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2.1 International Context

2.2 General Considerations

2

245

3.1 Individuals

3.1.1 A Test of Nationality or Citizenship

3.1.2 A Test of Residence

3.1.3 A Test of Ethnicity

7

789

10

12

3.2 Companies and other Legal Persons

3.3 The Issue of Ultimate Benefit

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15

16

17

5.1 A Comment on Constitutions

17

24

28

28

6.1 The Outright Ban

6.2 Intermediate Restrictions

6.2.1 The “Key Sector” Approach

6.2.2 Land Quantity Restrictions

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30

31

32

32

33

35

36

6.2.3 Prior Authorisation

6.2.3.1 Who Decides the Application?

6.2.3.2 What Must Be Supplied?

6.2.3.3 What is the basis of the decision?

6.2.3.4 What Other Restrictions or Requirements May Be Imposed?

6.2.4 Registration and Notification

6.3 How Are State Requirements Enforced?

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41

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46

49

This study is a revised version of a working document originally prepared for the Development

Law Service and Land Tenure Service of FAO in April 1995. The genesis of the document lay in

the request of the Government of Lithuania for assistance from FAO in analysing the policy and

legal options available for dealing with the sensitive issue of foreign ownership of land. There

were concerns at that time that Lithuania’s constitutional prohibition on ownership by noncitizens

might negatively affect the country’s efforts to join the European Union. There were

also, however, persisting fears that complete elimination of all restrictions on foreign ownership

would result in a loss of control by the nation over its own territory. Consequently, the

Government of Lithuania was eager to know how other countries had approached the issue of

foreign ownership, and to learn in particular about any intermediate strategies that might have

been designed, falling somewhere between complete prohibition and complete liberalisation.

The purpose of the 1995 document was to provide an overview of the wide-range of approaches

used around the world, in order to help ensure that the ongoing debate in Lithuania was

informed by as much comparative experience as possible.1

Since 1995, it has become increasingly clear that the issue of foreign ownership of land remains

high on the agenda of many nations around the world. Indeed, as the pace of economic

integration and globalisation accelerates, it can be expected that many existing regulatory

approaches will be re-examined. New techniques will be sought that are designed to strike a

better balance between a country’s perceived interests in regulating foreign investment in land,

and the modern imperatives of an international economy.

Because of the widespread and growing interest in this topic, the Development Law Service

decided to update the original 1995 document and to make it available to a wider audience.

The study is based on a review, where possible, of relevant legislation and other legal

instruments. Given the difficulties of access to many primary sources, however, the survey also

relies on foreign investment guides, country summaries in legal yearbooks, short articles from

the news sections of legal periodicals, internet databases, and the somewhat limited academic

and professional literature directly on the subject.2

The objective of this study is to provide information on the approaches that are, or have been

adopted to regulate foreign ownership of land. As such, it aims at providing a framework for

analysis and a representative sample of the legal techniques and strategies that have been

devised to deal with the issue; it is not intended to be an authoritative summary of the state of

the law in this area.

conference. In recent years, the restriction has been relaxed with respect to ownership of non-agricultural plots by

EU and OECD nationals. See Constitutional Law of the Republic of Lithuania On Subjects, Procedure, Terms and

Conditions and Restrictions on the Acquisition into Ownership of Land Plots Provided for in Article 47, Paragraph 2 of

the Constitution of the Republic of Lithuania, which came into force on 2 February 1998.

2 This literature was described as "scanty", in 1980, and the position has not improved greatly since then. Joshua

Weisman, "Restrictions on the Acquisition of Land by Aliens", 28 Am. J. Comparative L. 39 (1980).

Moreover, while every effort has been made to refer to the most recent accessible information

on the subject, it has not always been possible to ensure that the legal situation described for a

given country is up-to-date in all respects. Perhaps because of the fundamental nature of land

rights, the laws in this area do not change frequently, as a general rule. Nevertheless, dramatic

changes in basic land laws have occurred and are ongoing in a number of places around the

world, most notably in the countries of central and eastern Europe and central Asia, as well as in

parts of Africa and Latin America. European Union access criteria has prompted attention to the

issue of foreign ownership in many countries contemplating future EU membership, and a

economic crisis in Asia has inspired a number of countries, including Korea, Thailand and

Philippines, to consider changes to their restrictions on foreign ownership, in order to bolster

Consequently, it should be noted that the examples used here are presented primarily for their

indicative and illustrative value, a value that they retain even as they are, from time to time,

revised or discarded by the country in question. Nevertheless, future updates to this paper are

planned (including, inter alia, coverage of new developments in Central Asia and Africa), and will

be posted on the FAO Legal Office web site as they are completed. A paper version is

expected to be published in 2000.

Although restrictions on foreign ownership and use of land are frequently flagged in the

literature, if there are no references to restrictions, it does not necessarily follow that no

restrictions exist. In such cases, the study follows a cautious approach to characterising states

as having no restrictions on foreign land ownership.

The focus of this study is on foreign ownership and use of land. Accordingly, a number of

important related issues are not discussed in any detail. In particular, the study does not deal

with general restrictions relating to foreign investment and foreign exchange (which may also

impact on foreign ownership of land) nor with the issue of mineral and mining rights (some

states such as Australia and Brazil regulate the right of foreigners to exploit and mine for

minerals and other resources).

