Professor Verdross discusses the content of the Indonesian legislation on the Nationalization of the Netherlands Enterprises, and draws attention to pronouncements by the Indonesian Government during the parliamentary debates on the Nationalization Act from which it is evident that the payment of compensation is being used as a means of coercion in the political dispute between the Netherlands and Indonesia over New Guinea.
Since the payment of the compensation—the amount of which is in itself entirely uncertain—is being deferred to an indeterminate date in the future, while the Nationalization Act has retroactive effect from 3rd December, 1957, the measures discussed are, in the writer's opinion, to be regarded as a confiscation of alien property.
Over alien property on its territory a State has only a limited power—limited, that is, by international law. This principle, enunciated as long ago as the 18th century by Vattel, has been elaborated in the subsequent development of international law to mean that confiscation of property of aliens is under all circumstances contrary to international law (except as a penalty for grave crimes), whereas expropriations in the public interest against adequate compensation are permissible.