand resistance from the post-war Labour government (and resistance more broadly) to supranational determination of compensation through a socialistic-constitutional analysis of the issue. More specifically, how compensation, in the context of expropriation, is intrinsically tied to fundamental domestic issues of redistribution, the suitability of market value, and the valuation of property.  

Firstly, expropriation can be viewed in similar terms to providing positive social entitlements (social insurance, health, housing etc) as it aims to further citizens’ ability to flourish and achieve a basic minimum in life, and acts as method for equal distribution i.e., everyone being entitled to the benefits of expropriation. For the Attlee government, their programme of nationalisation was motivated by, amongst other things, improving the conditions for workers in society. Any requirement for compensation, especially one that is set at a high value, may act as a barrier to these or similar socially driven aims. As such, the state might determine it has the authority and discretion to decide the amount of compensation it sees as fair and fit to achieve such vital public goals. When viewed in this way, structuring and setting the level of compensation is a domestic decision that should be determined by a government which commands a majority in parliament and not a supranational court.

Further, there is an important question about whether ‘market value’ is a suitable measure for compensation. First, there will always be disagreement about what metric should be used when determining market value. The post-war Labour government’s nationalisation of rail went through various iterations of market value – even those who agreed with market value being based on profit disagreed about the time period that profit would be assessed by. More importantly, total deference towards market value can reward passive and private property owners who may benefit from an active and economically engaged community or a thriving community who have gained from government social and economic policies (e.g, regarding transport, infrastructure, small business support). On this view, there might be a rejection of compensation that includes value created by the social and economic engagement of a community. As such, taking the decision to exclude the metric of community valuation from market value should rest with domestic governments and not supranational judges. Ultimately, the value of property is a deeply political question that can only be legitimately determined by an elected government and legislature. Lastly, market value is unlikely to consider the misbehaviour and mismanagement of property owners. Should, for example, those in charge of polluting Britain’s rivers and seas be compensated highly?

Another matter that might be reserved for an elected government is whether to allow market value to be influenced by speculation. An increase in market value may result from conjecture on potential use of property, for example, where the government plans regeneration programmes through state funding or has partnered with businesses. This could lead to a distorted and inflated market value. For example, the Attlee government’s Town and Country Planning Act 1947 nationalised the right to develop and set compensation for land acquisition based on values at the time the legislation entered into force. The intention was to prevent fluctuations in market value, resist the influence of speculation, and allow the public – not private property owners – to gain maximum benefit from planning and development. Whilst there were difficulties with this system, the Labour government did not accept that private property owners had a moral or legal expectation to full market value compensation.

Finally, it is possible property gains in value because of its or the surrounding area’s ‘cultural significance’ for local communities (historical, environmental, religious etc). The question of cultural significance is unmistakably a domestic issue, as it is socially constructed by citizens of a nation and, where necessary, expressed through elected representatives. Indeed, Tom Allen argues ‘the community, acting through the legislature, could legitimately take the view that certain attributes of specific types of property should not be valued for compensation’. Because of the intrinsically domestic arc of property and culture, it is prudent for domestic legislatures to decide whether cultural factors should or should not be used in the calculation of compensation. Or, in other words, there can be no automatic supranational entitlement to, or consideration of, inflated compensation based on socially and democratically constructed cultural factors.

Overall, the questions of market value and the suitability of market value as a benchmark for compensation, speculation, and cultural significance are sensitive, political questions and are vital domestic considerations when designing expropriation programmes. For an external body to impose supranational standards on such matters risks the outcome being controversial, unaccountable, and lacking democratic legitimacy.

A Reassertion of Compensation by the European Court of Human Rights

Like Article 8 (Right to Respect Private and Family Life) being expanded significantly beyond its text, the ECtHR has used its dynamic evolution of Convention rights to reinsert compensation as an issue that can be substantively reviewed in expropriation cases. As explained, compensation was purposely excluded from the language and aims of A1P1 – the reinsertion of it by the Court is not a natural implication of its terms and neither has it officially been agreed to by member states.

