The Acceptable Limits of State Interference in Private Property Rights During Periods of Economic Crisis

Abstract

The power of the state to compulsorily acquire the privately held real property of citizens is recognised in numerous developed democracies. However, the exercise of this power remains extremely controversial. In most jurisdictions the state’s power to compulsorily acquire private property is limited to instances of necessary public good. In many instances, such as hospitals or railways, a necessary public good is clearly identifiable. However, successive United States Supreme Court judgments have expanded the definition of public good to include redevelopment which is primarily to the benefit of another private party. The Supreme Court judgment in Kelo v. City of New London sparked a political outcry which led to severe limitations being placed on the power of state authorities to compulsorily acquire property for private redevelopment. Given the jurisprudence of the Irish Supreme Court in cases such as Clinton v An Bord Pleanála and others it is likely that the attitude of the Irish courts would be similar to that of their American counterparts in Kelo. Proponents of the Coase Theorem argue that the state should take a secondary role in such property disputes, leaving resolution to be achieved through private bargaining between the parties. However, this approach is predicated on an illusion of minimal transaction cost. The effectiveness of such an approach also declines as the distance between the parties to the transaction increases. Furthermore, property rights cannot be understood in purely economic terms. The role of law must be to delineate property rights in a manner which takes account of, and balances, private economic and other arguments such as community cohesion, economic development and social justice concerns.

Keywords: Eminent Domain, Compulsory Acquisition, Public Good, Kelo, Coase Theorem

JEL Classification: K11