What’s it called when government takes over private businesses? A guide for entrepreneurs in government

Quick answer for entrepreneurs in government: what to call a government takeover of a private business

The short label depends on the facts. For many situations the words entrepreneurs in government will want to consider are nationalization, expropriation, eminent domain, and seizure. Use the right term because each name points to a different legal route and different compensation or remedies.

Nationalization usually means the state takes ownership, often by statute or executive action. Expropriation is the term used in international investment law for a government taking of foreign-owned assets, and it can be direct or indirect, with treaty-based compensation obligations in many cases, according to international guidance UNCTAD expropriation guidance.

Eminent domain is the U.S. constitutional takings power, governed by requirements for public use and just compensation, and it has a distinctive procedure and remedies under domestic law Eminent domain overview. Seizure is a broader term that can describe administrative or criminal taking of assets without a transfer to public ownership. This guide explains how those labels differ and what each likely means for entrepreneurs in government.

Legal categories and how they differ: nationalization, expropriation, eminent domain, seizure

These labels overlap but lead to different legal tests. Nationalization implies a formal transfer of private enterprises into the public sector, usually implemented by statute or executive action and driven by policy decisions. Analysts often treat nationalization as a policy choice with fiscal and governance implications, and policy reviews by international organizations explore those effects OECD state-owned enterprises reviews.

Expropriation, in contrast, is a legal concept in international investment law covering direct physical takings and indirect measures that effectively deprive owners of the use or value of assets. When foreign-owned assets are involved, many treaties require prompt, adequate and effective compensation in the event of expropriation, a standard discussed in international practice and guidance UNCTAD expropriation guidance. See an ICSID discussion of expropriation ICSID analysis.

In the United States, eminent domain rests on constitutional takings doctrine rather than treaty commitments; it is a domestic power that requires public use and just compensation under the Fifth Amendment. The constitutional and statutory frameworks that apply to eminent domain differ from treaty-based expropriation rules, and the remedies can follow distinct procedural paths Eminent domain overview.

Seizure is a term often used for administrative or criminal forfeiture where the state takes control of property, sometimes on different legal grounds and with separate procedural protections. Which label applies in a given fact pattern determines the forum, the likely legal tests, and whether compensation is a required remedy. Precision in naming the taking helps entrepreneurs and their advisers choose the right legal strategy and identify the likely decision makers and payors.

How eminent domain works in the United States and what entrepreneurs should know

The constitutional basis for eminent domain is the Fifth Amendment requirement that private property not be taken for public use without just compensation. That core rule sets the twin tests entrepreneurs should track: whether the planned taking qualifies as public use and whether the offered compensation is just. For a concise legal summary and the key decisions that shaped the doctrine, see a legal encyclopedia entry on eminent domain Eminent domain overview and our constitutional rights hub.

One landmark case is Kelo v. City of New London, which clarified that public use can be interpreted broadly and that economic development projects may meet the public-use test in some circumstances. That decision changed how courts and legislatures think about permissible public purposes and prompted many states to reexamine or tighten their eminent-domain statutes Kelo decision summary.

State-level rules matter a great deal. After Kelo, many states adopted statutory protections that narrow the scope of eminent domain, change procedures for challenging a taking, or require higher thresholds for public benefit. Entrepreneurs facing a potential taking should check local statutes, timelines for notice and hearing, and state-specific remedies because the practical process for valuation and compensation is governed at state level and in many cases by administrative practice.

Practically, an eminent-domain process often starts with a public agency identifying property needed for a public project, offering an appraisal-based estimate of compensation, and then, if the owner objects, initiating condemnation and court valuation. Entrepreneurs should maintain clear documentation of business use, value, and financial impacts, and consult counsel early to evaluate procedural protections and potential claims for just compensation.

Nationalization and state-owned-enterprise policies: when governments take ownership

Nationalization refers to a deliberate policy choice to transfer private assets into government ownership. Governments typically implement nationalization by statute or executive decree, and such actions often prompt detailed policy analysis because they alter public finances and the governance of strategic sectors OECD reviews of public ownership.

From a business perspective, nationalization often raises questions about compensation, the legal basis for transfer, and future governance of the reconstituted public enterprise. Analysts examine both near-term fiscal costs and long-term effects on investor confidence when public ownership expands, and those considerations often surface in country-level reviews of state-owned enterprises World Investment Report context.

Implementation routes can vary. Some nationalizations are sector-wide programs enacted by parliament or congress, while others use executive orders targeted at individual firms or assets. Entrepreneurs impacted by such measures need to identify the enabling statute or decree, the administrative process for transfer and valuation, and any domestic remedies or special tribunals set up to handle disputes.

