1 States enter into various types of international investment agreements such as traditional oil and mining concessions, production sharing contracts, joint ventures (equity and contractual), agriculture and manufacturing concessions, power development contracts, technical assistance contracts, turnkey contracts, engineering, construction and building contracts, public works concessions, public service concessions, transfer of technology and licensing contracts, loan and other financing agreements and various types of infrastructure development agreements such as Build, Operate, Transfer (BOT), Build, Own, Operate (Boo) and Build, Own, Operate, Transfer (BOOT) agreements. All the variants are also known as State contracts. See A.F.M. Maniruzzaman, The New Generation of Energy and Natural Resollrce Development Agreements: Some R�flections, 11 J. Energy and Natural Resources Law, 1993, pp. 207-47; Daniele Barberis, Negotiating Mining Agreements: Past, Present and Future Trends, Kluwer Law International, Deventer, 1998, at pp. 141-157; Piero Bernardini, Develoyment Agreements with Host Governments, in Robert Pritchard (ed.), Economic Development, Foreign Investment and the Law, Kluwer Law International, Deventer, 1996, pp. 161-174; Adel S.Z. Abadeer, Natural Resource Contracts Between LDC Governments and Foreign Companies: With Refèrence to the Egyptian Case, Ph.D. thesis, Boston University Graduate School, U.M.I. Dissertation Services, Ann Arbor, Michigan, 1993, Chapter m, pp. 68-122; Paul T. Vout et al., China Contracts Handbook, Sweet & Maxwell, Asia, 1997, Chapter 19, Boi Concession Contracts, at pp. 283-297; Thomas Walde, Treaties and Regulatory Risk in Ififrastrtictitre Investment, 34J.W.T. 2, April 2000, pp. 1-61; Alan C. Page, Transnational Mining Contracts, in N. Horn and C. Schmitthoff (eds.), l7re Transnational Law of International Commercial Transactions, Kluwer, Deventer, 1982, p. 223; see generally, Peter Fisher, Die internationale Konzession: l7reorie und Praxis der Rechtsinstitute in den internationalen Wirtschaftsbeziehungen, 1974; Charles Oman, Les Nouvelles Formes d'Investissement International dans les Pays en Developpement, 1984. In the present article the expressions "international investment agreement", "foreign investment agreement", "economic development agreement" (EoA) and "State contract" have been used interchangeably. 2 See for example, Bangladeshi Model Production Sharing Contract, March 1997, Article 28: Applicable Law, Article 28(1): "The validity, interpretation and implementation of the Contract shall be governed by the law of the People's Republic of Bangladesh." See also, 8 Martin Bartels, Contractual Adaptation and Conflict Resolution, Kluwer, Deventer, 1985, at p. 107; Juha Kuusi, The Host State and the Transnational Corporation, 1979, p. 145; Georges R. Delaume, The Proper Law of State Contracts and the Lex Mercatoria: A Reappraisal, 3 ICSID Pev-FiLj, 1988, pp. 79-81; idem, 1'he Propel Law of State Contracts Revisited, 12 ICSIIJ Rev-Ful, 1997, pp. 1-28.

3 See A.F.M. Maniruzzaman, The Lex Mercatoria and International Contracts: A Challenge for International Commercial Arbitration? 14 American University International Law Review, No. 3, 1999, p. 657 at pp. 717-728; M. Somarajah, Power and Justice in Foreign Investment Arbitration, 14 J. Int. Arb. 3, September 1997, p. 103; Stephen 1. Pogany, Economic Development Agreements, 7 ICSID Pev-FILJ, 1992, at p. 14: where the author of the article affirmed the trend towards the "localization" of State contracts in the petroleum sector as confirmed in a number of interviews he conducted with oil industry executives. See also Ahmed S. El-Kosheri and Tarek F. Riad, The Law Governing a New Generation of Petroleum Agreements: Changes in the Arbitral Process, 1 ICSID Rev-Fal, 1986, at pp. 257-58. 4 See T. Daintith (ed.), The Legal Charter of Petroleum Licences: A Comparative Study, 1981, at p. 15. 5 Derek W. Bowett, State Contracts with Aliens: Contemporary Developments on Compensation for Termination or Breach, 59 British Yearbook of International Law (EYIL) 1988, p. 49, at p. 53. See Article 5 of the Foreign Economic Contracts Law of the People's Republic of China of 21 March 1985 which provides that: "Contracts for Chinese-foreign equity joint venture, Chinese-foreign co-operative enterprise and for Chinese-foreign co- operative exploitation and development of natural resources to be performed within the territory of the People's Republic of China shall be governed by the LAw of the People Republic of China." (emphasis added); see China's s Foreign Trade, 1985, No. 12. Also, Article 15 of the Regulations for the Implementation of the Law of the People's Republic of China on Joint Ventures using Chinese and Foreign Investment, 20 September 1983, provides that: "The formation of a joint venture contract, its validity, interpretation, execution and the settlement of disputes under it shall be governed by the Chinese Law." (emphasis added); see id. See also C.P. Andrews-Speed and Zhiguo Gao, China Petroleum Legal Regime for Foreign Participation in Upstream Operations: The Foreign Oil Company's View, 14 Journal of Energy and Natural Resources Law, No. 2, 1996, p. 161, at p. 167: "The model and individual contracts provide that the contract shall be governed by the laws of China. If these are inadequate the contract falls back on 'the principles of applicable laws widely used in petroleum resources countries acceptable to the parties shall be applicable'." See also Mining Ordinance of Fiji, 16 December 1946, Article 56(2) in Icsm, Investment Laws, Vol. 2; Mining and Minerals Act of Zambia 1969, Article 130, in ICSID, Investment Laws, Vol. 10; The Guatemala Regulations for the Exploration and Exploitation of Hydrocarbons of 11 January 1978, Article 168; Iranian Petroleum Act of 1974, Article 23: "the validity, interpretation and implementation of the contracts shall be subject of the laws of Iran." See Organization of Petroleum Exporting Countries (01'EC), Selected Documents of the International Petroleum Industry, 1974, published in 1976, at p. 28; Joint Structure Agreement concluded between the National Iranian Oil Co. and Amerada Hess Corp., 27 July 1971, Article 38, reprinted in 41 Middle East: Basic Oil Laws and Concession Contracts (Original Texts), Barrows, 23, 1974; the Service Contracts between the National Iranian Oil Co. and Ultramar Co. Ltd., 7 August 1974, reprinted in OPEC, op. cit., at pp. 57 and 76. 6 See the Serbian and Brazilian Loans cases, P.C.LJ. (1929) Series A, Nos. 20/21, p. 41: "... any contract which is not a contract between States in their capacity as subjects of international law is based on the municipal law of some country." Compare John Collier and Vaughan Lowe, The Settlement of Disputes in International Law: Institutions and Procedure, Oxford University Press, U.K., 1999, at pp. 242-243, where the authors criticize the position.