The original position was upheld in Handyside, which concerned the confiscation of property. The ECtHR found that governments and domestic legislatures were the sole judges of necessity for an interference and the court was restricted to supervising the formal aspects of A1P1 i.e., the lawfulness of the implementation of the policy. No attempt was made to dynamically evolve from this position until Sporrong, where the Court declared any interference with A1P1 must strike a ‘fair balance between the demands of the general interest of the community and the requirements of the protection of the individual’s fundamental rights’. This was a radical departure from formally assessing lawfulness and reframed A1P1 requiring compensation schemes for expropriation schemes. The Court then went on to support liberal concepts of market value and compensation, by suggesting the state should consider a valuation prior to depressed market prices that were caused by delayed expropriation permits. Following this, support for more extensive compensation schemes was advanced by the ECtHR in James and Lithgow. The Court set out that the protection of A1P1 would be ‘illusory and ineffective’ if an adequate form of compensation was not provided.

Despite states having a wide margin of appreciation in relation to expropriation, the ECtHR, in more recent cases, has limited that discretion by ruling: compensation paid should be reasonably related to ‘market value’ (any other approach could open the door to a degree of uncertainty or even arbitrariness); compensation would be diminished if it was paid without reference to surrounding circumstances that increase its value; the property owner’s personal and social situation should be taken into account when determining compensation; in addition to other requirements.

As with other Convention rights, it is unlikely the ECtHR will ever remind itself of A1P1’s originalist intentions and rarely does it refer to the Travaux Préparatoires. However, the direction of travel is clear. Through continuous extrapolation and analogy, the Court has developed compensation as a condition or requirement for expropriation policies to be compatible with A1P1 – reflecting a more liberal approach and extending its reach to sovereign matters that should be reserved for member states. Indeed, it has developed and expanded A1P1’s obligations irrespective and independently of member states. To subject compensation, as this post has understood it, to substantive review by the ECtHR risks erecting a barrier to the domestic political process designing and implementing an expropriation-compensation scheme that reflects the will of an elected government and legislature.

Of course, it is possible the ECtHR rules in favour of the government in such cases. In Animal Defenders, the ECtHR has suggested a large degree of deference will be given to governments and domestic legislatures where matters of human rights are debated. Moreover, it is also important to recognise the requirement to exhaust domestic remedies may lead to a favourable outcome for the government. But where individual challenges do reach the ECtHR, this post has shown how domestic expropriation-compensation schemes can be subject to a range of supranational compensation requirements. Consequently, this, firstly, may lead to an elected government being forced to alter said compensation schemes to such an extent that the initiative itself no longer serves its original purpose. Secondly, as this post has argued, the requirements placed on compensation by the Court risks critical decision-making powers being removed from the political process – which is an essential method for the citizenry to realise manifesto commitments and legislative agenda they supported or voted for.

Conclusion

Overall, the ECtHR’s reinsertion and development of compensation has significant constitutional implications. More specifically, the liberal requirements of compensation supported by the Court disincentivises socialistic expropriation-compensation schemes and risks reducing the sovereign decision-making powers of an elected government and legislature. Whilst their exact plans remain unclear, a future Labour government may face difficult questions around sovereignty if and when industry and property owners seek to supranationally challenge the proposed expropriation-compensation schemes offered to them.

I would like to extend gratitude to Dr Jeremy Letwin and UKCLA editors, Dr Se-shauna Wheatle and Professor Michael Gordon, for their extremely helpful feedback on previous drafts. Any errors in this post are my own.

Sanjit Nagi, PhD Researcher at SOAS University of London

(Suggested citation: S. Nagi, ‘A Future Constitutional Battleground? Expropriation, Compensation, and the Right to Peaceful Enjoyment of Property under the European Convention on Human Rights’, U.K. Const. L. Blog (15th April 2024) (available at https://ukconstitutionallaw.org/)