Chapter

Legal Preconditions of Foreign Investment

Rosalyn Higgins Dbe Qc

in Themes and Theories

Published in print August 2009 | ISBN: 9780198262350
Published online March 2012 | e-ISBN: 9780191682322 | DOI: http://dx.doi.org/10.1093/acprof:oso/9780198262350.003.0046
Legal Preconditions of Foreign Investment

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This chapter argues that the legal framework of foreign investment must protect the legitimate expectations of both parties, and not of the investor alone. Certain short-term benefits, which can later be scaled down/phased out (such as tax holidays, write-off provisions, etc.) are a component part of that legitimate expectation. Their violation could in principle constitute a material breach. How important is it to investors to include, in the contractual elements of its investment arrangements, provision that the applicable law is a law other than the local law (and most usually international law)? The answer depends in large part upon whether any potential dispute is to be resolved by the local courts or by international arbitration. One recent arbitration has expressed hesitation about whether — even in the face of a stabilization clause — compensation is due for a termination of contract rights (nationalization) that is otherwise lawful, that is, not discriminatory, for a public purpose. At the domestic level, obviously both force majeure clauses and more general adaptation clauses have their place.

Keywords: foreign investment; breach; international law; international arbitration; stabilization clause; compensation; contract rights; force majeure; adaptation clauses

Chapter.  6180 words. 

Subjects: Public International Law

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