7 Richard Lillich, The Law Governing Disputes under Economic Development Agreements: Re-examining the Concept of "Internationalization", in Richard Lillich and Charles Brower (eds.), International Arbitration in the Twenty-First Century: Towards 'Jttdicialization and Uniformity, Transnational Publishers, Irvington, New York, 1993, at p. 92. 8 See Prosper Weil, Problèmes relatif aux contrats passés entre un Etat et un particulier, 128 Recueil des Cours, 1969, m, p. 95, at p. 158. See generally, Pierre Mayer, L4 neutralisation du pouvoir normatif de I'Etat en matière de contrats d'Etat, 113 Journal du Droit International, 1986, p. 5. 9 Robert Y. Jennings, State Contracts in International Law, 37 BVIL, 1961, at p. 156. See generally, Giorgio Sacerdoti, I Contratti tra Stati e Stranieri nel Diritto Internazionale, 1972; Philippe Leboulanger, Les Contrats entre Etats et entreprises etrangeres, Paris, 1985; D. Berlin, Les contrats d'Etat ("State-contracts") et la protection des investissements internationaux, 13 Droit et pratique du commerce international, 1987, pp. 192-271; Jean-Flavien Lalive, Contrats entre Etats ntt entnprises etatiques et personnes privees. Developpements recents, 181 Recueil des Cours, 1983, m, pp. 9-283; Pierre Lalive, Reflexions sur I'Etat et ses contrats internationaux: Lefon inaugttrale de I'annee academique 1975-1976, donnee le 20 ooobrr 1975, Geneve, 1976. 111 Lillich, supra, footnote 7, at p. 61. " See Articles 1 and 5 of the Resolution, adopted by the International Law Institute at its Athens session, on The Proper Law of the Contract in Agreements between a State and a Foreign Private Person (hereinafter, the Resolution), in Annuaire de l'Institut de Droit International, 1979, Vol. 58, Part u, pp. 193 and 195. 'z Case of Certain Norwegian Loans, Icj Reports, 1957, p. 9.

" Ibid., at p. 37. 14 See for example, Stephen M. Schwebcl, The Law Applicable in International Arbitration: Application of Public International Law, in Albcrt Jan Van l�cn Berg (gen. cd.), Planning Efficient Arbitration Proceedings: The Law Applicable in International Arbitration, T.M. Asser Institute, The Hague, 1994, p. 562, at pp. 567-569. 15 See generally, H. Lauterpacht, The Grotian Tradition in International Law, 23 BYIL, 1946, p. 23. '6 Ibid., at pp. 24-26. 17 Ibid., at p. 27. Is Id. ' See E. Lauterpacht (ed.), International Law Being the Collerted Papers of Hersch Lauterpacht, Vol. 1: The General Works, Cambridge University Press, U.K., 1970, at Chapter 2, pp. 216-230.

211 I. Brownlic, Principles of PlI1>lic International Law, fifth edition, Oxford University Press, U.K., 1998, at p. 32. 21 ld. 22 See Stephen M. Schwebel, International Arbitration: Three Salient Problems, Grotius, Cambridge, U.K., 1987, at pp. 108-115, 125-143; idem, Justice in International Law, Grotius/Cambridge University Press, U.K., 1994, at pp. 425-435. See generally, Philip Allott, t:III1Omia-New Order for a New World, Oxford University Press, U.K., 1990; idem, The Concepts of International Law, 10 EJIL, 1999, pp. 31-50. '.1 Sir Gerald Fitzmaurice, Her.sch Lauterpachl-The ScholarasJudge, Part t, 37 BW , 1961, p. 1, at pp. 64-65. 24 Schwebel, 1994, supra, footnote 22, at p. 427.

=5 See generally, F. Lalive, Contracts Between a State or a State Agency and a Foreign Company, theory and Practice: Choice of Law in a New Arbitration Case, 13 I.C.L.Q., 1964, p. 987, at p. 997, Maurice Bourquin, Arbitration and Econnmic Development Agreements, in Selected Readings on Protection by Law of Private Foreign Investments, New York, 1964, p. 99, at pp. 111, 113; H. van Houtte, International Arbitration and National Adjudicalion, in C.C.A. Voskuil and J.A. Wade (eds.), Hague-Zagreb Essays-4 on the Law of International Trade, 1983, p. 312, at pp. 322-327; Ignaz Seidl-Hohenveldern, The Theory of Quasi-International and Partly International Agreements, 11 Revue Belge de Droit International, 1975, p. 567, at p. 570; Alfred Vcrdross, Quasi-International Agreements and International Economic Transactions, 18 Y.B. World Aff., 1964, p. 230. zb See Oscar Schachter, International Law in Theory and Practice, Martinus Nijhoff, Dordrecht, 1991, at pp. 305- 314; Brownlic, supra, footnote 20, at pp. 549-553; Sir Robert Jennings and Sir Arthur Watts, Oppenheim's International Law, ninth edition, second impression, 1997, Vol. 1, parts 2 to 4, at pp. 927-931; Derek W. Bowett, Claims Between States and Private Entities: The Twilight Zone of International Law, 35 Catholic University Law Review, Summer 1986, No. 4, p. 929, at p. 937; Stephen J. Toope, Mixed International Arbitration, Grotius, Cambridge, U.K., 1990, at pp. 75-90; F.A. Mann, State Contracts and State Responsibility, in idem, Studies in International Law, Clarendon Press, Oxford, U.K., 1973, p. 302, at pp. 309-315; Gunther Jaenicke, Consequences of a Breach of an Investment Agreement Governed by International Law, by General Principles of Law or by Domestic Law of the Host State, in Detlev Chr. Dicke (ed.), Foreign Investment in the Present and a New Internarional Economic Order, University Press, Fribourg, Switzerland, 1987, p. 177, at p. 184; Pierre Lalive, as reported in 58 Annuaire de l'Institut de Droit International, 1979, Part n, at p. 94; D.P. O'Connell, International Law, 1970, Vol. u, at pp. 996-97; E. Jimcncz dc Arechaga, State Responsibility for the Nationalization of Foreign-Owned Property, 11 N.Y.U. J. Int'l L. & Pol., 1978, p. 179, at p. 191; Chittharanjan F. Amcrasinghe, State Responsibility for Injuries to Aliens, Clarendon Press, Oxford, U.K., 1967, at pp. 66-120; M. Sornarajah, Tlie International Law on Foreign Investment, Cambridge University Press, U.K., 1994, at pp. 325-352; idem, The Pursuit of Nationalized Property, Martinus Nijhoff, Dordrecht, 1986, at pp. 103-108. z� E. Lauterpacht (ed.), supra, footnote 19, at p. 153. 2H Ibid., at pp. 151 et seq.

=`' C.W. Jenks, Hersch L.4titerpaclit-7he Scholar as Prophet, 36 BYIL, 1960, p. 1, at p. 95. 311 Lauterpacht (ed.), supra, footnote 19, at pp. 151-177 and pp. 216-230; H. Lauterpacht, Is International Law a Part of the Law of England? Transactions of the Grotius Society 25, 1939, pp. 51-88; idem, Decisions of Municipal Courts as a Source of International Law, 10 BYIL, 1929, pp. 65-69. 31 H. Lauterpacht, 1929, ibid., at pp. 94-95. 'z Robert Y. Jennings, Rules Governing Contracts Between States and Foreign Nationals, International and Comparative Law Center, The Southwestern Legal Foundation, 1965, at pp. 127-128; see also idem, supra, footnote 9, at pp. 177-178; Sir H. Lauterpacht, Icj Reports, 1952, p. 37; see also P.C.I J., Series A, No. 7, at p. 19. 33 Jennings, supra, footnote 9, at p. 161.

