1 Introduction
This paper explores compulsory state acquisition of private property rights, primarily by reviewing existing literature. It consciously surveys a range of international economic and legal perspectives, rather than a focus on the New Zealand status quo. It does discuss the current New Zealand approach, but is not intended to represent a comprehensive summation of the New Zealand constitutional position or legal practice. The analysis is intended to advance debate on these concepts in the context of a wider context on improving regulatory quality in New Zealand.
The takings topic has been discussed recently in the review of the Public Works Act, and in Wilkinson (2001) where examples cited of possible New Zealand takings included compulsory acquisition of land, statutory revision of Maori reserve land leases, or even a requirement to provide statistical data for free. This takings aspect of regulation is the focus of this paper because of its topicality, the relative lack of coverage of it in the New Zealand context, and the distinct issues it raises regarding the nature of property rights.
A taking can be seen as simply a subset of the general concept of government regulation, or as one of a range of regulatory instruments available to government to achieve its purpose (albeit one that requires reassigning a property right).[1] Regulation, however, may not necessarily be treated as a taking unless it causes disproportionate private loss or sharply changes property rights expectations. The wider issue of improving regulatory quality overall to improve cost-benefit trade-offs and reduce compliance costs is touched on in section 6, but is not the focus of this paper.
The central question underlying the paper is “what protections against takings are appropriate, and specifically what is the role of compensation?”[2] Addressing this question requires defining a taking. A taking is broadly the act by which government assumes or assigns control over all or part of a property right (or legal right) held by a private party. It can include “appropriating for one's own or another's use or benefit”, or “assuming occupancy of” property.[3] In economic terms, it can be seen as government appropriating private property to achieve a public benefit.
The most longstanding principle underlying takings is “eminent domain”. This is defined as “sovereign control over all property in a state, with the right of expropriation” (Concise Oxford Dictionary, 1995) or the right of a government to appropriate private property for public use, usually with compensation to the owner.[4] Eminent domain is typified by compulsory acquisition of land, or rights to enter land, for public works. There is little if any dispute that when the government deprives someone of physical property, usually land, a taking has occurred.
“Physical” takings can be defined as where government or its agent actually assumes full ownership and/or occupation of a property right or a distinct portion of a property right. “Regulatory”or partial takings occur where government or its agent limits the nature of a property right by means of legislation, regulation, planning processes, permits or other regulatory means. Whether this distinction is meaningful is discussed in Section 4. A common example of a regulatory taking would be a planning requirement that limited the use to which property could be put, or the statute that authorises such requirements. A subset occurs where unrelated conditions are attached to a permit for a specific property use.[5] Whether such requirements are of general application (thereby both spreading costs and benefits) or single out specific property (more likely to impose a disproportionate cost) can also affect perceptions of acceptability and compensability.
Takings operate within a system of property rights supported by a rule of law and a constitutional framework.[6] This dates back as far as the Magna Carta.[7] The manner in which takings take place must be consistent with that system.[8]
Sections 2, 3 and 4 of this paper primarily review existing literature on definition of a taking, justifications for carrying out a taking, when compensation should apply and at what level, and the distinction between physical and regulatory takings. New Zealand’s use of takings is briefly outlined in Section 5. Section 6 discusses non-compensatory means of improving incentives on regulators. Concluding remarks are in Section 7.
Notes
- [1]In this sense, takings should be subject to the same regulatory quality regime as other forms of regulatory activity and considered in the context of the role of institutions and instruments in regulatory design, the focus of the work programme in which this paper falls.
- [2]Epstein (1985) notes that “all arrangements between the state and individuals are broken down into a network of relationships between different individuals” and from this approach identifies 4 questions for a takings agenda:
- [3]New Zealand guidelines on legislation refer to alteration of vested rights and ‘the principle that property will not be expropriated without full compensation” (Legislation Advisory Committee, 2001), while Standing Order 382 (2) (b) allows the Regulation Review Select Committee of Parliament to draw Parliament’s special attention to a regulation that “trespasses unduly on personal rights and liberties” (House of Representatives, 1996).
- [4]“The property of subjects is so far under the eminent control of the State, that the State, or the sovereign who represents it, can use that property, or destroy it, or alienate it, not only in cases of extreme necessity, which sometimes allow individuals the liberty of infringing upon the property of others, but on all occasions, where the public good is concerned, to which the original framers of society intended that private interests should give way. But when that is the case, it is to be observed, the state is bound to repair the loss of individuals at the public expense, in aid of which the sufferers have contributed their due proportion” (Grotius, 1625).
- [5]This can be inefficient where the value to the public of the condition (obtained at no explicit cost) is less than the cost imposed on the property right owner (Wilkinson 2001).
- [6]New Zealand law includes, by virtue of the Imperial Laws Application Act 1988, ancient statutes securing liberty and due process including Magna Carta and the Bill of Rights 1688, and the common law of England (including the principles and rules of equity), so far as it was part of the laws of New Zealand immediately before the commencement of the Act. The New Zealand Bill of Rights Act 1990 is also intended to affirm, protect, and promote human rights and fundamental freedoms in New Zealand.
- [7]The Magna Carta states that “No free man shall be seized or imprisoned, or stripped of his rights or possessions, or outlawed or exiled, or deprived of his standing in any other way, nor will we proceed with force against him, or send others to do so, except by the lawful judgement of his equals or by the law of the land” (Davis, 1989).
- [8]In the New Zealand context, guidelines note that “this body of rules imposes restraints on individuals and groups within society and regulates the way they exercise various freedoms. But at the same time it both confers and protects important rights, liberties and benefits. As a system it works only if the great majority of society and all major sections within it see it as supporting and protecting their interests.” (Legislation Advisory Committee, 2001).