Jonathan M. Lindsay

FAO Development Law Service

3 See Box 5, below.

Land is a fundamental resource of the nation state. Without land, without territory, there can be

all based upon land management and use.

As the modern state emerged, those who were not citizens were classified as "foreigners" or

"aliens" who, by their very status as such, were deemed not to be appropriate recipients of full

attitudes towards "foreigners" have changed, a process assisted by global communications,

increases in foreign investment and the growth of international trade. In many areas states

mutually accept the rights of each other's citizens to receive the same treatment as their own

citizens, and this trend is likely to continue. However as regards land, many states still restrict

its ownership and use by foreigners.

This comparative study looks at the legal and administrative techniques which various countries

have adopted to prohibit, restrict and regulate the ownership and use of land by foreigners

whether they be natural or legal persons.

A number of states such as Germany, France, the United Kingdom, Portugal, the Netherlands,

Belgium and Luxembourg, do not have any restrictions on foreigners as regards land ownership

countries which apparently also have no specific restrictions on foreign ownership or use of land

The presence or absence of restrictions and regulations designed to limit or control foreign land

ownership, may not be the end of the matter. If the purchase of land by a foreigner is for

investment purposes, or ancillary to investment, it may be subject to the rules and restrictions

set out in a state's foreign investment code. A comparison of foreign investment restrictions is

6 For a description of the historical development of foreign land ownership restrictions in England and France, see

7 In Germany, Article 14(2) of the Grundgesetz provides that there are no distinctions regarding ownership of

property between citizens and non-citizens. A similar provision exists in Article 711 of the Civil Code in France. In

Belgium, the ownership of property is a fundamental right of both Belgians and non-Belgians. For further information,

reported that Argentina had substantial restrictions on foreign ownership.

9 Equally a foreigner purchasing land, such as a family home, in the United Kingdom might not necessarily be in a

position to use the land for the intended purpose if that individual is unable to satisfy immigration requirements.

10 For many years foreign land ownership in India was severely affected by the exchange control restrictions in the

Foreign Exchange Regulation Act of 1973. Those restrictions have now been significantly liberalised. D.C.

A majority of the states reviewed discriminate against foreign ownership and, less frequently,

foreign use of land through various restrictions and regulations. These can range from an

outright ban to a simple requirement that notice of foreign ownership be given to the relevant

authorities. Such policies can apply to all of the land within a state's boundaries, or only to land

in certain areas, of a particular nature or designated for a particular use, or to a combination of

these.

This survey begins by considering the fundamental issues of the existing forms of land

ownership or tenure; what is meant by "land"; and who or what is a "foreigner". We will then

consider the various policy rationales for different approaches to land, before examining the

range of techniques and approaches.

The range of approaches to regulate foreign land ownership is striking. In one sense this

should not be surprising given that the issue is largely unregulated by international law, leaving

states to legislate in accordance with their own policies and requirements.

Customary international law places no restriction on the right of states to restrict or regulate

foreign ownership of land within their territories. States have sovereignty over their natural

to allow them entry only on terms - including a term that they may not own or use land or

International law is primarily concerned with the issue of the expropriation of land already

lawfully owned by foreigners. While expropriation itself is not unlawful under international law,

deciding whether or not to purchase land in a particular state might well be influenced by that

state's attitude to the issue of expropriation, this cannot in itself be considered to constitute a

legal restriction.

There are no global multilateral treaties on the issue of foreign land ownership or use. The

instrument which comes closest to regulating in this area is the Organisation for Economic

Cooperation and Development (OECD) Code of Liberalisation of Capital Movements which

imposes a general obligation on each state signatory to liberalise its policies towards

transactions and money transfers necessary for direct investment. However its impact on

11 This principle of customary international law was most recently affirmed in Principle 2 of the Rio Declaration at the

Earth Summit in 1992.

13 Various rules relate to the basis and manner for expropriation, including the amount of compensation paid; how

that amount is determined; when payable; and the appropriate forum for the assessment of any disputes that may

foreign ownership of land is minimal. One commentator has noted that it has "only a marginal

effect on existing real property law and would not prevent a participant country from enacting

Other related instruments are the draft United Nations Conduct of Transnational Corporations

Code, and the draft Multilateral Agreement on Investment, currently being negotiated through

the OECD. The former is designed to regulate the conduct of multinational corporations, and

the latter to minimise trade barriers to foreign investment. Neither of these draft agreements

Regional international treaties can have a more direct bearing on the issue. Until the passing of

Decisions 220 and 291 by the Commission of the Cartagena Agreement, members of the

Andean Pact (Colombia, Venezuela, Peru, Ecuador and Bolivia) were each bound at national

level to severely restrict levels of foreign investment in their economies, and by extension,

of Member States to restrict or regulate the ownership of land by foreigners who are nationals of

other Member States as set out in Box 1.

Other potential restrictions in international law on a state's right to regulate or restrict foreign

ownership of land are bilateral Friendship, Commerce and Navigation Treaties or their modern

cousins, Bilateral Investment Treaties. As the latter's name suggests, such treaties are more

concerned with investment regulation in general, in particular the grant of “national treatment”,

whereby foreign investors are accorded the same treatment as national investors, or “most

favoured nation” status, whereby all foreign investors, regardless of nationality, are treated

equally.

Few such treaties, however, grant foreign nationals a right to own property in the host state.