.14 Sec especially, H. Lauterpacht, 1939, supra, footnote 30, at pp. 62-67; 62 Recueil des Cours, 1937, m, at pp.129-48. See also generally, H. Lauterpacht, International Law and Human Rights, 1950. Fath El Rahman A. El Sheikh, The Legal Regime of Foreign Private Iniestment in the Sudan and Saudi Arabia, Cambridge University Press, Cambridge, U.K., 1984, at p. 278; P. Vellas, 1 Droit International Economique et Social, 1965, at p. 30. ;5 However, one may disagree that Jennings did not go that far if one considers his position solely from the perspective of remedies that: "A termination or alteration of the contract by a change made in the proper law, though it cannot in the nature of things amount to a breach of contract in proper law, may nevertheless amount to a breach of international law. The claim may be delictual in form but it may still be a remedy in respect of the contract." supra, footnote 9, at p. 181. See about the Swiss-French doctrine in, for example, the Losinger and Co. case, Y.C.LJ., Scries C, No. 78, and the Norwegian Loans case, Icj Reports, 1957, p. 9, both discussed in Mann, supra, footnote 26, at pp. 309-315. 36 Jennings, supra, footnote 9, at pp. 161, 177-178. 3� See Professor Henri Batiffol's comments in Proceedings in the Institut dc Droit International, 58 Annuaire de l'Institiot de Droit International, 1979, Part I, at pp. 141-146; and 63 Annuaire de 1'Institut de Droit International, 1989, Part I, at pp. 133-134. Professor Bowett (Whewcll Professor of International Law, Cambridge University, as he then was) is also of the view that "the relevance of international law is theoretically undeniable in such a case [contract between a State and a foreign entity], but its practical relevance is limited by the fact that international law contains no rules relevant to breach of contract as such." Bowett, supra, footnote 26, at p. 936. Many other writers after careful observations could not but recognise that the paucity of precise rules is a stumbling block for the application of intemational law to such contracts. See Joe Verhoeven, Contrats entre Etats et ressortissants d'autres Etats, in Le contrat economique international: Stabilite et evolution, Brussels, 1975, p. 115, at p. 140; C. Delaume, Transnational Contracts, Oceana Pubs., Dobbs Ferry, N.Y., 1976, Vol. 1, para. 1.13; Wolff, Pritiate International Law, 1950, p. 417. See also idem, Some Observations on the Autonomy of Contracting Parties in the Conflict oflaus, 35 Grotius Transactions, 1950, p. 143, at p. 152; J.E.S. Fawcett, Legal Aspects of State Trading, 25 l3VIL, 1948, p. 34, at p. 44; Chittharanjan F. Amerasinghe, State Brearhrs of Contratts with Aliens and International Law, 58 AJIL, 1964, p. 881, at p. 906; W. Friedmann, Law in a Changing Society, 1959; K. Lipstein, 7lie Place of the Calvo Clause in International Law, 22 BVIL, 1945, p. 130, at p. 143: "international law contains no branch dealing with contracts. If the breach of contract is to form the basis of a claim based on international law, it must constitute a tortious act in the nature of a denial ofjustice." S. Friedman, Expropriation in International Law, 1953, at p. 156: "contracts cannot be the subject of international disputes since international law contains no rules respecting their form and effect." Nielsen, American- Turkish Claims Settlement: C3pinions and Report, 1937, pp. 286, 287; "the law of nations does not embrace any 'Law of Contracts', such as is found in the domestic jurisprudence of nations, and such cases are of course not actions on contracts in terms of domestic law." Detlev Vagts (Bemis Professor of International Law, Harvard University) adds: "One problem with such clauses [international law clauses in oil development agreements] is that there simply is not much international law about, say, proper mining or oil drilling practices.", Dispute Settlement and Development, Contribution No. 6.67.4.2, in A.F.M. Maniuzzaman (Honorary Theme Editor), International Development Law, Theme No. 6.67, Errcyclopedia of Life Support Systems, UNESCO-EoLss, EoLSS Publishers, Oxford, U.K., forthcoming. But see Lillich, supra, footnote 7, at p. 110, where he concluded that: "In any event, the legal argument that public international law and general principles of law provide no rules about contracts, never persuasive, is becoming even less so with each passing year." See also Christopher T. Curtis, Tic Legal Security of Etorronric Development Agreements, 29 Harv. J. lnt'l L. 2, 1988, p. 317, at pp. 341-346.

3H See Arthur T. von Mchrcn, Rapporteur; and Eduardo Jimenez de Arechaga, Co-Rapporteur; Draft Reyort, in 63 Anntiaire de l'Institnt de Drnit International, 1989, Part I, p. 100, at pp. 133-134. 39 Jennings, supra, footnote 9, at pp. 178-179. ;" Jennings and Watts, supra, footnote 26, p. 929; compare Jennings, supra, footnote 9, at pp. 166-168; F. V. Garcia-Amador, State Responsibility in Case of "stabilization Clallses, 2 Journal of Transnational Law and Policy, 1993, p. 23, at p. 32. '� Jennings, supra, footnote 9, at pp. 177-178. z Compare Mann, supra, footnote 26, at p. 266; Schachter, supra, footnote 26, at p. 311. The author notes: "the fact that a contract has international importance because of its nature and magnitude does not result in an exception to the general principle that contracts are subject to domestic law." In the Proceedings of the Institute of International Law, most of the members of the Institute refuted the proposition that "economic development agreements" or "investment agreements" should be dealt with as a separate category in regard to applicable law; 57 Annunire Ae I'Institut de Droit International, 1977, Part i, at pp. 207 et seq. 13 In the Proceedings of the Institute of International Law, the majority of the members rejected the position that an arbitral clause should be considered as evidence of an intention to select a particular body of law other than that of the contracting State as the applicable law; ibid., at pp. 205 and 254; see also 58 Arumaire de l'Instititt de Droit Intemational, 1979, Part u, at pp. 92-96: the article referring to arbitral clauses as of possible relevance to choice of law was rejected by the Institute of International Law. Bowett, stipra, footnote 5, at p. 52. Pierre Lalive, L'in/illellce des clauses arbitrales, 11 Revue Beige de Droit International, 1975, pp. 570-580. " See generally, Prosper Weil, Les clauses de stabilisation nu d'inlangibilite inserees dans les accords de �n'f<<�fm<'nf eanmmique, in Melanges Offers a Clrarles Rousseau: La COltll1l1l11atlté Internationale, 1974, p. 301; Nicolas David, Les clauses de stabilite dans les contrats pétroliers-QllestiolJS d'un praticiell, 113 Journal du Droit International 1986, p. 79; Thomas W. Walde and George Ndi, Stabilizing International Investment Commitments: International Law versus Contract Interpretation, 31 Texas Int'l Law J. 1996, p. 215; Christopher T. Curtis, supra, footnote 37, at pp. 346-362; S.K. Chatterjee, The Stabilisation Clause Myth ill Investment Agreements, 5 J. Int. Arb. 4, December 1988, p. 97; Nagla Nassar, Sanctity of Contracts Revisited, Martinus Nijhoff Pubs., Dordrecht, 1995, at pp. 121-139; Esa Paasivirta, Internationalization and Stabilization 4 Co 11 tracts versus State Snvereigrrty, 60 BYIL, 1990, p. 315, at pp. 323-331. 4; See the Texaco v. Libya case, 53 I.L.R. 389, 1977; Revere Coyyer & Brass Co. v. Omc (Revere Coyyor & Brass), 56 I.L.R. 258, 1978; Jennings, supra, footnote 9, at pp. 177-78; see also Jennings and Watts, supra, footnote 26, at p. 927; A. Broches, Choice-of Law Provisions in Contracts with Governments, in Willis L.M. Reese (ed.), International Contracts: Choice of Lam and Language, Oceana Pubs., New York and Rome, 1962, p. 64; Prosper Weil, Principles generaux du druit et contrats d'Etat, in Le Droit des Relations Hconoltliqtles Internationales: Eludes Offertes d Bertlrold Goldman, Litec, Paris, p. 387; Charles Leben, Retonr sur la notion de contrat d'Etat et sur le droit applicable, a celui-ci, in Molanges Offerts a Hubert Thierry, Pedone, Paris, 1998, pp. 247-280; Wilhelm Wengler, Les pril1cipesc�él1ératlx dii droit en tant que loi de contrat, 71 Revue Critique en Droit International Privy, 1982, p. 467.

