1 1Dr Lorenzo Cotula, Law Degree (University 'La Sapienza' of Rome), MSc (London School of Economics), PhD (University of Edinburgh), is Senior Researcher - Law and Sustainable Development at the International Institute for Environment and Development (LIED), in the UK. He can be contacted at firstname.lastname@example.org. The author would like to thank Antony Crockett, Howard Mann, Andrea Shemberg and Halina Ward for their useful comments on earlier drafts of this article; responsibility for the views expressed and any errors made lies entirely with the author.
2DukeEnergyInternationalPeruInvestmentsNo.1 Ltd.v.RepublicofPeru, Award on the Merits, 18 August 2008, ICSID Case No. ARB/03/28. An annulment proceeding is currently pending before an ICSID ad hoc committee.
3 See e.g. Christopher Greenwood, "State Contracts in International Law: The Libyan Oil Arbitrations", 53 Bb.Y.B. Int'I L.27 (1982). ^ See e.g. Esa Paasivirta, Participation of States in International Contracts and Arbitral Settlement of Disputes (1990); Nagia Nassar, Sanctity of Contracts Revisited: A Study in the Theory and Practice of Long-Term International Commercial Transactions (1995); Thomas Walde and George N'Di, Stabilising International Investment Commitments, 31 Texas Int'l. LJ 215 (1996); Piero Bernardini, The Renegotiation of the Investment Contract, 13(1) ICSID. Rev - FILJ 411-425 (1998); Peter Muchlinski, Multinational Enterprises and the Law (1999); Klaus Peter Berger, Renegotiation and Adaptation of International Investment Contracts: The Role of Contract Drafters and Arbitrators, 36(3) Vanderbilt Journal of Transnational Law 1347-1380 (2003); Abdullah Faruque, Validity and Efficacy of Stabilization Clauses: Legal Protection vs. Functional Value 23 J. Int'l Arb. 317 (2006); A.F.M. Maniruzzaman, "Stabihzation in Investment Contracts and Change of Rules by Host Countries: Tools for 0 & G Investors", Association of International Petroleum Negotiations (2007); Peter D. Cameron, "Stabilization in Investment Contracts and Change of Rules by Host Countries: Tools for 0 & G Investors", Association of International Petroleum Negotiations (2007). For the author's own work, see for instance "Reconciling Regulatory Stability and Evolution of Environmental Standards in Investment Contracts: Towards a Rethink of Stabilization Clauses", 1 (2) JournalofWorldEnergyLaw&Business (2008) 158-179.
Sheldon Leader, "Human Rights, Risks, and New Strategies for Global Investment", 9J. Int'lEcon.L. 657 (2006); Olivier de Schutter, "Transnational Corporations as Instruments of Human Development", in P. Alston and M. Robinson (Eds), HumanRightsandDevelopment:TowardsMutualReittforcement, 403 (2005); Amnesty International UK, Human Rights on the Line: The Baku-Tbilisi-Ceyhan Pipeline Project (2003); Amnesty International UK, Contracting out of Human Rights: The Chad-Cameroon Pipeline Project (2005); International Institute for Environment and Development, Lifting the Lid on Foreign Investment Contracts: The Real Deal for Sustainable Development, (2006); and Global Witness, Heavy Mittal? A State within a State: The Inequitable Mineral Development Agreement between the Government of Liberia and Mittal Steel Holdings NV (2006); and Andrea Shemberg, "Stabilization Clauses and Human Rights", research report commissioned by the International Finance Corporation and the United Nations Special Representative to the Secretary General on Business and Human Rights (2008), available at http://www.ifc.org/ifcext/sustainability.nsf/AttachmenGSByTitle/p- StabilizationClausesandHumanRights/$FILE/Stabilization+Papcr.pdf. 6 TexamOverseasPetroleumCompanyandCaliformiaAsiaticOilCompanyv.TheGovemmentof theLibyanArabRepublic, 19 January 1977, 53 ILR 389, paras. 66-68. GovernmentofKuwaitv.AmericanIndependentOilCo.(Aminoil), 24 March 1982, 21 II.M 976. 8 AcipCompanyv.People'sRepublicof theCongo, 30 November 1979, 21 I.L.M. 726 (1982). RevereCopper&Brass,Inc.v.OverseasPrivateInvestmentCorporation(Opic), 24 August 1978, 56 ILR 257. 10Acm,supra note 8, at para. 88. lt LibyanAmericanOilCompany(Liamco)v.TheGoverrtmentof theLibyanArabRepublic, 12 April 1977, 62 h.R 140.