While treaties typically provide that each state "shall" admit investments from the other state

party, such obligations are frequently qualified by a clause adding words to the effect that the

restricting foreign ownership of land would therefore still apply. Indeed in a 1976 study of the

thirty-six such treaties entered into by the USA, only three guaranteed foreigners the same

treatment as nationals in respect of the general acquisition of land, and six in respect of the

acquisition of land by inheritance. By far the greatest number gave a time allowance for the

Therefore although the terms of bilateral investment treaties vary considerably, requiring each to

be considered on its own terms, in general such treaties have little practical effect on the

a discussion of the UN Conduct of Transnational Corporations Draft Code.

(1976).

restriction and regulation of foreign ownership of land.

The Treaty of Rome, which establishes the European Economic Community, as amended by the

Single European Act 1987, the Treaty of European Union 1992, and the Treaty of Amsterdam 1997,

does not specifically deal with the issue of foreign land ownership, whether or not the foreigners are

nationals of other Member States.

However, treaty provisions prohibiting discrimination on the grounds of nationality, guaranteeing the

free movement of goods, persons, services and capital, and freedom of establishment within the

European Union, combine to restrict the competence of Member States to limit land acquisition by

nationals of other Member States. Foreigners who are not nationals of EU Member States are still

subject to the laws of the individual Member States.

Within the scope of application of this Treaty, and without prejudice to any conditions contained

therein, any discrimination on the grounds of nationality shall be prohibited …

The Community shall adopt measures with the aim of progressively establishing the internal market …

The internal market shall comprise an area without internal frontiers in which the free movement of

goods, persons, services and capital is ensured in accordance with the provisions of the Treaty.

(1) … the Council shall … draw up a general programme for the abolition of existing restrictions

on freedom of establishment within the Community …

(2)(e) The Council and the Commission shall carry out the duties devolving upon them under the

preceding provisions, in particular: … (e) by enabling the national of one Member State to acquire and

use land and buildings situated in the territory of another Member States …

Also relevant is Regulation 1612/68/EEC granting nationals of Member States equal employment rights

and rights of accommodation in connection with their employment (Article 9).

Belgium, Germany, France, Luxembourg, the Netherlands, Portugal and the United Kingdom have no

restrictions on foreign ownership of land. In the Republic of Ireland, foreigners (except those with 7

years continuous residence) are required to obtain the permission of the Land Commission to

purchase land or hold a lease, mortgage or contractual interest, such as an option, in agricultural land.

Italy and Spain have restrictions on the acquisition of land by foreigners in border areas. In Spain, EU

national are exempted from these restrictions, although in Italy, ownership and use of land in border

areas by EU nationals and other foreigners must be authorised by the local Prefect of Police. Greece

also has special restrictions on the acquisition of land in border areas. EU nationals are subject to the

same restrictions and must obtain the same authorisation as Greek citizens. Other foreigners are

subject to a different regime.

Ownership and use rights in relation to land in some legal systems (including most common law

systems) are based on a distinction between real property (land and land rights) and personal

property. In other legal systems, particularly civil law systems, rights in respect of land are

based on distinctions firstly, between immovable things (land and buildings) and movables and

secondly, between real rights enforceable against the world and personal rights which are only

enforceable against specific parties. In some legal systems, land ownership rights are described

as permanent use rights although for practical purposes, the effect of such a right often appears

However there are many variations among countries, even between legal systems from the

same "family". For example in most legal systems, particularly those influenced by Roman law,

Furthermore, in addition to the substantive law differences, there are numerous other

differences between jurisdictions as to the practicalities and proof of land ownership, notably

whether this is by deed or registration. Further, it should be noted that in federal states, land

ownership legislation is often left to the provinces or states, which have more direct control over

A comparative survey of different legal concepts of, or approaches to, land ownership is beyond

the scope of this paper. However, it is important to be aware of the effects which differences in

underlying legal concepts can have on the formulation and implications of restrictions on the

foreign ownership and use of land.

Despite the many differences between legal systems in this area, broadly speaking notions of

of possession, of use and enjoyment, and of alienation (i.e. the right of sale or other disposal).

Ownership rights are usually subject to some restrictions in the interests of the community at

large. For example, under Roman law (on which the ownership regimes in many civil law

systems are based), the general rule that ownership was absolute and conferred upon the

owner the right to deal with property in any way whatsoever unless prohibited by law, was

tempered by the qualification that in doing so, the legal rights of others must not be infringed.

Not all legal systems, however, admit such a concept of private land ownership. For example in

19 See for example, Article 7 of the Ukrainian Land Code. Cited in W.E. Butler, M.I. Braginski, and A.A. Rubanov,

20 For example, Article 750 of the Mexican Civil Code defines land - ("Bienes Immuebles" or real property) - as

including the "soil and constructions attached thereto ... plants and trees while united to the ground ... everything

which is united to the ground in permanent manner..."

23 Although there may be significant differences as regards rules on the inheritance of land.

ownership of land is not permitted for ideological reasons - although it may be used or leased by

both nationals and foreigners. Some states which were formerly part of the USSR have

changed or are in the process of changing the law in this area, although state ownership retains

a strong hold in many of these countries.

