CHILE: PROPOSED CONSTITUTIONAL AMENDMENT CONCERNING NATURAL RESOURCES AND THEIR NATIONALIZATION

CHILE: PROPOSED CONSTITUTIONAL AMENDMENT CONCERNING NATURAL RESOURCES ANDTHEIR NATIONALIZATIONSource: International Legal Materials, Vol. 10, No. 2 (MARCH 1971), pp. 430-435Published by: American Society of International LawStable URL: http://www.jstor.org/stable/20690743 .

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430

CHILE : PROPOSED CONSTITUTIONAL AMENDMENT CONCERNING NATURAL RESOURCES AND THEIR NATIONALIZATION*

[December 21, 1970]

CHAPTER III

Constitutional Guarantees

Article 10. The Constitution ensures to all the inhabitants of the

Republic:

* * *

(10)-*/ The right to ownership of property in its different forms.

The law shall prescribe the manner in which property is to be acquired, used, enjoyed, and disposed of and the limitations and obligations thereon which ensure its social function and render it accessible to all. The social function of property includes whatever may be required by the general inter ests of the State, public benefits and health, a better utilization of the pro ductive sources and energies in the service of the community, and a raising of the living conditions of the people as a whole.

Whenever the interest of the national community so demands, the law may reserve to the State exclusive domain over natural resources, production goods, or others, declared to be of preeminent importance to the economic, social or cultural life of the country. It shall seek, likewise, a suitable distribu tion of property and the establishment of family "homesteads".

No one may be deprived of his property except by virtue of a general or

special law which authorizes expropriation on grounds of public benefit or social interest, defined by the lawmaker. The expropriated owner shall always have the right to compensation, the amount and terms of payment of which shall be equitably determined by taking into consideration the interest of the com

munity and of the expropriated owner. The law shall prescribe the rules for

fixing the compensation, the court which is to hear claims concerning the amount, which shall in all cases rule according to law, the manner of dis

charging this obligation, and the time and manner in which the expropriator shall take material possession of the expropriated property.

1/ Amended by Law 16,617 of January 18, 1967, published in the Diario Oficial on January 20, 1967.

*[Translated for International Legal Materials by Helen L. Clagett from the Spanish text in El Mercurio of December 22, 1970.

[Article 10 (10) of the present Constitution of Chile has been reproduced for the convenience of the reader from the translation prepared by the Pan American Union. The proposed additions to the Constitution are indented and enclosed by brackets.

[The amendment was reported out of the Senate on February 10, 1970, with modifications. The Chamber of Deputies will consider the amendment next. If there are further modifications, the amendment will go back to the Senate and possibly to a mixed commission of both chambers. International Legal Materials will carry the amendment as modified, once it emerges from both chambers of

Congress.]



431

[Proposed addition]

[The State has absolute, exclusive, inalienable and im

prescriptible ownership over all mines, guano deposits, metal lic sands, salt deposits, and coal and hydrocarbon deposits that may be located on private land with exception of surface

clays, rocks and sands directly used in construction.

The Law shall determine the substances that may be the

subject of exploration and exploitation contracts, the form and safeguards for the respective grants and concessions, what matters will be affected, the rights and duties that will arise therefrom, and the operations that must be carried out

by concessionaires in the interest of the community in order to merit the protection and guarantees of the law. Neverthe

less, exploration and exploitation of liquid and gaseous hy drocarbons, and of natural radioactive substances may not be

subject to any concession.]

Whenever the expropriation of rural property is concerned, the compensa tion shall be equivalent to the assessed valuation in effect for purposes of the land tax, plus the value of improvements not included in such valuation, and it may be paid partly in cash and partly in installments over a period of not more than thirty years, all in the manner and under conditions specified by law.

The law may reserve to the national domain for public use all waters ex

isting within the national territory and may expropriate those under private ownership in order to incorporate them in that domain. In such a case, owners of expropriated waters may continue to use them as concessionaries of a right of appropriation and they shall have the right to compensation only when, by total or partial denial of that right, they are effectively deprived of suf ficient water to meet, by reasonable and beneficial use, the same needs that were met prior to denial of the right.

[Proposed addition]

[When expropriation is made of surface lands, buildings, constructions, plants, installations, machinery, equipment, means of transport including thereunder privately-owned rail roads, tools, implements and personal property, rights of way, other property and rights of any category, even intangibles, that may be required for the normal operation of mining compa nies defined by law as "large mining industry", the amount of the compensation shall be the original cost of said property, after deduction of amortization, depreciation, write-offs, depletion of mines, and devaluation through obsolescence.

