Counterfactual Reasoning and Expropriation Compensation: An Argument for Elimination of Elimination Rules

Abstract

AbstractTo award compensation for expropriated property, it is usually necessary to determine what the value of the property would have been if there had been no expropriation. This requires counterfactual thinking, a form of “make-believe” reasoning that legal professionals and valuators often find difficult to apply. The challenge becomes particularly difficult and important when the scheme underlying expropriation influences the value of the property that is taken. In such situations, rules developed in case law and legislation often attempt to clarify when aspects of property value should be attributed to the expropriation scheme and disregarded from further consideration. This article critically addresses elimination rules of this kind, arguing that they interfere with counterfactual assessments in ways that can render these assessments more difficult, less predictable, and more open to manipulation. To illustrate the overarching point, it is argued that recent proposals for reform in England and Wales, aiming to constrain the scope of contrary-to-fact elimination in expropriation cases, might not work as intended and could potentially make the situation worse. More broadly, the article argues that counterfactual reasoning in expropriation cases cannot be circumvented by legislative and casuistic interventions. Just as the law of tort, the law of expropriation compensation illustrates why counterfactual reasoning should be recognised as an irreducible and unique mode of legal reasoning, one that should be addressed as such by legal theorists and lawmakers alike.