In many African countries, the notion of land ownership being vested in the state prevails,

though private use or occupancy rights based on statute or customary law are recognised in one

result of major reform of the land regime in the 1970s which sought to consolidate and simplify

the previous mixture of customary and statute law, nearly all land is vested in the Governor of

each state to be held on trust for the citizens of Nigeria. The State Governors have power to

grant rights of occupancy over the land, to consent to the alienation of such rights and to

override them in the public interest. The licensing of alienation gives the Governors power to

In Israel, 92 per cent of the land is state owned, and subject to very limited exceptions, the law

provides that it cannot be sold. Therefore, apart from the 8 per cent of Israeli territory in which

land can be owned privately, land holding takes place on the basis of the grant of long term

Although restrictions on the ownership of land by foreigners are more common, some states

place restrictions on types of land use. A number of states restrict the rights of foreigners to

using land for certain purposes. Furthermore, even if a state does not expressly regulate

foreign use of land, it may retain the right to approve or grant leases or use rights which means

that the state retains an element of control which can be used to regulate foreign land use.

In some parts of the world, such as in substantial portions of many African countries and the

South Pacific, land systems are based upon customary land tenure, "… a phrase which is widely

26 See for example Eritrea, Land Proclamation, 1994; Tanzania, Land Act, 1999.

27 Land Use Act 1978. See Emmanuel Nwabuzor, "Real Property Security Interests in Nigeria: Constraints of the

28 Normally leases are for 49 years with an option to renew for a similar term, to a maximum of 98 years. See

(Kluwer, 1992), part on Israel.

customary land tenure in the South Pacific, more than 90 per cent of the land in the 22 countries and territories

Pacific, Fiji, 1995), at 2.

land tenure is a form of land holding which is based upon the customary laws of the community,

which are often unwritten.

The Vanuatu Constitution, for example, states that all land belongs to indigenous customary

owners and their descendants, and that only indigenous citizens who have acquired land in

However, customary land holding is permitted for 75 year terms, and foreigners (or persons

from other islands in Vanuatu) wishing to acquire land on an island may do so with the

To regulate ownership of land by foreigners it is essential to define which natural and legal

persons (such as companies) are considered "foreigners". This issue may raise complex

definitional questions, particularly regarding legal persons, which will be answered in different

ways depending on the policy objective that the state concerned seeks to achieve.

Different states use different terminology. For consistency, the terms "foreign" and "foreigner"

have been used throughout this study, and may apply to both natural persons and to legal

persons, such as companies. These terms have been used instead of words like "national",

"citizen", "alien", in order to encompass the wide variety of tests of "foreignness" which are used

in the regulation of land ownership and use.

This Part examines three issues: the definition of a foreign natural person (including a member

of a foreign partnership); the definition of a foreign company or legal person; and how the issue

of ultimate benefit is relevant in respect of both natural and legal persons.

It is important to appreciate from the outset that in most cases the question of whether a person

is foreign is raised only once - at the point when, or before, the land in question is purchased or

of a lease, has been completed. One of the few exceptions discussed in the literature is Ireland,

where the Land Act provides that where "control" of company with an interest in agricultural land

passes to foreigners the company is under a duty to notify the Land Commission within one

As regards individuals, two main tests are used: nationality/citizenship alone and a combination

test of nationality/citizenship and residence. However there is no rigid distinction between the

two tests and elements of each may overlap. A third, more infrequent test, makes reference to

ethnicity.

33 Land Act 1965, s. 54(5)(a). See also the US International Investment and Trade in Services Survey Act of 1976

which requires notification by foreigners acquiring 10 per cent or more of the shares of US real estate corporations.

International law provides that each state should determine who is and who is not a national

nationality, citizenship and its attendant privileges is beyond our scope. For the purposes of this

survey a reference to a person as a national follows the classification adopted by the state in

Although the national/non-national test might seem straightforward, a review of its use in the

context of land ownership shows that the notion has a wide variety of applications. A common

provision permits only nationals or citizens to own land, either at all, or free from restriction. For

example the Constitution of Lithuania originally provided that only the State and natural persons

foreigners may not own land, or that they are subject to certain restrictions, many of which will

be considered below.

Some states differentiate between "types" or classes of foreigner in regulating land ownership or

use. Typical examples are legislative provisions that place additional restrictions on enemy

aliens in time of war. For instance the US Trading with the Enemy Act 1970 allows the federal

government to take control of enemy alien property in times of war or a declared emergency.

Further, under the US Foreign Assets Control Regulations, during a state of emergency prior to

the outbreak of war aliens from designated states may be required to obtain Treasury

Similarly, in the Canadian province of Nova Scotia the relevant statute expressly provides that

Other jurisdictions positively discriminate in favour of classes or types of foreigner, the most

striking, perhaps, being the concept of the "alien friend" in New Jersey law (see Box 2).

Similarly, Saudi Arabia, which otherwise prohibits foreign ownership of land, makes an

In determining which foreigners will be granted privileged status as regards land rights, the

issue of reciprocity is a common criterion. Certain states such as Turkey and El Salvador

international custom, and the principles of international law; Articles 1 and 2 of the Hague Convention on Certain

Questions Relating to the Conflict of Nationality Laws 1930.

