Arbitration - Investing into North African Solar Power - page 102

rules out the application of an “incomplete” system of law. Hence, the direct
application of international law as the applicable law of the contract,
e.g. concession and state contract, is not advisable. Both parties should agree on a
domestic law as the applicable law, but should include a section that international
law functions as a back-up.
The “corrective function” of international law is also accepted nowadays. 418
International commercial 419 and investment 420 arbitration include the principle that
parties can freely choose the applicable law. If they decide to choose domestic law,
it is a clear expression of party autonomy, which is a prevailing feature of interna-
tional arbitration. However the influence of international law on domestic law is
nothing new. One example is jus cogens rules, which always apply. As expressed in
Art. 53 of the VCLT, jus cogens is a general principle of law which influences all
contracts. Without a doubt, it is part of international customary law.

2.4.2.4 Stabilization Clauses

To prevent a change of national legislation to the disadvantage of the investor, there
is a possibility to conclude a stabilization clause. 421 If a concession is subject to host
state law, the investor faces the risk that the state will use its sovereignty to interfere
with the contractual balance. In countries with a French legal background, it is not
uncommon that the executive authority (unilaterally) changes, terminates or mod-
ifies a concession contract if it is within the interest of the public. 422 It is possible to
apply stabilization clauses only to certain parts of the contract. 423 As long as
changes to the law are within the constitutional framework of the host state, they
are not forbidden. 424
There is a wide acceptance of stabilization clauses if they are not permanent and
irrevocable, and thus do not limit state sovereignty too much. 425 Long stabilization
clauses in contracts can lead to problems as BITs are not insurance policies against

418 Schreuer ( 2009 ), 620-627 paras 214-235.
419 ICC supports it, in: Maniruzzaman ( 2001 ), 309 (318).
420 ICSID [2002] ARB/98/4—Annulment (2002), 933 (941) para 40, (941-942) para 42 and (942)
paras 44-45; ICSID [2007] ARB/01/3—Award, 65 para 207; ICSID [2007] ARB/02/16—Award,
69 para 237; ICSID [2006] ARB/01/12—Award, 20-21 paras 66-68; ICSID [2000] ARB/96/1—
Award, 169 (191) paras 64-67; ICSID [1999] ARB/94/2—Award, 197 (216-217) para 69; ICSID
tribunals against this view, in: Schreuer ( 2009 ), 627-630 paras 236-244.
421

Joff´ ( 2000 ), 33 (42); Metje ( 2008 ), 66-67 and 111; Hobe and M¨ ller ( 2009 ), 65 (73); Lorcher
( 2005 ), 11 (17); Krajewski ( 2009 ), 182; Herdegen ( 2003 ), 13 (23); Dolzer and Schreuer ( 2008 ),
75; Schreuer ( 2009 ), 588, para 117; cf Berger (2003), 65 (76).
422 Herdegen ( 2003 ), 13 (17).
423 Schreuer ( 2009 ), 588-589 para 119.
424 Schreuer ( 2009 ), 588 para 116.
425 Aaken ( 2006 ), 544 (551); cf Sch

€ obener et al. ( 2010 ), 245, Kap. 4 § 16 para 93.