4/0 See 1èxaco v. Libya, ibid., at pp. 441-457. '� See Schachter, supra, footnote 26, at pp. 305-314; Somarajah, 1994, supra, footnote 26, at pp. 327-352. 48 See Texaco v. Libya and Revere Copper & Brass Co., both stipra, footnote 45; see also Ignaz Seidl- Hohenveldern, Schiedssprudr uber die Nationalisientng von Erdtilkonzessiorten der Texaco rrnd der Calasiatic dtircil Libyen, 23 Recht der Internationalen Wirtschaft, Aussenwirtschaftsdienst des Betnebs-Beraters, 1977, p. 502. 49 Brownlie, supra, footnote 20, at p. 552; see also M. Somarajah, International Commercial Arbitration, 1990, at pp. 137-143; Arechega, supra, footnote 26, at p. 181: "the acquired right to private property ... is no longer protected by contemporary international law." Weil, supra, footnote 8, at p. 199; F.V. Garcia-Amador, T7if Emerging International Law of Development, Oceana Pubs., New York and Rome, 1990, at pp. 123-126. 51' See for example, on "acquired rights": the German Interest in Polish Upper Silesia case (merits), P.C.1 J. (1926) Series A, No. 7, pp. 22 and 44; the German Settlers in Poland case, P.C.LJ. (1923) Scries B, No. 6, p. 36; Niederstrasser v. Poland, Schicdsgericht fur Oberschlesien, Vol. 2, Nos. 3-4, p. 156; Goldenberg and Son v. Germany, U.N.R.I.A.A. (1928) Vol. 2, p. 909; the Sopron-Koszeg Local Railway Co. case, Annual Digest, 1929-1930, Case No. 34; Saudi Arabia v. Arabian American Oil Company (Art.�.trc'o), 27 I.L.R. 1963, p. 117, at pp. 134, 205, 227 and 228. See also D.P. O'Connell, Economic Concessions in tlre Law of State Succession, 27 BYIL 1950, p. 93, at p. 96, n. 1. 51 Kamal Hossain and Subrata R. Chowdhury (cds.), Penitanent Sovereignty over Natural Resources in International Law: Principle and Practices, Frances Pinter, London, 1984, at p. ix; see generally, Jean Touscoz, Le regime jrrridique international des lrydrorarbures et le droit international (in �i'f/f�f'mp�f, 100 Journal dc Droit International, 1973, p. 296. 52 UNGA Resolutions 523 (vi) of 12 January 1952; 626 (vn) of 21 December 1952; 837 (ix) of 14 December 1954; 1314 (xin) of 12 December 1958; 1515 (xv) of 15 December 1960; 1803 (xvn) of 14 December 1962; 2158 (xxi) of25 November 1966; 2386 (xxm) of 19 December 1968; 2692 (xxv) of 11 December 1970; UNCTAD Trade and Development Board Resolutions 88 (xn) of 19 October 1973; 3016 (xxvii) of 18 December 1972; 3037(xxvil) of 19 December 1972; 3082 (xxvm) of 6 December 1973; 3171 (xxvm) of 17 December 1973; 3021 (S-vi) of 1 May 1974 (Declaration of the Establishment of a New International Economic Order); 3202 (S-Vi) of 1 May 1974 (Programme of Action on the Establishment of a New International Economic Order); 3281 (xxix) of 12 December 1974 (The Charter of Economic Rights and Duties of States, Article 2). See generally, Hossain and Chowdhury (cds.), ibid.; Nico Schnjvcr, Soverer'gnty over Natural Resources, B�rlancirtg Rights and Duties, Cambridge University Press, U.K., 1997; Guy Feuer and Herve Cassan, Droit lnternalional du Dél'elopl'el1lCl1t, 1985, especially at pp. 209-30 and 275-89. 11 See the Brundtland Commission Report, published under the title Our Corrrrnorr Fnture, World Commission on Environment and Development, Oxford, U.K., 1987; Article 25 of the Rio Declaration on Environment and Development, Doc. A/Confl51/5/Rev.l, 13 Junc 1992, in 31 I.L.M., 1992, p. 814. See generally, Winfried Lang (ed.), Sustainable Development and International Law, Graham and Trotman/Martinus Nijhoff, Dordrecht, 1995; Philippe Sands, International Law in the Field of Sustainahle Development, 65 BYIL, 1994, pp. 303-81; Maurizio Ragazzi, The Concept of International Obligations F,rga Omnes, Clarendon Press, Oxford, U.K., 2000, at pp. 145-1 fi2.

Sa Especially on tins principle, see Prosper Weil, Droit international et contrats d'Etats, in Melanges offerts a Paul Reuter: Le droit international: Unite et diversity, 1981, p. 549, at p. 569; Pierre-Yves Tschanz, Contrats d'Etats et mesures unilaterales de 1'Etat devant 1'arbitre international, 74 Revue Critique de Droit International Prive, 1985, p. 47. See also generally, A.F.M. Maniruzzaman, State Contracts with Aliens: 77re Question of Unilateral Change by the State in Contemporary International Law, 9 J. Int. Arb. 4, December 1992, pp. 141-171. Compare Fernando R. Teson, .9 Philosophy of International Law, Westview Press, 1998, at pp. 89-90. See also Amoco International Finance Corporation v. Government of the Islamic Republic of Iran, 15 Iran-U.S.C.T.R., 1987, p. 189, at pp. 242-243. The Tribunal observed that the rule of public international law, i.e. that a State has the duty to respect contracts freely entered into with a foreign party, "must not be equated with the principle yacta sunt senial1da, often invoked by claimants in international arbitrations. To do so would suggest that sovereign States are bound by contracts with private parties exactly as they arc bound by treaties with other sovereign States. This would be completely devoid of any foundation in law or equity and would go much further than any State has ever permitted in its own domestic law." Anaconda-Iran, Inc. v. Covernment of the Mama Republic <1 Ira et al., 13 Iran-U.S.C.T.R., 1986, p. 199, at p. 231. " See for example, Sornarajah, supra, footnote 49, at pp. 137-143; idem, 1994, supra, footnote 26, at pp. 347-352; idem, 1986, supra, footnote 26, at pp. 108-112 and 133-135; Michael E. Dickstein, Revitalizing the International Law Governing Concession Agreements, 6 International Tax and Business Lawyer, 1988, p. 54, at pp. 71-74, 75-79 and 83-85; A Fatouros, International Law and Internationalized Contract, 74 A.J.I.L., 1980, p. 134, at p. 136: "Any law of contracts, national or international, is bound to start with this principle [pacta sunt sen'af1da]. But it cannot stop there." 5fl The terms "acquired" and "vested" rights arc more often than not used interchangeably in the legal literature. 57 See generally, John Rawls, TIle Law of Peoples, Harvard University Press, Cambridge, Mass., 1999, especially at pp. 113-120; idem, A 71theory of Justice, revised edition, Oxford University Press, U.K., 1999, especially Chapter,; I, ir and v. 5< Oscar Schachter, Sharing the LYtrrld's Resources, Columbia University Press, New York, 1977, at pp. 16-23, p. 23. 5,} See Alan Story, Property in International Law: Need Cuba Compensate U.S. Titleholders for Nationalising their Property? 6 The Journal of Political Philosophy, No. 3, 1998, p. 306, at pp. 314-319. W1 Anon., Vie Variable Quality of a Vested Right, 34 Yale Law Journal 1925, pp. 303-9 at p. 307. See also Weil, supra, footnote 8, at p. 199.