35 In addition it is accepted under international law that a person may be a stateless person.

36 Article 47(1). These restrictions have been relaxed at least with respect to ownership of non-agricultural plots by

37 James R. Mason, "PSSST, Hey Buddy, Wanna Buy a Country? An Economic and Political Policy Analysis of

generally permit foreigners to hold land on condition that reciprocal rights are granted to their

nationals. Taiwan permits the acquisition of land rights by foreigners whose own governments

have entered into equal and reciprocal treaties with it - such as a Treaty of Friendship,

described in Box 1 are another example of treaty obligations giving rise to a preferential status

for some foreigners on the basis of the existence of reciprocal rights (in this case for citizens of

other Member States).

Article 16 of the Italian Civil Code on the other hand makes the grant of all civil rights to

foreigners, including the right to own land, conditional on reciprocal rights being granted to its

Poland has taken the notion of reciprocity further, where, as of January 1997, any EU

companies operating in the country are able to purchase real estate and lease natural

This reciprocity can also apply to the manner of land acquisition. For example the US State of

North Carolina permits the acquisition of land rights by succession or testamentary disposition

differentiating on the basis of nationality, a further variation relates to an exception based on the

intended acquisition of citizenship. Indiana State law requires that aliens not intending to

become naturalised citizens must dispose of all property in excess of 320 acres within 5 years of

preferential treatment is the result of a bilateral treaty, but may also be a factor in Poland seeking accession to the

EU.

alien not intending to become a citizen escheats after 8 years. KY.Rev. Stat. Ann § 381.300(1) (Michie/Bobbs-Merrill

1970).

Alien friends shall have the same rights, powers, duties, liabilities and restrictions in respect of real

estate situate within this State as native born citizens. Any alien who shall be domiciled and

resident in the United States and licensed or permitted by the government of the United States to

remain in and engage in business transactions in the United States, and who shall not be arrested

or interned or his property taken by the United States shall be considered an alien friend within the

meaning of the act.

Occasionally legislation permits individuals to cure their nationality "deficiency" in the context of

land ownership by allowing them become pseudo-citizens in so far as land ownership or holding

27 provides that only Mexicans by birth or naturalisation have the right to own land, but that "the

same right may be granted to foreigners, provided they agree before the Minister of Foreign

The Constitution of the Philippines, which prohibits foreign ownership of land, even limiting the

rights of occupation of foreign mortgagees, makes an exception for those who acquire lands by

to the devolution of land to foreign statutory heirs who are parents or children of the landowner,

"immovables", has limited exceptions, and will permit a foreign spouse to own land jointly with

Not all jurisdictions allow such exceptions. In Thailand, where foreign ownership of land has

Article 22(1) of the Bulgarian Constitution also requires that any acquisition of land through legal

inheritance be transferred.

Finally there can be links between the concept of citizenship or nationality and residence, such

as in the case of Malta where restrictions on land ownership apply to people who are "nonresident",

which is in turn defined as a person who is not a citizen of Malta or who is not the

A test of residence is the other most common method of restricting or preventing foreign

45 Commonly known as a "Calvo" clause.

46 David L. Callies, "Land Ownership, Use and Property Rights: the Balance Between Local Ownership and Foreign

Europe"), at 20-25.

48 Foreign Currency Act, 219/1995, s. 17.

the 1998 financial crisis, made some inroads into what has been one of the most restrictive national regimes

concerning foreign ownership. The foreign ownership ceiling in condominium projects was raised to 49% from 40%,

and to 100% (for five years) if the buildings are located in or near Bangkok; payment terms for foreigners were

relaxed, allowing them to pay in baht; foreigners can acquire up to one rai each for residential purposes if he or she

1999 Economic Review, 1999 Year End Edition.

residence is used by states partly to ensure that absentee owners, who may be less inclined to

use the land productively and contribute to the state economy, do not own land. Trends in this

regard relate to the protection of agricultural land for active use, and concerns about absentee

landowners on vacation properties. Consequently granting ownership rights only to those

foreigners who are resident is seen as being justified (see Part 4).

may only buy rural property, subject to authorisation and compliance with specified formalities, if

Some jurisdictions specify residence for a certain period. Irish law provides that a non-Irish

citizen who has been ordinarily resident in Ireland for 7 years need not obtain the prior written

consent of the Land Commission to purchase, lease, or acquire any interest in rural agricultural

Further, satisfying a residence test regarding land purchase may not be sufficient to guarantee

unrestricted use of the land. For example, there is no bar to non-residents buying or renting

property in Monaco but unless they have a residence permit they may only stay in Monaco for

In contrast the 1984 Swiss Federal Law on the Acquisition of Real Estate by Persons from

Abroad (the "Lex Friedrich") bases its requirements on residency permits. Foreigners with yearround

residence permits do not need government authorisation for the real estate they occupy.

If the presence or absence of a residence permit is not the test, and not all states require them,

how is residence to be measured for the purpose of land ownership regulation?

The Canadian province of Saskatchewan, which provides that aliens may not hold farmland of

51 States may have other tests of residence, habitual residence or domicile, often in connection with tax and

immigration laws and this survey does not purport to offer a comparative analysis of those concepts - except where

they are expressly defined in foreign land ownership legislation.

(Kluwer, 1991) (hereafter "Campbell Latin America”), at 20-24, Brazil.

