Investor-state contracts

Where an investment is made in a foreign country, a contract is often entered into between the investor and the government of that country, or with a government entity formally independent of but still closely tied to the government. The chapter first examines the legal, practical and theoretical aspects of how these contracts become subject to international law, both historically and today, especially through the medium of international arbitration. It then discusses the question of the applicable law, including the relationship between municipal law and international law. Furthermore, the chapter examines more closely the substantive international law applicable to investor-state contracts, which includes both rules protecting contracts as assets or legitimate expectations against illegitimate intrusions by state power. Finally, the crucial and difficult question of contractual restriction of state powers, and the more specific international legal approach that has developed in relation to so-called stabilization clauses is explored.