The State shall immediately take physical possession of the property, as soon as the expropriation order becomes ef fective.

Unless the party subject to expropriation accepts some other form of payment, compensation shall be made in cash over a thirty-year term, at an annual interest of 3 percent. Servicing of the debt will be in equal and successive annual instalments.]

Small rural property holdings worked by the owner and the housing inhab ited by its proprietor may not be expropriated without previous payment of compensation.



432

[Proposed addition]

[When nationalization of the nation's natural wealth or resources, or of material or other types of elements

required to develop these, or of enterprises that are high ly important to the national economy, is made on the basis of national interest or public use, the parties suffering the expropriation may not claim any rights other than those

arising from the application of Section 8 of this article. Third persons, insofar as concerns the State, may claim

rights only against the amount of compensation.

When the law affects the rights of private persons on the basis of general interest, whether to reduce these or to impose burdens thereon, or even to deprive them of said

rights, such persons may not claim any benefits, franchises, exemptions or guarantees that emanate from any agreements, conventions, privileges, accords, or contracts entered into with the State or its authorities, even should these have been granted pursuant and subject to legislation prior to the present measures being adopted, or if they have been

approved by the said laws.]

[Proposed Additional Transitional Articles to the Constitution]

[Fifteenth: Until such time as a new law shall regulate the manner and conditions to govern mining concessions refer red to in Section 10 of Article 10 of the present Political

Constitution, persons who have, up to the present, been owners of mining property shall henceforth be considered merely con

cessionaires, despite the fact that the use and enjoyment of the rights which have up to this time been acknowledged as theirs continue to be governed by the laws in effect. This shall be without prejudice to the provisions of the following sixteenth transitional article.

Sixteenth: Because national interest so demands it, and by virtue of the sovereign and inalienable right of the State to dispose freely of its natural wealth and resources, the incorporation into full and exclusive national owner

ship is decreed of all property necessary to the normal op eration of what the law in force has defined as the "great copper mining industry", as well as all other property owned by operating enterprises or their affiliates, and those in dicated by the President of the Republic. For all effects of the present nationalization, the Andina Mining Company shall be considered to be a "great mining industry".

This nationalization through expropriation shall be effected pursuant to the following rules:

a) Expropriation shall include all surface areas, buildings, constructions, plants, installations, machinery, equipment, means of transportation including privately owner railroads, tools, implements and personal property, active servitudes or rights of way, and property and rights of any nature, even intangibles such as patents and other industrial property, and generally any property necessary to continue the normal operation of this great copper min

ing industry and its by-products under conditions not



433

inferior to the present ones or to the projected expansion plans, even when these are owned by enterprises other than those carrying on the operations.

b) Nationalization shall also include property forming part of the assets which are current, cash, non current or deferred, and particularly accounts receivable, cash on hand, and finished or semi-finished products and

by-products, spare parts and materials.

The President of the Republic shall determine which of the specific properties referred to in the present section and the preceding one shall be transferred to State ownership.

The outstanding accounts not paid on their due date

by the respective debtors shall be discounted from the im mediate instalments to be paid as compensation.

c) All stipulations are hereby annulled with ref erence to the purchase price, or the price to be paid for stock under the promise to sell in order to establish the mixed copper mining companies, and also the stipulations re

ferring to the form and conditions of payment for said stock, and the advisory and administration contracts entered into by said mixed companies with foreign companies.

The profits collected by the Copper Corporation, the taxes and other liens paid by these mixed companies pur suant to law or to agreements contracted by them, shall not

give rise to any reimbursement; but payments made or to be made by the Copper Corporation on the price or on account of the price for the stock acquired by it, or by the State as

guarantor of this obligation, shall be chargeable to the com

pensation provided under the sixteenth transitional article.

The principal and accessory obligations to be de voted to the constitution of or to facilitate the operation of the mixed companies or corporations in which the Copper Corporation and foreign companies participate, or arising out of their establishment and present integration, shall have no value except as provided in the preceding section insofar as concerns the granting of more rights to the mem bers than those which proportionately correspond to them pursuant to the present sixteenth transitional article.