International expropriation, investment treaties, and remedies entrepreneurs can pursue

In the international context, expropriation covers both direct physical takings and indirect measures that have the effect of depriving owners of asset value. UNCTAD frames expropriation as direct or indirect and notes that many investment treaties require compensation that is prompt, adequate and effective in many cases UNCTAD expropriation guidance. See the UNCITRAL handbook on obligations in investment treaties UNCITRAL handbook.

Treaty protection depends on the specific investment treaty or bilateral investment treaty in force between the investor’s home state and the host state. Where a treaty applies, remedies may include investor-state dispute settlement, which is a forum where investors can pursue treaty claims for compensation, subject to the treaty’s scope and any procedural prerequisites.

Availability and outcome of treaty claims will depend on treaty language, timing, and the precise facts. Entrepreneurs with cross-border assets should review relevant treaties, consider stabilization and expropriation clauses in contracts, and understand that international remedies can take years and carry procedural hurdles. Practical mitigation can also include political-risk insurance and early documentation of losses to support any later claim.

Development finance, land acquisition, and involuntary resettlement protections

When a project is financed or supported by multilateral lenders, land acquisition and involuntary resettlement are treated as specific processes with distinct safeguard policies. The World Bank and similar institutions require documented safeguards and compensation frameworks for projects they finance, and these rules are separate from general national takings doctrines World Bank guidance on involuntary resettlement.

These safeguards do not replace domestic law claims, but they provide an additional procedural route that may influence project implementation and compensation outcomes. For businesses operating near or within financed projects, early engagement with project teams and careful record keeping of property rights, use, and loss estimates can affect how compensation processes unfold.

How entrepreneurs in government can assess risk and practical mitigation steps

Start with a checklist-style risk assessment. Identify the legal regime that would apply if an action occurred: is the threat domestic eminent domain, sectoral nationalization, an administrative seizure, or a measure that could trigger treaty-based expropriation protections? Mapping the likely legal label helps determine the relevant forums and probable remedies and is a critical first step for entrepreneurs in government who need to protect assets across jurisdictions World Investment Report context. Consider also resources on strength and security.

Contractual protections can be helpful. Entrepreneurs can include stabilization clauses and explicit expropriation clauses in contracts, require dispute resolution terms, and seek guarantees where possible. Political-risk insurance can provide a financial backstop for certain events, though coverage terms and claims procedures vary by insurer and policy.

Documentation matters. Keep contemporaneous records of permits, approvals, business plans, valuations, communications with authorities, and any notices received. Those documents are central to supporting valuation arguments in domestic compensation claims or treaty-based proceedings, and they can affect quick administrative remedies as well as longer international claims.

When to call counsel. Seek specialized legal advice early if you see signs of government action. Counsel can help identify the right legal label, preserve evidence, and evaluate whether domestic appeals, administrative challenges, or treaty-based options are available. Decisions about immediate mitigation, filing injunctions, or preparing a treaty claim should be informed by counsel with relevant domestic and international experience.

Common mistakes, practical examples, and a concise conclusion for entrepreneurs in government

A frequent mistake is treating all takings as legally identical. Assuming a domestic eminent-domain route applies when the event is actually an international-style expropriation can lead to missed forums and lost remedies. Entrepreneurs should not overlook treaty language, local statute differences, or the separate safeguards that apply to financed projects UNCTAD expropriation guidance. See a recent analysis of compensation and damages in investor-state disputes Compensation and Damages in ISDS reform.

Scenario one, an eminent-domain example: a local authority identifies a parcel used by a small manufacturer for a public road project. The business receives notice and an appraisal-based offer. First steps include documenting business use and value, consulting local counsel about state eminent-domain statutes and procedures, and assessing whether alternative sites or negotiated compensation are feasible. The Fifth Amendment’s just compensation principle is central in such cases and state rules determine the process for valuation Kelo decision summary.

Scenario two, an international expropriation example: a foreign investor sees regulatory changes that effectively prevent operation of a plant. If a treaty is in force between the investor’s home state and the host state, the investor may have treaty-based compensation rights, subject to the treaty’s terms and any investor-state dispute settlement procedures. Early steps include preserving records, seeking local advice, and checking treaty coverage and procedural prerequisites World Investment Report context.

Next steps for entrepreneurs in government: map the applicable legal regime, document impacts carefully, and seek specialized counsel when a governmental measure appears imminent. Primary sources such as UNCTAD guidance on expropriation, World Bank resettlement standards, and local eminent-domain statutes are the best starting points for a factual assessment and for planning mitigation. For author background, see about.