Foreign Investment Contracts: Unexplored Mechanisms of Environmental Governance

30 Pages Posted: 16 Jan 2011

Date Written: February 1, 2009


Scholars have observed that non-state actors are increasingly taking on new and significant roles in the development, implementation, and enforcement of international rules. New forms of private and hybrid (public-private) governance are emerging in a multitude of issue areas. However, one important governance mechanism significantly predates novel developments such as reporting and certification schemes and yet remains relatively unexplored in the global governance literature. Foreign investment contracts (FICs), also referred to as host government agreements or state contracts, are agreements made between a foreign investor (often a multinational corporation) and a government or state-owned entity acting on behalf of its government. FICs govern the relationship between a private actor and a state, imposing rights and obligations on both parties. In many cases they supplant national regulation. They also have complicated legal interactions with certain intergovernmental agreements (e.g. bilateral investment treaties) and may affect the implementation of others (e.g. human rights treaties, multilateral environmental agreements). Disputes that arise under FICs are often delegated to international arbitration. These issues are discussed with reference to several FICs governing large-scale investments in developing and transition economies. A particular focus is given to the implications of these agreements for environmental governance in these states.

Keywords: private governance, foreign direct investment, environment, contracts

Suggested Citation

Tienhaara, Kyla, Foreign Investment Contracts: Unexplored Mechanisms of Environmental Governance (February 1, 2009). Available at SSRN: or

Kyla Tienhaara (Contact Author)

Queen's University ( email )

Kingston, Ontario K7L 3N6

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