12MethanexCorp.v.UnitedStatesofAmerica, Final Award, 3 August 2005, http://www.state.gov/ documents/organization/51052.pdf, para. IV.D.7, emphasis added. �3Parkerings-CompagnietASv.Lithuania, Award, 11 September 2007, ICSID Case No. AKB/05/8, available at http://ita.law.uvic.ca/documents/Parkerings.pdf, para. 332. 1; Leader, supra note 5; and Cotula, supra note 4.
Walde, T., and Kolo, A., 2001, "Environmental Regulation, Investment Protection and 'Regulatory Taking' in International Law", 50 IcIQ 811, at 819. ls For a US domestic case where tighter local consultation requirements were found to have resulted in the regulatory taking of a mining concern, see UnitedNuclearCorp.v.US, 912 F.2d 1432 (Fed. Cir. 1990), United States Court of Appeals, Federal Circuit, 24 August 1990.
17 See paras. 41-43 of the award.
18 See Walde, T., 2008, "Renegotiating Acquired Rights in the Oil and Gas industries: Industry and Political Cycles Meet the Rule of Law", 1 (1 )JournalofWorldEnergyLawFrBusiness 55, at 74-75. 19 The sole substantive article of the MRL provided as follows: "The formation, and other acts, contracts and transfer of equity, arising from merger or division agreements of any type of legal entity, whether mercantile, civil or cooperatives, shall be exempt from all taxes, including the Income Tax and fees for registration in the Public Registries until December 31, 1994" (Law No. 26283 of 1994, article 1). z°DukeEnergyInternationalPeruInvestmentsNo.1 Ltd.v.Republicof Peru, Decision on Jurisdiction, 1 February 2006, ICSID Case No. APB/03/28, paras. 132 and 133. Award on the Merits, para 209. A more detailed discussion of this issue is beyond the scope of this note.
z= Award, para. 129.
23 Para. 214 of the Award on the Merits. 24 Host Government Agreement between the Government of Turkey and the MEr Participants, 19 October 2000. 25 Aminoil, note 7 above, para. 95. 26 Ibid., paras. 94 and 95. 27 "The Shaikh shall not by general or special legislation or by administrative measures or by any other act whatever annul this Agreement except as provided in article 11 [which enables termination for breach of obligations, including default in payments]. No alteration shall be made in the terms of this Agreement by either the Shaikh or the Company except in the event of the Shaikh and the Company jointly agreeing that it is desirable in the interest of both parties to make certain alterations, deletions or additions to this Agreement" (article 17 of the concession contract at stake in the Aminoil case).
28 Award on the Merits, paras. 216 and 219. z9 Para. 222. 3° Paras. 223 and 227. 11 Para. 227. 3z Para. 350. 33 Paras. 345, 349, 362-366.
34 Award, para. 126. 35Supra note 5.
36 Paras. 215-216. ;� Paras. 223, 226 and 228. Arbitrator Tawil dissented on this point, and argued that the power of the tribunal to review the interpretation or application of tax law was not limited to a standard of reasonableness (paras. 6-9 of his Partial Dissenting Opinion). 3g Para. 228. 39AssociatedProvincialPictureHousesv.WednesburyCorporation  1 KB 223. 40 Paras. 300 and 307. Paras. 13-27 of his Partial Dissenting Opinion, especially para. 17.
^2 Interestingly, a reading of the award suggests that the claimant's position changed somewhat during the arbitration proceedings. While in its memorial the claimant argued that the stabilization regime should cover the application of existing regulation "in a manner wholly inconsistent with previous applications"; in its reply the claimant extended this to cover "any changes to the interpretation of application" of existing legislation. See paras. 196-197 of the award. 43 Amnesty International UK, 2003, supra note 5. ^4 This latter point is further discussed below.
45 Para. 218.
^6 As I argued in Cotula, supra note 4. Sheppard, A., and Crockett, A., "Stabilisation Clauses: A Threat to Sustainable Development?", forthcoming in Cordonier-Segger, M.C., Gehring, M., and Newcombe, A. (Eds), SustainableDevelopmentinWorldInvestmentLaw, Kluwer Law International, also conclude that it is advisable to make explicit provision subjecting the stabilization clause to the host state's obligations under international treaties on human rights, health, safety and environmental standards.
a� Anonynous personal communication from an insider legal expert. 48 Cotula, supra note 4.