55 The Land Act 1965, s. 45(2)(a).

ownership policies (i.e. no restrictions at all), but with increasingly tough immigration and visa policies.

more than a certain value unless they have been "resident farmers" of the land for five years,

The Australian Foreign Takeovers 1975 Act, which requires notification of proposed acquisitions

ordinarily resident non-citizens. An ordinarily resident non-citizen is defined as someone who

has been in Australia for 200 days in the preceding 12 months, and whose presence is not

What happens if residence is surrendered? Most laws with residence as the test seem to be

silent on the point - being concerned with status at the date of acquisition. The US State of

Missouri however provides that a resident owner of farmland must dispose of such land within 2

Some states apply tests based on ethnic origin due to their unique land holding structures; this

situation is most likely to occur in systems of customary land tenure. For example 90 per cent

of land in Fiji is held in trust for native Fijians according to native custom and tradition. Such

lands cannot be owned by people who are not native Fijians unless a whole community (the

beneficiaries) dies out, after which the land reverts to the state. However in certain limited

circumstances the Native Lands Commission can lease land to a non-native Fijian. Similar

restrictions on non-native ownership apply in Papua New Guinea, where customary groups,

according to unwritten rules and principles, own nearly 99 per cent of the territory.

"Landowners" within such groups can only sell "their" land to another group member.

Most of the provisions concerning ownership of land by legal persons in various countries’

legislation are in respect of companies rather than other legal entities such as trusts or

associations. The status of partnerships is usually determined by reference to the status of

some or all of the individual partners. For example, to fulfil the requirements of Icelandic Law,

requirements as outlined in the Canadian Income Tax Act.

59 Foreign Takeovers Act 1975, as amended by the Foreign Takeovers (Amendment) Act 1989.

63 Act on the Control of Acquisitions of Real Property by Persons Residing Abroad and by Foreign Legal Entities

(1613/92). The same rule applies in Norway where partnerships are foreign even if only one foreigner participates -

including a sleeping partner.

foreign individuals. South Korea permits foreign companies to own the land necessary for their

operations, with the approval of the Economic Planning Board. A separate approval process

operates in South Korea for companies with over 50 per cent foreign equity, which may

Romanian Senate approved a bill that, for the first time, permits foreign companies, but not

foreign individuals, to buy property. Similarly, while Bulgarian law imposes restrictions on

foreign individuals, there are no limits on Bulgarian partnerships or companies with foreign

A range of tests are applied to determine whether or not a company is foreign for the purpose of

limiting or restricting land ownership or use rights. The simplest test is to examine where a

incorporated. For example in Bermuda the law simply provides that foreign registered

straightforward.

While such a test of corporate nationality may be simple, however, it may also be misleading.

Thus it is common for international treaties to "pierce the corporate veil", and to look beyond

Such "extended" examination is frequently adopted in the context of foreign ownership of land.

Indeed it may be very relevant to popular fears of foreign economic domination, particularly in

connection with the activities of transnational corporations. Land ownership restrictions based

on the narrow test of foreign registration would obviously not apply to locally incorporated

subsidiaries of transnational corporations or to other locally incorporated companies controlled

by foreigners.

One of the difficulties facing regulators is defining at what stage a national company is to be

regarded as controlled by foreigners and therefore subject to land acquisition restrictions. The

laws of many states simply require an examination of the share registers to ascertain the

proportion of foreign shareholders and the extent of their voting rights. In the Dominican

Republic a company is regarded as foreign controlled where foreigners control 51 per cent of

transitional legislation in the early 1990s which provided that foreign legal entities and Finnish

1992), at 2A.10.18. There have been some recent moves to liberalise Korea’s law concerning foreign ownership.

65 Boris Bogdanov Landjev, "Legislation on Foreign Investments in Bulgaria: Historical Background and Current

66 But they can own up to 40 per cent of the shares of a Bermudan company which owns land. Campbell Latin

legal entities controlled by foreigners (where control means having more than 50 per cent of the

In Oman, Royal Decree 24/95 now permits companies with up to 49 per cent foreign ownership

to purchase land, a measure likely to encourage foreign investment, but not foreign ownership.

In Malta the Immovable Property (Acquisitions by Non-Residents) Act 1974, provides that a

Maltese company with 25 per cent of its shares owned by non-residents, as well as one directly

or indirectly controlled by non-residents is a non-resident company and is governed by the

Other states set higher thresholds. Icelandic law provides that in order to qualify as a national

company and thereby avoid the somewhat burdensome restrictions on foreign land ownership, a

limited company must not only be domiciled and based in Iceland but all the directors must be

Icelandic and Icelanders must own 80 per cent of the shares and control the majority of votes at

Arabian law to taint a company as "foreign" as regards land ownership. A Saudi entity having

non-Saudi shareholders (which must already be licensed under the Foreign Capital Investment

Code) may only own real property for corporate purposes if it has obtained a licence from the

Similarly the 1976 US Agricultural Foreign Investment Disclosure Act ("AFIDA"), which requires

foreigners to register the acquisition of any interest (except a security interest) in agricultural

land larger than 10 acres within 90 days, defines a "foreign person" as any "entity that is created

greater interest, or where a "coalition" of such persons owns at least 10 per cent; or if 50 per

Until the introduction of liberalisation measures in 1990, the issue of foreign control of a

company was also extensively defined in the law of Trinidad & Tobago (see Box 9). In addition

to considering the amount of shares held by foreigners, regard was had to the size of any

69 See the Act on the Control of Acquisitions of Real Property by Persons Residing Abroad and by Foreign Legal

71 These conditions can be dispensed with by the relevant ministry - but no dispensation is needed if the lease can

regime is nearly as strict. Joint stock companies need concessions, unless the company is registered in Norway, has

an entirely Norwegian Board, and at least 2/3 of the stock is Norwegian owned.