�t Jennings, supra, footnote 9, at pp. 173-177; Garcia-Amador, supra, footnote 49, at pp. 123-126. See generally, Wilhelm Wengler, Les accords entre Etats et entreprises etrangeres sont-ils des traites de droit international? 76 Revue Generate de Droit International Public, 1972, p. 313. �2 American Law Institute Press, St. Paul, Minn., 1987, especially pp. 119-144. See also generally, Brice M. Clagett and Daniel B. Poneman, The Treatment of Economic Injury to Aliens in the Revised Restatement of Foreign Relations Law, 22 The International Lawyer, No. 1, 1988, p. 35; Peter D. Trooboff, The Revised Restatement off Foreign Relations Law of the United States: Reaffirmation of Established International Legal Principles Governing State Responsibility Toward Foreign-Owned Investment, in Dicke (ed.), supra, footnote 26, p. 201. 63 See Aa,9ntco, supra, footnote 50, at 117, 134, 205 and 228; James Hyde, Economic Development Agreements, 105 Recueil des Cours, 1962, p. 271, at pp. 315-325; Jennings, supra, footnote 9, pp. 156-182; R. Higgins, The Taking of Property by the State: Recent Developments in International Law, 176 Recueil des Cours, 1982, p. 259, at pp. 322 et seq; see also generally, Hiiscyin Pazarci, La responsabilite internationale des Etats à I 'occasiol1 des contrats cOl1clus entre Etats et personties privees étrangères, 79 Revue Générale de Droit International Public, 1975, p. 354. r�� See generally, Patrick Rarnbaud, L'Affaire "des Pyramides", 31 Armuairc Français de Droit Intemational 1985, p. 508; Philippe Leboulanger, Etat, Politique et Arbitrage: L'Alfaire du Plateau des Pyramides, 1986 Revue de I'Arbitrage 3. (,5 Spp (Middle East) Ltd. and Southern Pacific Projects v. Egypt and EcxrrH, 1983, 1988 L.A.R., p. 309, at p. 330. It should be noted that in this case the defendants refuted "the claimants' argument in favour of the so-called 'denationalization' of the applicable law", coming to the conclusion that "the law governing the substantive issues could be nothing but the Egyptian legal system". Government's Supplementary Statement of Argument, p. 13, referring to Government's Rejoinder and Statement of Argument, pp. 104-130, in 1988 L.A.R., p. 309, at p. 328. The claimants contended that "no rules and/or principles drawn from the body of domestic Egyptian law should be allowed to override the principles of international law applicable to international investment projects of this kind." Final Submission, pp. 24-77; Statement of Argument, pp. 65-78, in 1988 L.A.R, id. '6 See generally, O'Connell, supra, footnote 26, Vol. i, at pp. 56-79; D.W. Grcig, International Law, 1976, pp. 55-91; Jennings and Watts, supra, footnote 26, pp. 54-81; W.E. Butler, International Law and Municipal Law: Some Re/lections on British Practice, in idem, (ed.), International Law and the International System, 1987, p. 67; A.A. Rubano, T7ie Development 4 Generally Recognized Rules of International Law Mentioning National Law, in ibid., at p. 85 (for Soviet theory of international law). See Chung Chi Cheung v. R., 1939 A.C. 167-168, per Lord Atkin: "International law has no validity save in so far as its principles are accepted and adopted by our own domestic law ... The Courts ... will treat it as incorporated into the domestic law, so far as it is not inconsistent with the rules enacted by statutes or finally declared by tribunals ..." "

67 Brownlie, supra, footnote 20, at p. 32. 68 Toope, supra, footnote 26, at p. 239. e`r 21 I.L.M. 1982, p. 976; 66 I.L.R., p. 518. 711 Ibid., at para. 142. It should be noted that in this case the Government of Kuwait argued that the localization of the relationship under Kuwaiti law did not exclude the application of international norms, since international law was part and parcel of the law of Kuwait as a modern State and a Member of the United Nations. The Tribunal substantially accepted this contention. According to the Tribunal, the law of Kuwait applied "to many matters over which it [was] most directly involved". However, the Tribunal held that "this conclusion based on good sense as well as law, [did] not carry any all-embracing consequences with it", and that, since international law was part of the law of Kuwait, it was also to be applied to the determination of the case. " Ibid., at para. 10. '2 It has to be borne in mind that the parties to the agreement concerned did not provide in precise terms what the applicable law was. They did, however, provide a guideline to that effect for the Tribunal in Article it.2 of the agreement, which provided that: "The Law governing the substantive issues between the Parties shall be determined by the Tribunal, having regard to the quality of the Parties, the transnational character of their relations and the principles oflaw and practice prevailing in the modern world." In view of this provision, the Tribunal observed that: "... by referring to the transnational character of relations with the concessionaire, and to the general principles of law, this Article brings out the wealth and fertility of the set of legal rules that the Tribunal is called upon to apply." (para. 7). In any event, while applying public international law along with the law of Kuwait, considerable significance was accorded to the "legitimate expectations of the parties" as reflected in the aforementioned provision of the agreement. See Brownlie, supra, footnote 20, at p. 553; idem, Some Questions Concerning the Applicable Law in International Tribunals, in J. Makarczyk (ed.), Theory of International Law at the Threshold of the 21st Century: Essays in Honour of Krzystof Skubiszewski, Kluwer Law International, Deventer, 1996, p. 763, at pp. 768-770.

73 See Jennings and Watts, supra, footnote 27, p. 82. " See Felice Morgenstern, Judicial Practice and the Supremary of Il1ternatiol1alLAw, 27 BYIL, 1950, pp. 48-66. 75 J.G. Starke, I7te Primacy ofltiternational Law, in Studies in International Law, 1965, p. 159, at pp. 160-62; see also Brownlie, supra, footnote 20, at p. 32; G. Gaja, Positivism and Dualism in Dionisio Anzilotti, 3 EJIL 1992, pp. 123-138. 71, See O'Conncll, supra, footnote 26, Vol. i, at pp. 56-79. 77 See Jennings and Watts, supra, footnote 26, at p. 84. Compare Michael Kirby, The Impact of International Human Rights Norms: 'A Law Undergoing Evolution", 25 Western Australian L. Rev., 1995, p. 1; idem, 77ie Growling Rapprochmel1t Between International Law and National Law, at the Website: «http://www.hcourt.gov.au/speeches/ kirbyj/wceram.htm�>. 78 See for example, Sornarajah, supra, footnote 49, at p. 157. 7') See the Brazilian Loans case (France v. Bm�-!Q, P.C.1j. (1929) Series A, No. 21, pp. 124-125; the Serbian Loans case, P.C.LJ. (1929) Series A, Nos. 20/21, at p. 46; Judge McNair, Seyarate Opinion, Fisheries case, Icj Reports, 1951, p. 181; Judge Klaestad, Dissenting Opinion, Nottebohm case (second phase), Icj Reports, 1955, at pp. 28-9. See also the Lighthouses case, P.C.LJ., Series A/B, No. 62, p. 22; and the Panevezys-Saldutiskis Railway case, P.C.I.j., Scries A/B, No. 76, p. 19. See also Brownlie, supra, footnote 20, at p. 40: "Interpretation of their own laws by national courts is binding on an international tribunal. This principle rests in part on the concept of the reserved domain of domestic jurisdiction and in part on the practical need of avoiding contradictory versions of the law of a State from different sources." The domestic practice of a particular country concerned can be indicative of whether international law has supremacy over municipal law in the legal system of that country in the event of any conflict between the two. See for example, the Schooner Jane, 37 Ct. Cl. 24, 1901, at p. 29; the Ship Rose, 36 Ct. Cl. 290, 1901, at pp. 301-302; the Schooner Nancy, 27 Ct. Cl. 99, 1892, at p. 109; Re Mittermaier, Ann. Dig., 1946, Case No. 28. F.R. Teson, T7ie Relations between International Law and Municipal Law: Tfie MonismlDualism Controversy, in M. Bothe and R.E. Vinuesa (eds.), International Law and Municiyal Law, German-Argentinian Constitutional Law Colloquium, 1982, p. 107, at pp.111-12. "" Schwebel, 1987, supra, footnote 22, at p. 140.

