Binding States: A Commentary on State Contracts and Investment Treaties

Abstract

This article was originally published in Business Law International at [2005] 6(3) BLI 372. It examines three techniques that have been used to create obligations of public international law on states that are parties to commercial contracts with private parties. The first technique, referred to as 'simple internationalisation', derives from arbitral awards in the seventies following the wave of Libyan nationalisations (in particular the 1977 Texaco v Libya award). The second technique is to use the 'umbrella' clause that exists in a number of bilateral investment treaties (BITs). Here however, arbitration practice seems divided as to the exact effect of these clauses (compare SGS v Pakistan and SGS v Philippines). The third technique is for states to enter into project specific treaties that elevate the underlying commercial contracts to the international plane. The Channel Tunnel treaty is one example. The BTC (Baku-Tbilisi-Ceyhan) pipeline is another example: it involved an intergovernmental agreement (IGA) between Turkey, Georgia and Azerbaijan and several host government agreements (HGAs) with the commercial companies.

Keywords: State contracts, investment treaties, contract internationalization, Texaco v Libya, BTC, transcaspian pipelines, umbrella clause, stabilisation clauses