The Unilateral Change of Economic Development Agreements

Abstract

IT seems appropriate to begin this article with an apology. Legal writings on economic development agreements, i.e., contracts between governments and foreign private investors, are already abundant and, as Professor Farer formulated it,' torrents of language are foaming around eminent topics like the one which is the object of this study. The efficient practitioner undoubtedly would be inclined to dismiss the problem invoked here altogether as being merely the legal academic's concern with little or no impact on reality. Does not, after all, the law in this field entirely depend on the skill and bargaining power of the negotiators and the techniques of the draftsmen of legal documents? Or, to say it in a more academic way,2 is not the iex contractus the only governing law between the parties? This thesis, as we shall see, is untenable. Economic development agreements are not situated in a legal vacuum but-at least partlygoverned by rules of international or transnational law based on the general principles of law recognised by civilised nations.3 It is true, of course, that unilateral modification or abrogation of agreements becomes relevant only in a small minority of cases when the relations of the contracting parties have reached an impasse and consensual arrangements are no longer possible. This, however, is no reason to neglect the issue. Foreign private investors in developing countries try to obtain a maximum of government guarantees for the security of their investment such as promises of non-expropriation and clauses of non-interference or legislative stability. In drafting such clauses, they should know what they can reasonably expect of them. Moreover, clarification of the legal issues may help or induce the parties to find a realistic and comprehensive basis for cooperation and thus avoid unnecessary litigation.