11 Sec A.F.M. Maniruzzaman, Choice of Law in International Contracts-Some fundamental Conflict or LAws Issues, 16 J. Int. Arb. 4, December 1999, p. 141, at pp. 152-154. "= See for example, Weil, suyra, footnote 54, at p. 558; Joe Verhoeven, Arbitrage entre Etats et entreprises etrangeres: Des regles speci(rques% in Hommage ajean Robert, Les Etats et I'arbitrage international, Rev. Arb. 1985, p. 609, at pp. 627-28; Pierre Mayer, Le mythe de "I'ordre juridigue de base" (on "Grundlegung") in Etudes Offertes a Bertltold Coldman, supra, footnote 45, p. 199. H.1 See Maniruzzaman, supra, footnote 81, at pp. 152-154. H4 Mann, supra, footnote 26, at p. 315. See also S.K.B. Asante, Stability of Contractual Relations in the Transnational Investment Process, 28 I.C.L.Q., 1979, p. 401, at p. 406; Serbian Loans, supra, footnote 79, at p. 20; Norwegian Loans, supra, footnote 12, at p. 31. H5 See Bowett, supra, footnote 26, p. 932, n. 12; G.R. Delaume, Tlre Prosper Lnw of State Contracts and the Lex Mercatnria: A Reaypraisal, 4 Icsm Rev-Fry, 1989, p. 79; Asante, ibid., at p. 406. H6 Mann, supra, footnote 26, at p. 315. 87 The preliminary question of whether or not there is a breach of contract is to be determined by the proper law of the contract. The idea of submitting the question of breach of contract between a State and a private party to the proper law was adopted in the 1961 Harvard Draft Convention on the Responsibility of States; A.J.LL., 1961, pp. 548 et seq. Article 12(1) of the Harvard Draft provides that: "The violation through an arbitrary action of the State of a contract or concession to which the central government of that State and aliens are parties is wrongful. In determining whether the action of the State is arbitrary, it is relevant to consider whether the action constitutes: (a) a clear and discriminatory departure from the proper law of the contract or concession as that law existed at the time of the alleged violation; (b) a clear and discriminatory departure from the law of the State which is a party to the contract or concession as that law existed at the time of the making of the contract or concession, if that law is the proper law of the contract or concession; (c) an unreasonable departure from the principles recognised by the principal legal systems of the world as applicable to governmental contracts or concessions of thc same nature or category; or (d) a violation by the State of a treaty."

'8 Bowett, supra, footnote 26, at pp. 936-937. 19 See generally, G. Fitzmaurice, llre General Principles of International Law Considered from the Standpoint of the Rule of Law, 92 Recueil des Cours, 1957, II, p. 1, pp. 68-94, especially at p. 70. 911 Mann, supra, footnote 26, at p. 315. 91 Ibid., at pp. 262 et seq; idem, Lex Facit Arbitrtlm in Pieter Sanders (ed.)., International Arbitration Liber Amicortlm for Martin Domke, Martinus Nijhoff, Dordrecht, 1967, p. 157, at pp. 159-162. '" F.A. Mann, T7te 71,eoretical Approach towards the Law Governing Contracts Between States and Private Persons, 71 1 Rev. Bel. de Droit Int'l, 1975, p. 562, at p. 586; also, ibid., at p. 594; idem, State Contracts and State Responsibility, 54 A.J.LL., 1960, p. 572, at p. 580; idem, supra, footnote 26, at p. 266. See also W.M. Rcisman, Systems of Control in International Ajudication and Arbitration: Breakdown and Repair, Duke University Press, 1992, at pp. 134-139. 93 See ibid., at p. 136. 9" See A.F.M. Maniruzzaman, State Contracts and Arbitral Choice-of-Law Process and Techniques — A Critical Appraisal, 15 J. Int. Arb. 3, September 1998, p. 65 at pp. 66-68. 15 Compare Schwebel, 1987, supra, footnote 22, at pp. 142-43. 9ó See Otto Sandrock, How Much Freedom Should an International Arbitratur Enjoy-- 71", Desire for Freedom from Law v. the Promotion of International Arbitration, Am. Rev. Int'l Arb., 1992, p. 30; A.T. von Mehren, To What Extent is International Commercial Arbitration Autonomous? in Etude Operte a B. Goldman, supra, footnote 45, p. 217; J. Paulsson, Delocalization of International Commercial Arbitration: When and Why It Matters, 32 I.C.L.Q., 1983, p. 53; idem, I he Extent of Independence of International Arbitration from the Law of the Situs, in J.D.M. Lew (ed.), Contemporary Problems in International Arbitration, School of International Arbitration, Centre for Commercial Studies, Queen Mary College, London, 1986, p. 141; Maniruzzaman, supra, footnote 94, at pp. 66-72. See also Patrick Borches, The Internationalization of Contractual C:on/iicts Law, 28 Vanderbilt Journal of Transnational Law, 1995, p. 421; Ian F.G. Baxter, International Business Disputes, 39 I.C.L.Q., 1990, p. 288; idem, International Conflict of Laws and International Business, 34 I.C.L.Q., 1985, p. 538.

9� See Schwebel, 1987, supra, footnote 22, at pp. 125-143. 9s Thomas E. Carbonneau (ed.), Lex Mercatoria and Arbitration: A Discussion of the New Law Merchant, revised edition, Juris Publishing, Yonkers, N.Y., 1998, at p. 35. Professor Reisman observes: "Lex mercatoria usurps parties' choice of law and the designation by private international law of some national law's system for governing that choice of law. It usurps the governing law and the controls that a particular national community deems necessary for commercial transactions occurring within its space ... Without ever making the issue explicit, lex mercatoria is, in effect, saying that such a usurpation is good." Reisman, supra, footnote 92, at p. 138. 99 See Maniruzzaman, supra, footnote 3, at pp. 678-680. 100 Jennings, supra, footnote 9, at p. 178. Texaco v. Libya, supra, footnote 45, at p. 460, para. 50. See also Weil, supra, footnote 44, at pp. 319-320. Compare Kurt Lipstein, International Arbitration Between Individuals and Governments and the Confiict of Laws, in Essays in Honour of Schwarzenberger, 1988, p. 177, at p. 182. �°= See Ice, Case 4761 (1984), reported in Clunet (1986), p. 1137. Although this case was concerned with Italian and Libyan private parties, the Tribunal held that the contract was subject to "international public order" even though it had been determined that Libyan law should govern.

III] Convention on the Settlement of Investment Disputes Between States and Nationals of Other States, 1965, Vol. 1, Icsii) Reports, Grotius, Cambridge, U.K., at pp. 3 et seq. 1114 See A. Broches, l1ze Convention on the Settlement of Investment Disputes between States and Nationals of other States, 136 Recueil des Cours, 1972, u, p. 331, at pp. 392 et seq.; Ibrahim F.I. Shihata and Antonio R. Parra, Applicable Substantive Law in Disputes between States and Private Foreign Parties: 'T7te Case of Arbitration under the Icsli) Convention, 9 Icsm Rev-Fy, 1994, p. 183; M. Hirsch, The Arbitration Meclranism of tlre International Centre for the Settlement of Investment Disputes, Martinus Nijhoff, Dordrecht, 1993, at pp. 135-141; A.F.M. Maniruzzaman, International Commercial Arbitration: The Confiict of Lawns Issues in Determining the Applicable Substantive Law in the Context of lnvestment Agreements, Netherlands International Law Review, Vol. XL, No. 2, 1993, p. 210, at pp. 233-235. ms Lipstein, supra, footnote 101, at p. 182; see also G. Delaume, State Contracts and Transnational Arbitration, 75 A.J.LL., 1981, p. 784, at p. 798. 1116 Jennings, supra, footnote 9, pp. 181-2; see also Bowett, supra, footnote 26, at pp. 936-37; CJ. Olmstead, Economic Development Agreements between States and Aliens: Choice of Law and Remedy, 48 California L. Review, 1960, p. 424. 1117 Jennings, ibid., at p. 179. 108 See Jennings and Watts, supra, footnote 26, pp. 81-82; Delaume, supra, footnote 85, p. 90. 1119 Bowett, supra, footnote 26, at p. 937. 110 Jennings, supra, footnote 9, at p. 181.