The mixed mining companies are hereby dissolved and the relations that had evolved between the members are

liquidated pursuant to the general rules, based on the rights granted by the present sixteenth transitional article.

d) Persons or enterprises affected by the national ization shall have a compensation as their sole right, the amount of which shall be the original cost of the expropri ated properties, after deduction of amortizations, deprecia tion, write-offs, mine depletion, and devaluation through obsolescence, and ignoring all revaluations of any nature. The properties that constitute current and cash assets shall be evaluated pursuant to the original purchase price, or manu facture or execution cost. Non-current or deferred assets shall be evaluated proportionately to the paid-up assets which are not consumed and not imputed to the operation costs.



434

Said compensation shall be decreased by a sum equiv alent to the excessive income production that said persons or

enterprises, or their predecessors have enjoyed since 1955 over the normal revenues which they themselves, or similar

enterprises may have obtained in their total international

operations.

e) There shall be no compensation whatsoever for mineral deposits other than those presently under exploita tion or for which eventual operation is planned for the

future, whether these are owned by persons or enterprises engaged in the exploitation or by third persons. Said

deposits and all related rights shall be transferred out

right to the State,

Neither shall there be right to compensation for

properties which the State does not receive in good opera tive conditions, nor for those delivered without service

rights, attention to repairs and spare parts, nor for re search studies, prospectuses and other intangible compens able properties if delivered without all documents, plans, reports and data required for full utilization.

f) Third persons may claim rights only against the compensation amount. Nevertheless, the State may take over any debts it may determine and negotiate new terms for payment with the creditors, deducting the value there of from the compensation. In any case, the payments that the State must make shall be deducted from the immediate installments of the respective compensation.

The State shall not accept any debts whose amounts, in the discretion of the President of the Republic, have not been usefully invested.

g) The State reserves the right to review, pur suant to law, all operations, imports, exports, documen tation and accounting of the copper enterprises in order to control and require full compliance with the legal obliga tions that affect them, and to prosecute any liability that these [enterprises] may incur therefrom. The resulting credit balances of this nature in favor of the State shall be deducted from the compensation.

Similarly, the State reserves the right to in

spect the existence, state and condition of the operations of the expropriated properties. Defects which may be found in such aspects shall give rise to the application of the final ruling in Section e) or to a reduction in the compen sation, as the case may be.

h) Unless the parties affected accept some other form of payment, compensation shall be payable in cash within the term of 30 years, at a three percent annual interest. The servicing of this debt shall be in equal and successive annual installments. The first installment shall become pay able one year from the date on which the definite amount of the compensation has been fixed.

j) Persons who have, since 4 September 1970, been entrusted in any capacity with administration or possession



435

of expropriated properties, whether owned by the mining enter

prises, or by other enterprises to which this nationalization

refers, shall be considered as depositories of said properties for purposes of liability.

k) The Office of Comptroller-General of the Repub lic shall determine the amount of compensation to be paid, pursuant to the preceding measures.

1) Appeal will be available against any determi nation made pursuant to the above section to the State and to the expropriated persons, before a Tribunal comprised of the Chief Justice of the Supreme Court, a member of the Con stitutional Tribunal designated by the President of the

Republic, the president of the Central Bank, the director of the National Planning Office, and the vice-president of the Production Development Corporation. This tribunal shall render a decision after hearing the parties and studying the antecedents it deems necessary for its decision. The pro visions of Article 86 of the Constitution shall not be ap plicable to this tribunal.

m) Refusal to deliver the studies, prospectuses, plans, reports, documents, information and other intangibles necessary to normal operations and to the progress of future

plans, and any conduct tending to disrupt the normal routine of the exploitation, or of the above-mentioned plans through obstructions or interruptions directly or indirectly imputable to the expropriated persons, shall be considered adequate grounds to suspend payment of the compensation.

The Tribunal cited in the preceding section shall decide on the justification of the suspension, in the manner so stipulated therein.

n) The State shall immediately take physical pos session of the properties once this amendment becomes effec tive.

O) The President of the Republic is empowered to

adopt measures concerning the transitional and permanent rules for management and exploitation of the properties and deposits affected by this nationalization, without prejudice to the

powers granted by laws in force to the Copper Corporation. To this end, any enterprises or services deemed necessary may be created.



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CHILE: PROPOSED CONSTITUTIONAL AMENDMENT CONCERNING NATURAL RESOURCES AND THEIR NATIONALIZATION