72 Regulations for non-Saudis taking Possession of Real Property in the Kingdom, Royal Decree No. M/22, 13

73 7 USC §3508(2)-(4),1988; 7 CFR §781.3(b), 1989.

74 See Box 9.

is foreign controlled. The Land Act 1965, which applies to agricultural land, provides that a

person will be regarded as controlling a company or body corporate if the articles of association

or similar document confers powers of control upon them and the affairs of the company are

conducted in accordance with their wishes. If that person is a non-resident foreigner, then the

The Swiss Lex Friedrich also takes a broad approach to the issue. Permission to acquire land is

required not only by companies which are not domiciled in Switzerland but also by Swiss

companies controlled by non-residents. To determine the issue of control the law examines

whether or not non-residents have a "dominant position" in the company. There is a

presumption of such a dominant position if more than one third of its shares are held by nonresidents,

if the management is substantially non-resident or if according to a special statutory

noted that the Swiss government recently sought to revoke the Lex Friedrich, but Swiss citizens

Finally some states, usually those which restrict direct foreign land holding, do permit joint

ventures to own land even though they might otherwise have foreign status by reason of the

participation of foreign venture members. An example is Latvia where in December 1994 the

Parliament approved an amendment to the land law which allows the purchase of land by joint

ventures with foreign participation provided that Latvian citizens hold the majority stakes and by

foreign companies from countries with which Latvia has agreements protecting foreign

hand, prohibits even joint venture companies from owning land - although they may acquire

lesser land use rights and can also rent land. Since 1980, the grant of "cultivation titles" in

respect of agricultural land to foreign investment companies has been prohibited. Title is

granted to the local joint venture partner who can rent, but not sell, the land to the joint venture

Even if an individual or company does satisfy the relevant tests, it may not be the ultimate

beneficiary of the land, or any other assets, which it legally owns or is entitled to use.

Ownership of such rights may be a mere front. As a result some states seek to determine the

75 Land Act 1965, s. 54(5)(b).

77 Some amendments to the Lex Friedrich are that: companies no longer need authorization to purchase real estate

for trading, manufacturing or any other commercial business (though approval is still required for companies trading

only in real estate); authorisation is no longer required where the foreign acquirer does not intend to use the property

directly, but rents to a third party for a commercial purpose. In relation to natural persons, those with a year round

residence permit no longer need authoristion to buy the real estate they occupy; also those employed in international

organisations or engaged in diplomatic missions no longer need approval; and the net size of properties requiring

approval has dropped. Holiday properties are still subject to approval. "Switzerland: Acquisition of Real Estate",

78 A. Peterson, "Latvia authorises the sale of land to foreigners" NOVECON, 19 December 1994.

status of the party which ultimately derives the economic benefit from the land

In New York State, the law provides that restrictions on foreign ownership apply to the person

Takeovers Act 1975, a "foreign person" includes the trustee of a trust estate, in which a natural

person or persons not ordinarily resident in Australia or a foreign corporation or corporations,

In contrast, the use of trust provisions in Mexico offered a government sanctioned device for

foreigners to get around the prohibition of foreign ownership in border and coastal areas (see

Box 3).

Some regimes specifically prohibit the use of the trust to get around land ownership restrictions.

A US state of Missouri statute prohibits foreign individuals and companies from owning

agricultural land and expressly prohibits persons acting as their trustees and fiduciaries, from

Even where a state devises comprehensive legal tests to determine whether a person or legal

entity is a foreigner; is controlled by a foreigner; or seeks to hold land for the benefit of a

foreigner, the laws establishing those tests will only be effective to the extent that they are

implemented. There is very little reference in the literature as to implementation in this regard.

What seems reasonably clear is that the more complex the law is the more costly it will be to

apply, even if the burden of proof is placed on the suspected foreigner. One author refers to the

"very tedious enquiries" which are often necessary in Switzerland in order to determine whether

Pursuant to Article 27 of the Mexican Constitution, foreigners cannot own land within the strip of land

100 kilometres wide along the borders and 50 kilometres wide along the country’s beaches. Since

the issuing of a 1971 Decree, however, the Ministry of Commerce and Industrial Development has

been able to authorise foreign investors and Mexican companies with foreign shareholders to obtain

beneficial rights in Mexican trusts owning property in the zones. Legal title is held by a financial

institution, the trustee, and the trust interests are marketed by a means of trust participation

certificates. These beneficial interests, which are lawful because they are personal rather than real,

may last up to 30 years after which new trusts can be granted on the same terms and conditions if

the same foreign investor appears as beneficiary of the new trust.

may be able to afford to pay for such enquiries but for poorer countries, if laws on this issue are

to be applied then a balance arguably has to be struck between the degree of complexity of its

tests and the amount of resources it is politically prudent to allocate to implementation.

In any event it seems likely that no test is absolutely guaranteed to address all eventualities.