See A.O. Adcde, Ï11e Minimum Standards in a World of Disparities, in R.S.J. Macdonald and D.M. Johnston (eds.), The Structure and Process of International Law, 1983, p. 1001, at pp. 1004-05; Edwin Borchard, The "Minimum Standard" oftlic Treatment of Aliells, 38 Mich L. Rev., 1940, p. 445; Allan Roth, T7ie Minimum Standard of International Law Applied to Aliens, 1949, at pp. 72-74; Schrijver, supra, footnote 52, at pp. 173-183; A.F.M. Maninizztnian, Expropriation of Alien Property and the Principle of Non-Discrimination in International Law of Foreign Im'cstmcl1t: An Ovewiew, 8 J. Transnat'l L. and Policy, No. 1, Fall 1998, p. 57. See also Fair and Equitable Treatment, in UNCTAD Series on Issues in International Investment Agreements, United Nations, New York and Geneva, 1999, UNCTAI)/IrE/Iii/11 (Vol. in), U.N. Pub. Sales No. E.99.u.D.lS. 112 Schachter, supra, footnote 26, at p. 311; Karl-Heinz Bockstiegel, The Legal Rules Applicable in International Commercial Arbitration Involving States or State-Controlled Enterprises, in 60 Years of Ice Arbitration: A Look at the Future, Ic:c: Pub. No. 412, 1984, at p. 164. 111 Gunther Jaenicke, Tlie Prospects for International Arbitration: Disputes Between States and Private Enterprise, in A.H.A. Soons (ed.), International Arbitration: Past and Prospects, 1990, p. 155, at p. 158; idem, supra, footnote 26, at pp. 181-182. 114 Rosalyn Higgins, Problems and Process: International Law and How We Use It, Clarendon Press, Oxford, U.K., 1994, at p. 141. 115 Jaenicke, supra, footnote 113, at p. 158. 116 See for example, Bowett, supra, footnote 5, at p. 52.

117 Bowett, supra, footnote 26, at p. 932, n. 12. "H Brownlie, supra, footnote 72, at p. 767. "9 C. Schreuer, Commentary on the ICSID Convention: Artide 42, 12 ICSID Rev-F«�, 1997, p. 398, at p. 443. 120 Id. 121 See the Report of the World Bank Executive Directors on the IcsiD Convention, Doc. ICSID/2, para. 40. 122 Compare Schwebel, 1987, supra, footnote 22, at pp. 125-143.

123 See for example, Cxtl International, Inc. v. Ministry of Roads and Transportation, et al., (C.ttt Int'I), 4 Iran-U.S.C.T.R., 27 December 1983, p. 263. iza Article v of the Claims Settlement Declaration provided that: "The Tribunal shall decide all cases on the basis of respect for law, applying such choice of law rules and principles of commercial and international law as the Tribunal determines to be applicable, taking into account relevant usages of the trade, contract provisions and changed circumstances." See George H. Aldrich, The Jurispmdence 4 the Iran-United States Claims Tribunal: An Analysis ythe Decisions of tile Tribunal, Clarendon Press, Oxford, U.K., 1996, p. 156, at pp. 156-170. �=5 See for example, Can Int'l, supra, footnote 123, at pp. 267-268. 126 See for example, Saipem S.I'.A. (Italy) v. Bangladesh Oil, Gas and Minera! Corporation (Bangladesh), Ice Arbitration Case No. 7934/CK, Partial Award (Jurisdiction) dated Dhaka, 27 November 1995 (unpublished), where the Tribunal (R. Luzzatto, W. Malis and I. Brownlic) held that "the Contract is an international construction contract and Claimant's claim for compensation for extension of time is a typical claim for this type of contract. Even if the Contract (governed solely by the law of Bangladesh, particularly the Contract Act, Act ix of 1872 which is silent on the issue concerned) does not expressly mention the term compensation for time extension, it is implied that this is covered under any international construction contract." 127 Perhaps this possibility has incited one scholar to make a radical proposal as follows: "The parties' engagement in transnational commercial venture and invocation of the international arbitral process constitute an implied submission to the law which governs all transnational commercial ventures. The application of any law designated by the parties must be tempered by reference to commercial usages, which now are being progressively formalized into the basic tenets of the lex mercatoria. In any given international arbitration, the arbitrators can modify provisions of the governing law and adapt them to the rules and principles of the arbitral international law merchant." (emphasis added): Carbonneau, supra, footnote 98, at p. 35. 12K NAFTA, Article 1131(1). 129 Energy Charter Treaty, Article 26(b), 34 ILM 360, 1995.

r3" See Articles 1 and 5 of the Resolution, supra, footnote 11, pp. 194-195. '3� See Thomas W. Walde, Investment Arbitration under the Energy Charter Treaty-From Dispute Settlement to Treaty Implementation, 12 Arb. Int'l, No. 4, 1996, p. 429, at pp. 457-458; Andrew E.L. Tucker, The Energy Charter Treaty and "Compulsory" International State/II1J1estor Arbitration, 11 Leiden Journal of International Law, 1998, p. 513, at pp. 524-525; Daniel M. Price, An Overview of the N.4FT.1 Investment Chapter. Substantive Rules and Investor-State Dispute Settlement, 27 The International Lawyer, No. 3, Fall 1993, p. 727; Georges R. Delaume, Consent to IcslD Arbitration, in Joseph J. Norton et al. (eds.), 77re Changing World of International Law in the Twenty-First Century: A Tribute to the Late Kenm·th R. Simmonds, Kluwer Law Int., Deventer, 1998, Chapter 6, p. 155, at pp. 172-174. "2 Many writers still seem to have reservations about attributing "true international character" to ICSID and Iran-United States Claims Tribunals. See Toope, supra, footnote 26, at pp. 245 et seq.; see also Collier and Lowe, supra, footnote 6, at p. 83. 133 Compare Toope, ibid., at pp. 385-400. Professor Karl-Heinz Bockstiegel notes in his review of Toope's book: "If Toope means that, if an arbitration between a State and a foreign private party were truly 'international', the obligations imposed upon the parties by the decisions of the Tribunal would have to be international legal obligations, others might not share his understanding of the term 'international'." Bockstiegel, 86 A.J.LL., 1992, p. 228, at p. 230. 134 Draft Articles on State Responsibility, United Nations International Law Commission, 10 EJIL, No. 2, 1999, at p. 447.

115 On the question of thc nature of arbitration between a State and a foreign entity, see V.V. Vecder, T7ie Lens Gold/ields Arbitration: Vie Nistorical Roots 411/rCc Ideas, 47 1.c.L.Q., October 1998, p. 747, at pp. 749-750. 13" How an arbitral award in a dispute between a State and a foreign company can rupture the diplomatic relations between that State and the State of the nationality of the foreign company and can become a major factor in their poisonous relations has been well illustrated by the Lena GoldJields arbitration. For an interesting account, see ibid., at pp. 786-790. 1J7 See generally, Toope, supra, footnote 26. '3H Seidl-Hohenveldem, supra, footnote 25, at p. 570. Compare Bockstiegel, supra, footnote 112, at pp. 167- 168: characterizing the contracts between State parties and foreign private enterprises as "public international law contracts". "`' See generally, J. Cable, Gunboat Diplomacy: Political Applications of Limited Naval Force, Macrnillian, London, 1981. 1411 See Ian Brownlie, International Law and the Use of Force by States, Clarendon Press, Oxford, U.K., 1963, at pp. 264-70 and 361-8. 141 Compare the Military and Paramilitary Activities case, Icj Reports, 1986, p. 119.

