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Unpublished Paper
Application of pacta sunt servanda to State Contracts between Investors and Host States and its Implication for International Investment Regime
ExpressO (2013)
  • Taehee Ahn, University of Michigan Law School
International investment law regime has been under a heated debate over its legitimacy. Criticism on the legitimacy of the international investment regime is heavily based on the privatization of the regime: individual and ad hoc private arbitrators, rather than permanent inter-governmental institutions, have been conferred mandate to decide disputes between investors and host states. Especially the arbitrators have dealt with the host states’ exercise of regulatory measures being faced with economic crises, basing their judgments on individualized interpretation and application of applicable laws. Whether the arbitrators of private nature could properly reflect public policy concerns has been intensely debated. Moreover, the privatization has an implication even beyond the private actor’s juridical power over sovereign acts of state in that they, though controversial, affect international law-making by establishing case-law through individualized arbitrations. Given the international investment regime’s unique nature in which non-state actors, i.e. foreign investors, enjoy strong protection against host states’ domestic policy change, private investors’ influence on the international law-making may well place individual on the equal footing with state as the subject of international law in the area of international investment regime. This is more true when states and investors are parties to contracts where individual is without support of its own state by concluding an investment treaty. Thus, private arbitrators may promote the status of private actors within international law by affecting the international law-making through their individualized choice and application of relevant international law. This paper will suggest caution against private arbitrators’ individualized influence on international law-making especially through arbitrations on disputes over contracts between host states and investors in which the principle of pacta sunt servandahas played a significant role. Since the arbitrators’ alleged bias towards investors may lead to unfair decisions against host states, arbitration awards rendered by private arbitrators should be scrutinized thoroughly through the lens of legal doctrine of sources of international law.
  • international investment regime,
  • state contracts,
  • pacta sunt servanda
Publication Date
February 26, 2013
Citation Information
Taehee Ahn. "Application of pacta sunt servanda to State Contracts between Investors and Host States and its Implication for International Investment Regime" ExpressO (2013)
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