Posted: September 10th, 2022

Rules of Drafting Investment Contracts

Rules of Drafting Investment Contracts
Explain the rules of drafting investment contracts. (the answer should explain the types, formation, applicable law, stabilization clauses and renegotiation and provide examples).

Note: Please refer to this reference given that it provides answers, and refer to this reference mandatory , Name of reference: (principles of International Investment law -Rudolf Dolzer and Christoph Schreuer- Oxford university press).
Rules of drafting investment contracts
The types of investment contracts include the interests of investors and the public interests of the state. The legal setting of an investment is adjusted to meet the complexities of investment contracts. The contract of the investment also reflects the bargaining power of the investors and state in cases where there is an individual project taking place. For this reason, the investors and the government often negotiate the terms needed. The different sectors of the economy have led to typical agreements which have evolved over the past years. There is also a second type of contract which took place in the 1970s (Dolzer, & Schreuer, 2016). The agreement was for the oil-producing countries to control their resources and technologies within their borders. Therefore, the main of this project will be to examine the rules of drafting an agreement contract.
The rules of drafting an agreement contract applies to both investors and the state in determining the law applied to the contract on conflict resolution. For this reason, the host’s state views both the state and investor as the vantage point of protecting the sovereignty of the nation (Dolzer, & Schreuer, 2016). Several possible choices in regards to the allocation law have emerged depending on the bargaining power and negotiation skills. However, the application of international law and rules have been compromised when it comes to drafting the investor’s agreements.
Another rule is that international law is applicable based on the constitution of a given country. This makes it hard for the investor to accept the legislative measure put in place. Moreover, the choices of law clauses also need to be interpreted in numerous ways when drafting the investment contracts (Cotula, 2015). The definition of requirement referring to the general principle of law may not be self-evident in some circumstances. For instance, the sources or references used might raise issues of interpreting the agreement.
The rules also suggest that the agreements should be renegotiated by the investor and the state to allow special rules to exists between the groups. For instance, each group should create a legal framework which lasts longer from the initiation of the project till the end (Dolzer, & Schreuer, 2016). The investor will also be concerned to safeguard the stability of the treaty. An applicable agreement provides rules which are meant to promote stable relationships of the citizens, such as umbrella clauses. An umbrella clause results in equitable and fair treatment. However, such rules are not desired by the investors and also not put in place. For this reason, most investors have sought to negotiate stabilization clauses with a legal regime whose past has been subjected to volatility.
Another rule states that the more recent a trend has been on a renegotiation clause, the more it is to preserve the stability of the treaty. Having such a clause leads to economic equilibrium (Cotula, 2015). For example, an equilibrium agreement was formulated under article 34 of the model exploration and sharing agreement (Dolzer, & Schreuer, 2016). In this agreement, in future case law, if the customs duties are exceeded, then both groups shall enter into a negotiation to reach an equitable solution. Getting into a fair settlement maintains the equilibrium. However, difficulties will increase, thus trigger the right to renegotiate with the investor. Additionally, beyond the triggering point, both groups have ways to structure the actual process of appropriate renegotiation. The renegotiation process relies on the criteria, which creates space for negotiation.

Reference
Cotula, L. (2015). Investment contracts and sustainable development: How to make contracts for fairer and more sustainable natural resource investments (No. 20). IIED.
Dolzer, R., & Schreuer, C. (2016). Principles of international investment law. Oxford University Press.42(5), 28–35

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