�a= The "Calvo Clauses" (based on the Doctrine) are inserted in contracts between governments (in particular those of Central and South American States) and nationals of foreign States "whereby the foreign national agrees that any claim or dispute arising under the contract shall be disposed of by the local tribunals and shall not be the subject of 'international reclamation', thereby purporting to renounce any claim upon his home State for its protection.": Jennings and Watts, supra, footnote 26, Vol. 1, at p. 930. See also generally, D. Shea, Calvo Clause, 1955; D. Graham, The Calvo Clause: Its Current Status as a Contractual Renunciation of Diplomatic Protection, 6 Texas International L. F., 1971, p. 289; Lipstein, supra, footnote 37, p. 130. 143 Seejennings and Watts, supra, footnote 26, Vol. 1, at p. 441, n. 15: "As to debts owed by a State to foreign States and their nationals, intervention is no longer permissible to secure the payment of such debts. This was not formerly so. The matter assumed some importance at the beginning of the 20th century in the context of the so- called 'Drago Doctrine' which asserted that intervention was not allowed for the purpose of making a State pay its public debts." 144 See generally, Sornarajah, 1994, supra, footnote 26, at pp. 121-130 and 133-134; S. Guha Roy, Is the Law of State Responsibility for Injuries to Aliens a Part of Universal International Law? 55 A.J.LL., 1969, p. 562. ms Id. 146 See generally, Augustus Asante Agyemang, Note, The Suitability of Arbitratiollfor Settling "Political" Investment Disputes Involving Africa States, 22 J.W.T. 6, December 1988, p. 123. �" See generally, Underhill v. Hernandez, 168 U.S. 252 (1897); Michael D. Ramsey, Acts of State and Foreign Sovereign Obligations, 39 Harv. J. Int'l L., No. 1, Winter 1998, pp. 1-100; Anne-Marie Burley, Law among Liberal States: Liberal Internationalism and the Act-of State Doctrine, 92 Columbia L. Rev., 1992, p. 1907. 148 Oetjen v. Central Leather Co., 246 U.S. 297 (1918). 149 Underhill v. Hernandez, supra, footnote 147. 15(l Ibid., at pp. 303-304. 151 Banco Nacional de Cuba v. Sabbatino, 376 U.S. 398 (1964). 152 Ibid., at p. 423.

rs3 See Horacio A. Grigera Naon, Arbitration in Latin America: Overcoming Traditiona! Hostility, 5 Arb. Int'l, 1989, p. 137; Sampson Sempasa, Obstades to International Comvnercial Arbitration in ,African Countries, 41 LC.L.Q., 1992, p. 387. 154 See generally, J. Paulsson, Third World I'articipation in International Investment Arbitration, 2 ICSID Rev-FlLJ, 1987, p. 1, at p. 19; Sornarajah, supra, footnote 3, p. 103; idem, The Climate of International Commercial Arbitration, 8 J. Int. Arb. 2, June 1991, p. 47; Hossam Issa, International Commercial Arbitration: A Study in the Mechanisms of International Legal Dependency, 1984; Mauro Rubino-Sammartano, Developing Countries vis-d-vis International Arbitration, 13 J. Int. Arb. 1, March 1996, p. 21; Joseph T. McLaughlin, Arbitration and Developing Countries, 13 Int'l Law, 1979, p. 211; Amr A. Shalakany, Arbitration and the Third World: A Plea for Reassessing Bias under the Specter of Neoliberalism, 41 Harv. J. Int'l L., No. 2, Spring 2000, p. 419. rss Shalakany, ibid., p. 419; McLaughlin, ibid., p. 211. 15(1 See von Mehren and Arechaga, supra, footnote 38, at p. 133. 157 Id.

''" Professor Lalive has suggested that the implication of international law as applicable law is limited to an international law of contractual interpretation and that does not include the international responsibility of the State: P. Lalive, supra, footnote 26, at p. 94. '''' See Schachter, supra, footnote 26, at pp. 305-314; Brownlie, snpra, footnote 20, at pp. 549-553; Jennings and Watts, supra, footnote 26, Vol. 1, parts 2 to 4, at pp. 927-931; Bowett, supra, footnote 26, at p. 937; Toope, supra, footnote 26, at pp. 75-90; Mann, supra, footnote 26, at pp. 309-315; Jaenicke, supra, footnote 26, at pp. 179, 184; P. Lalive, as reported in Institute of International Law, 58 YHIL, 1980, at p. 194; Arcchaga, supra, footnote 26, at p. 191; Amerasinghc, supra, footnote 26, at pp. 66-120; Sornarajah, 1994, supra, footnote 26, at pp. 325-352; idem, 1986, supra, footnote 26, at pp. 103-108. 160 Bowett, supra, footnote 26, at p. 937; see also I. Brownlie, Principles of Public International Law, fourth edition, Oxford University Press, Oxford, U.K., 1990, at pp. 547-551, p. 547, n. 36; Schachter, supra, footnote 26, pp. 311-319; F.A. Mann, State Contracts and State Responsibility, 54 A.J.I.L., 1960, p. 572, at pp. 575-80; Amerasinghe, supra, footnote 26, at pp. 77-84. 161 Jaenicke, supra, footnote 26, at p. 179. 162 Sec Schwebel, sura, footnote 14, at pp. 567-569; Lillich, supra, footnote 7, p. 61. '6' Compare generally, the International Law Commission Reports on International Responsibility by Dr F.V. Garcia-Amador as its Special Rapporteur: Yearbook oftlie International Law Commission, 1956, Vol 11, p. 173; Yearbook of the International Law Commission, 195R,Vol. l1,p. 47; and YearGook of tlre International Lam Commission, 1960, Vol. u, p. 41.

1(,' Elihu Lauterpacht, The World Bank Convention on the Settlement of International Investment Disputes, in Recueil d'Etudes de Droit Internarional en Hommage a Paul Guggenheim, Geneva, 1968, p. 642, at p. 660; B. Goldman, l.e droit applicable selon la Convention de la Bird, du 18 mnrs 1965poiir le règlement de différends relatifs aux investissemmts entre Etats et ressortissants d'autres Etats, llllnvestissel1rents Etrangers et Arbitrage entre Etats et Personnes Privies: La Convention, B.I.R.D. du 18 mnrs 1965, Dijon, 1969, p. 133, at p. 151. 11-5 Vuylstcke, Forefgn Investment Protection and Icstn Arbitration, 4 Ga. J.I.C.L., 1974, p. 343, at pp. 346, 349; Lauterpacht, ibid., at p. 665. Compare Toopc, supra, footnote 26, at pp. 243-253; J.D.M. Lew, Ayplicable Law in International Commercial Arbitration: A Study in Commercial Award, Occana Publications, New York, 1978, at p. 21. 116 LsTCO v. Liberia, Award, 31 March, 2 Icsin Reports, 31 March 1986, p. 358. Southern Pacific Properties (Middle East) Limited v. Arab Republic of Egypt (hereinafter, thc Spp Award), Case No. Arte/84/3, reported in 8 ICSID Rev-FIL'i, 1993, No. 1, p. 328; also reported in 3 IcsiD Reports, Grotius, Cambridge, U.K., 1995, pp. 96 et seq.; for a surrnnary of the facts concerning the flight of the case from Ice to IcsiD, see pp. 102-104. 161 Ibid., 8 ICSID Rev-FlLj, 1993, at para 80. 1(,') Schrcucr, supra, footnote 119, at p. 440. "" G.R. Delaume, The Pyramids Stand-The Pharaohs Can Rest in Peace, 8 lcsil) Pev-Flfj, 1993, p. 231, at p. 248.

171 Moshe Hirsch, T7�e Arbitration Mechanism of the International Centre for the Settlement of Investment Disputes, Martinus NijhoffPubs., Dordrecht, 1993, at p. 141. 17' Id. See cases and works cited at footnote 79, supra; O. Chukwumerije, International Law and Artide 42 of the ICSID Contention, 14 J. Int. Arb. 3, September 1997, p. 79, at p. 86. 173 See the Spp Award, supra, footnote 167, the Dissenting Award, at pp. 482-83. 174 The first sentence of Article 42(1) of the ICSID Convention clearly provides for this option. As the Article reads: "(1) The Tribunal shall decide a dispute in accordance with rules of law as may be agreed by the parties (emphasis added). 175 See Nagla Nassar, Internationalization of State Contracts: ICSID, The Last Citadel, 14 J. Int. Arb. 3, September 1997, p. 185.