One author has noted that "the struggle between those applying the tests and foreigners trying

to mask themselves demonstrates that no single test nor any combination of tests can

hermetically seal off foreign infiltration".85 The problem of foreign owners hiding their identities

by establishing several layers of ostensible owners was noted in the 1979 US Federal

Regulations under AFIDA. While these regulations initially appeared to establish no limit for

proving the ultimate level of ownership, a subsequent cut-off point was decided: ownership was

to be traced to the third level, or the true owners of company C, which owns company B, which

owns company A, the owner of the land, would not be enquired into. Even this level is admitted

to be somewhat arbitrary and while it is more stringent than most of the tests of "foreignness"

considered, would not prevent a determined foreigner from avoiding compliance with AFIDA's

Perhaps unsurprisingly, the literature does not reveal the extent to which foreigners do

successfully mask their purchases of land. If, as seems the case, foreigners can often manage

somehow or other to get around foreign ownership restrictions through the use of trusts and

holding companies the question remains as to the purpose of such restrictions. Are they

designed to regulate and restrict foreign ownership of land - or is their purpose to appear to do

so? Tests that claim to examine the issue of ultimate benefit will be of little effect unless they

can actually be applied.

86 See T.L. Schmidt, "Closing the Barn Door: A Suggested United States Response to International Restrictions on

of AFIDA.

A number of different possible policy reasons exist for restricting and regulating foreign

ownership and use of land - and for adopting different techniques. An understanding of the

various policy rationales will better inform our consideration of the techniques for controlling

foreign land ownership.

A number of possible policy objectives are set out below, but these headings tend to overlap.

For example restrictions on foreign ownership of agricultural land might conceivably be justified

under a number of policy headings, all or only some of which may be invoked in a given

situation, including the protection of national security, the prevention of speculation, the

prevention of foreign economic domination and the protection of rural communities.

Nevertheless a review of the topic and literature suggests the that the various techniques

adopted seek to implement the following policy objectives:

The US Agricultural Foreign Investment Disclosure Act defines a “foreign person” as:

(A) any individual:

(i) who is not a citizen or national of the United States;

(ii) who is not a citizen of the Northern Mariana Islands or the Trust Territory of the Pacific

Islands; or

(iii) who is not lawfully admitted to the United States for permanent residence, or paroled into the

United States, under the Immigration and Nationality Act …

(B) any person, other than an individual or a government, which is created or organized under

the laws of a foreign government or which has its principal place of business located outside

of all the States;

(C) any person, other than an individual or government,

(i) which is created or organized under the laws of any State; and

(ii) in which, as determined by the Secretary under regulations which the Secretary shall

prescribe, a significant interest or substantial control is directly or indirectly held – (I) by any

individual referred to in subparagraph (A); (II) by any person referred to in subparagraph (B);

by any foreign government; or (IV) by any combination of such individuals, persons and

governments; and

(D) any foreign government.

7 USC § 3508(3) (1988).

Border area restrictions on foreign land ownership - and in the case of Peru in

part of states' policies on military security. Arguably measures to protect food security

and to prevent economic domination could also be included under this heading.

Fears of foreigners "taking over" the US has led to various restrictive measures at both

such concerns may be more common in states with weak or undervalued currencies.

The border protection measures in Mexico may fulfil national security objectives, but

more directly address concerns about the creation of foreign enclaves in the border

Some governments, such as that of Hungary, have expressly included restrictions on

foreign ownership to deal with this perceived threat in a time when demand exceeds

supply. Again measures to prevent land speculation on the basis of rising prices could

also be grouped under the next heading.

requirements may also be designed to prevent extensive absentee ownership where the

landowner has no connection with the community.

Earlier this century, various US West Coast states used land ownership restrictions to

An example is the Australian Foreign Takeovers Act 1975, which restricts acquisitions by

foreigners of urban land.

Examples include those states that severely limit the purposes for which land may be

87 See Box 8.

90 Turkey.

92 Malta.

purchased, such as Thailand and Malta, to ensure that such land holdings are in

accordance with national economic development aims and objectives.

number of Canadian and US states that also restrict or forbid foreign ownership of

speculation in agricultural land and to preserve the social fabric of rural areas.

Perhaps the best example is the US where extensive reporting requirements were

implemented precisely so that such information could be ascertained. For example, in

1995, foreign persons owned 15.1 million acres of US agricultural land, and Maine has

Restrictions on foreign ownership of land may also be in accordance with other stated, or

a problem in that the "reasons formally advanced are not necessarily identical with those which

their very nature remain unacknowledged. These might include nationalism, racism, and

ownership and use of land will depend in each case on the historical, political and economic

context.

One author has traced various stages in the history of the restriction of foreign land ownership in

the US. Sullivan describes how concern in the late nineteenth century at the size of holdings of

agricultural land by British companies, and also the activities of one Irish absentee landlord, in a

time of rural depression led to restrictions on foreign ownership being introduced by a number of

states. He then considers the restrictions imposed on foreign land holding by a number of West

94 Country Profile: Morocco (London: Foreign and Commonwealth Office and Department of Trade & Industry,

1992).

95 Similarly Missouri forbids non-resident alien ownership of farmland. Resident aliens may own farmland but must

36. In Iowa aliens can own all types of state land except agricultural lands IOWA Code Ann. § 567.3(1)(1992). The

term "alien" includes corporations or other entities where non-resident aliens own a majority interest § 567.3(3), 4, 5

(1992).

96 USDA, Economic Research Service, Internet: www.econ.ag.gov/epubs.

97 Political ideology might supply reasons for suc