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In Contractual Renegotiations and International Investment Arbitration, Aikaterini Florou explores the sensitive issues of renegotiating state contracts and the relationship between those contracts and the overarching international investment treaties. By introducing novel insights from economics, the author deconstructs the contract-treaty interaction, demonstrating that it is not only treaties that impact the underlying contracts, but also that those contracts have an effect on the way the open-textured treaty standards are interpreted. The originality of the argument is combined with an innovative interpretative methodology based on relational contract theory and transaction cost economics. Departing from the traditional emphasis of international lawyers on the text of investment contracts, Florou shows instead that such contracts are first and foremost “economic animals” and the theory of obsolescing bargaining does not paint a full picture of the contract-treaty interaction.

A lot of ink has been devoted to Brexit: when (and if) it will happen, under what terms, and what its legal effects will be. Some have enquired whether Brexit can create an avalanche of investor-state disputes potentially based on the frustration of the investors’ legitimate expectations. This article takes a step back from the current volatility of the ongoing negotiations and addresses a bigger policy question, which has been emerging steadily also in other contexts: what will be the actual interplay between international, EU and domestic laws for the resolution of investment disputes after Brexit? To address this question, this article first examines the Withdrawal Agreement and the new arbitration mechanism that it establishes. Second, it explores the interaction between international and domestic laws, in light of the current developments in EU law, especially the Achmea judgment and the Member States’ Declarations on Achmea, as well as implications for the enforceability of arbitral awards in the UK post-Brexit. The article concludes with the remark that policy makers need to address the current underlying tensions between the three laws of international investment; domestic, EU, and international, by paying due respect to international law.

In: European Investment Law and Arbitration Review Online

Abstract

The relationship between international investment treaties and the underlying contracts remains a highly disputed matter in international investment law. This project explores the contract-treaty interaction by using the renegotiation of regulatory contracts in the sector of energy infrastructure as a natural experiment, with a particular emphasis on the arbitral disputes that arose from the Argentine crisis. It deploys to this end an original analytical framework drawing from transaction cost economics and relational contract theory. The result of the novel combination of these two analytical frameworks is the construction of an interpretative methodology that takes an integrated approach to the two instruments – the contract and the overarching treaty – in a way that achieves a more sustainable balance between the competing public and private interests.

The book rests in particular on three arguments: the first is the relational-contract nature of dynamic treaty standards, which require the long-term cooperation of the parties. The second is the status of these vague standards as default rules complemented by the provisions of the underlying contracts, which are also relational, and act as gap-fillers. The last, normative argument is that the relationship between these (default) treaty rules and the (gap-filling) contractual provisions should be determined by transaction cost economics, and specifically the goal of economizing on the transaction costs of bounded rationality and opportunism when and interpreting relational treaty standards.

The relational contract theory interpretation of investment-treaty standards, namely the standard of fair and equitable treatment, has evident policy implications for the reform of the investor-state dispute settlement system and the future of international investment relations. Applying the principles and tools of relational contract theory to the interpretation of these standards would bring more consistency and pragmatism to the adjudication of disputes arising from the renegotiation of regulatory contracts. More importantly, it would be a powerful law-and-economics tool to achieve the alignment of the parties’ incentives both during the dispute and, in a backward induction, the implementation of their contract. Forcing the parties’ cooperation and contributing to the success of their concession and thus the ensuing development of a host state are long-neglected priorities of international investment law, which shall form part, though, of the mission of international investment arbitration as global governance.

In: Contractual Renegotiations and International Investment Arbitration

Abstract

The relationship between international investment treaties and the underlying contracts remains a highly disputed matter in international investment law. This project explores the contract-treaty interaction by using the renegotiation of regulatory contracts in the sector of energy infrastructure as a natural experiment, with a particular emphasis on the arbitral disputes that arose from the Argentine crisis. It deploys to this end an original analytical framework drawing from transaction cost economics and relational contract theory. The result of the novel combination of these two analytical frameworks is the construction of an interpretative methodology that takes an integrated approach to the two instruments – the contract and the overarching treaty – in a way that achieves a more sustainable balance between the competing public and private interests.

The book rests in particular on three arguments: the first is the relational-contract nature of dynamic treaty standards, which require the long-term cooperation of the parties. The second is the status of these vague standards as default rules complemented by the provisions of the underlying contracts, which are also relational, and act as gap-fillers. The last, normative argument is that the relationship between these (default) treaty rules and the (gap-filling) contractual provisions should be determined by transaction cost economics, and specifically the goal of economizing on the transaction costs of bounded rationality and opportunism when and interpreting relational treaty standards.

The relational contract theory interpretation of investment-treaty standards, namely the standard of fair and equitable treatment, has evident policy implications for the reform of the investor-state dispute settlement system and the future of international investment relations. Applying the principles and tools of relational contract theory to the interpretation of these standards would bring more consistency and pragmatism to the adjudication of disputes arising from the renegotiation of regulatory contracts. More importantly, it would be a powerful law-and-economics tool to achieve the alignment of the parties’ incentives both during the dispute and, in a backward induction, the implementation of their contract. Forcing the parties’ cooperation and contributing to the success of their concession and thus the ensuing development of a host state are long-neglected priorities of international investment law, which shall form part, though, of the mission of international investment arbitration as global governance.

