Having concluded the elaboration of its operating regulations and the formation of its work commissions, the Constitutional Convention now advances in the substantive debate. One of the matters in which many hope (and many others fear) to see changes is the protection of private property. Although the inclusion of this guarantee in the new Constitution seems beyond doubt, there are some specific aspects in which the assembly could introduce relevant innovations. One of them is the amount of compensation for expropriation.
The current Constitution guarantees that any person affected by an expropriation "will always have the right to a full compensation." As part of a broader argument, which considers that the constitutional regime of 1980 grants an anomalously wide protection to the right to private property, part of the Assembly and some academics have proposed replacing this formula with one that establishes that the compensation for expropriation shall be established by statute, considering both the interests of the community and those affected.
From a comparative perspective, the regulation of private property in the 1980 Constitution is indeed uniquely broad and detailed. However, from a functional approach, the right to a full compensation is a common norm at a global level. For example, in the United States, the Supreme Court has ruled that the right to 'just compensation' under the Fifth Amendment guarantees the injured party compensation that is the full and perfect equivalent in money of the property expropriated (US v. Miller 317 US 369 (1943), 373), while the Swiss Constitution explicitly establishes that the person affected by an expropriation is entitled to full compensation (Art. 26).
On the other hand, in practice, constitutions that follow models consisting in balancing public and private interests reach the same result. For example, the German Constitutional Court has ruled that while the German Basic Law does not have an explicit commitment to market value as a measure of compensation for expropriation (Art. 14(3)), in principle, the weighting of public and private interests means the right of the affected party to be compensated for the effective damage suffered, unless exceptional circumstances, such as being partially responsible for the expropriation or obtaining an economic benefit from it, justify a lower amount (BVerfGE 24, 367). The European Court of Human Rights has followed a similar approach (James v United Kingdom [1986 ECHR 2])
There are both reasons of efficiency and arguments of principle that explain the comparative convergence towards the market price as a basic criterion for assessing compensation for expropriation. According to Ugo Mattei, behind this formula lies the adoption of what the Theory of Public Goods has shown to be the most socially efficient rule for this type of problem: on the one hand, it justifies the State forcibly acquiring property rights over things that cannot be acquired in the market and are essential to provide certain public goods, and, on the other hand, it guarantees that the entire cost of providing these public goods will be absorbed by the State, without arbitrarily imposing negative externalities on the community. In addition, from a principle-based point of view of, the effective damage formula is also respectful of individual’s dignity and equality before the law, as it prevents certain subjects from being instrumentalized for collective benefit by imposing on a few the economic cost of goods that serve all.
The above has three implications. The first is that it is not evident that the new Constitution need to replace the full compensation criterion with that of the balance of interests in order to remain within the dominant trends of contemporary constitutionalism. The second is that, even if that were the option of the Assembly, the market value should continue to be the primary criterion for setting compensation for expropriation. The third is recognizing that the expropriation of specific assets is not the best route to implement redistributive policies.
The author is a professor of Civil Law at the University of Chile.
Published in El Mercurio, Friday, January 21, 2022.