In: Contractual Renegotiations and International Investment Arbitration

Abstract

The relationship between international investment treaties and the underlying contracts remains a highly disputed matter in international investment law. This project explores the contract-treaty interaction by using the renegotiation of regulatory contracts in the sector of energy infrastructure as a natural experiment, with a particular emphasis on the arbitral disputes that arose from the Argentine crisis. It deploys to this end an original analytical framework drawing from transaction cost economics and relational contract theory. The result of the novel combination of these two analytical frameworks is the construction of an interpretative methodology that takes an integrated approach to the two instruments – the contract and the overarching treaty – in a way that achieves a more sustainable balance between the competing public and private interests.

The book rests in particular on three arguments: the first is the relational-contract nature of dynamic treaty standards, which require the long-term cooperation of the parties. The second is the status of these vague standards as default rules complemented by the provisions of the underlying contracts, which are also relational, and act as gap-fillers. The last, normative argument is that the relationship between these (default) treaty rules and the (gap-filling) contractual provisions should be determined by transaction cost economics, and specifically the goal of economizing on the transaction costs of bounded rationality and opportunism when and interpreting relational treaty standards.

The relational contract theory interpretation of investment-treaty standards, namely the standard of fair and equitable treatment, has evident policy implications for the reform of the investor-state dispute settlement system and the future of international investment relations. Applying the principles and tools of relational contract theory to the interpretation of these standards would bring more consistency and pragmatism to the adjudication of disputes arising from the renegotiation of regulatory contracts. More importantly, it would be a powerful law-and-economics tool to achieve the alignment of the parties’ incentives both during the dispute and, in a backward induction, the implementation of their contract. Forcing the parties’ cooperation and contributing to the success of their concession and thus the ensuing development of a host state are long-neglected priorities of international investment law, which shall form part, though, of the mission of international investment arbitration as global governance.

In: Contractual Renegotiations and International Investment Arbitration

Abstract

The relationship between international investment treaties and the underlying contracts remains a highly disputed matter in international investment law. This project explores the contract-treaty interaction by using the renegotiation of regulatory contracts in the sector of energy infrastructure as a natural experiment, with a particular emphasis on the arbitral disputes that arose from the Argentine crisis. It deploys to this end an original analytical framework drawing from transaction cost economics and relational contract theory. The result of the novel combination of these two analytical frameworks is the construction of an interpretative methodology that takes an integrated approach to the two instruments – the contract and the overarching treaty – in a way that achieves a more sustainable balance between the competing public and private interests.

The book rests in particular on three arguments: the first is the relational-contract nature of dynamic treaty standards, which require the long-term cooperation of the parties. The second is the status of these vague standards as default rules complemented by the provisions of the underlying contracts, which are also relational, and act as gap-fillers. The last, normative argument is that the relationship between these (default) treaty rules and the (gap-filling) contractual provisions should be determined by transaction cost economics, and specifically the goal of economizing on the transaction costs of bounded rationality and opportunism when and interpreting relational treaty standards.

The relational contract theory interpretation of investment-treaty standards, namely the standard of fair and equitable treatment, has evident policy implications for the reform of the investor-state dispute settlement system and the future of international investment relations. Applying the principles and tools of relational contract theory to the interpretation of these standards would bring more consistency and pragmatism to the adjudication of disputes arising from the renegotiation of regulatory contracts. More importantly, it would be a powerful law-and-economics tool to achieve the alignment of the parties’ incentives both during the dispute and, in a backward induction, the implementation of their contract. Forcing the parties’ cooperation and contributing to the success of their concession and thus the ensuing development of a host state are long-neglected priorities of international investment law, which shall form part, though, of the mission of international investment arbitration as global governance.

In: Contractual Renegotiations and International Investment Arbitration

Abstract

The relationship between international investment treaties and the underlying contracts remains a highly disputed matter in international investment law. This project explores the contract-treaty interaction by using the renegotiation of regulatory contracts in the sector of energy infrastructure as a natural experiment, with a particular emphasis on the arbitral disputes that arose from the Argentine crisis. It deploys to this end an original analytical framework drawing from transaction cost economics and relational contract theory. The result of the novel combination of these two analytical frameworks is the construction of an interpretative methodology that takes an integrated approach to the two instruments – the contract and the overarching treaty – in a way that achieves a more sustainable balance between the competing public and private interests.

The book rests in particular on three arguments: the first is the relational-contract nature of dynamic treaty standards, which require the long-term cooperation of the parties. The second is the status of these vague standards as default rules complemented by the provisions of the underlying contracts, which are also relational, and act as gap-fillers. The last, normative argument is that the relationship between these (default) treaty rules and the (gap-filling) contractual provisions should be determined by transaction cost economics, and specifically the goal of economizing on the transaction costs of bounded rationality and opportunism when and interpreting relational treaty standards.

The relational contract theory interpretation of investment-treaty standards, namely the standard of fair and equitable treatment, has evident policy implications for the reform of the investor-state dispute settlement system and the future of international investment relations. Applying the principles and tools of relational contract theory to the interpretation of these standards would bring more consistency and pragmatism to the adjudication of disputes arising from the renegotiation of regulatory contracts. More importantly, it would be a powerful law-and-economics tool to achieve the alignment of the parties’ incentives both during the dispute and, in a backward induction, the implementation of their contract. Forcing the parties’ cooperation and contributing to the success of their concession and thus the ensuing development of a host state are long-neglected priorities of international investment law, which shall form part, though, of the mission of international investment arbitration as global governance.

In: Contractual Renegotiations and International Investment Arbitration