*Dinesh D. Banani is an Executive Editor of the Boston College International & Comparative Law Review. 1 William M. Stelwagon, Financing Private Energy Projects in the Third World, 37 Cath. Law. 45, 45 (1996). 2See Catherine Pedamon, How Is Convergence Best Achieved in International Project Finance?, 24 Fordham Intl L.J. 1272, 127273 (2001). 3Id. at 1273. 4 David Blumental, Sources of Funds and Risk Management for International Energy Projects, 16 Berkeley J. Intl L. 267, 270 (1998); Christopher J. Sozzi, Project Finance and Facilitating Telecommunication Infrastructure Development in Newly-Industrializing Industries, 12 Computer & High Tech. L.J. 435, 447 (1996). 5 Stelwagon, supra note 1, at 5455. 6See Christopher Dugue, Dispute Resolution in International Project Finance Transactions, 24 Fordham Intl L.J. 1064, 1065 (2001). 7See Amr A. Shalakany, Arbitration and the Third World: A Plea for Reassessing Bias Under the Specter of Neoliberalism, 41 Harv. Intl L.J. 419, 465 (2000). 8 Edward C. McCutcheon, Think Globally, (En)Act Locally: Promoting Effective National Environmental Regulatory Infrastructures in Developing Nations, 31 Cornell Intl L.J. 395, 411 (1998). 9Id. 10 Nagla Nassar, Project Finance, Public Utilities and Public Concerns: A Practitioners Perspective, 23 Fordham Intl L.J. 60, 60 (2000). 11 McCutcheon, supra note 8, at 411. 12Id. 13See Nassar, supra note 10, at 60. 14 McCutcheon, supra note 8, at 412. 15 Nassar, supra note 10, at 62. 16Peter K. Nevitt, Project Financing 1 (4thed. 1983). 17 Nassar, supra note 10, at 62. 18See id. at 63. 19See Pedamon, supra note 2, at 1273. 20Id. 21See Blumental, supra note 4, at 270. 22See Nassar, supra note 10, at 62. 23Id. at 65. 24Id. 25See id. at 6364. 26See Dabhol Financing,Intl Corp. L., Apr. 1995, at 2. 27Id. 28Id. 29See Nassar, supra note 10, at 62. 30 Sozzi, supra note 4, at 447. 31See Pedamon, supra note 2, at 1273. 32 Blumental, supra note 4, at 270. 33See id. 34See Pedamon, supra note 2, at 1274; see also Nassar, supra note 10, at 65. 35See generally Ken Miyamoto, Measuring Local Legal Risk Premium in Project Finance Bonds,40 Va. J. Intl L. 1125, 1127 (2000) (providing background on project finance transactions). 36 Blumental, supra note 4, at 271. 37See generally Stelwagon, supra note 1, at 5560. 38See id. at 60. 39See Daniel Mazzini, Stable International Contracts in Emerging Markets: An Endangered Species?, 15 B.U. Intl L.J. 343, 355 (1997). 40See id. at 352. 41Id. 42Id. 43Id. at 35253. 44See Mazzini, supra note 39, at 35354. 45See id. at 371. 46 Nassar, supra note 10, at 65. 47See Stelwagon, supra note 1, at 60 (providing examples of host government policies). 48See Dugue, supra note 6, at 1074. 49Id. at 1065. 50Id. at 1072. 51Id. at 1076. 52Id. 53 Dugue, supra note 6, at 1076. 54Id. at 1077. 55Id. 56See id. 57Id. 58 Dugue, supra note 6, at 1077. 59Mark Hunter & Alan Redfern, Law and Practice of International Commercial Arbitration 23 (2d ed. 1991). 60See id. 61See Nassar, supra note 10, at 65. 62Hunter & Redfern, supra note 59, at 23. 63Id. 64Id. 65See id. 66See Mark Kantor, International Project Finance and Arbitration with Public Sector Entities: When is Arbitrability a Fiction?, 24 Fordham Intl L.J. 1122, 1125 (2001). 67See id. 68Id. 69Id. at 1126. 70 R. Doak Bishop et al., Strategic Options Available when Catastrophe Strikes the Major International Energy Project, 36 Tex. Intl L.J. 635, 686 (2001). 71 Kantor, supra note 66, at 1126. 72Id. 73Id. 74Id. 75Id. 76 Kantor, supra note 66, at 1127. 77Id. 78Id. at 1128. 79Id. at 1129. 80Id. at 112829. 81 Kantor, supra note 66, at 1131. 82Id. at 113233. 83Id. at 1129. 84See id. 85Id. 86 Kantor, supra note 66, at 1130. 87Id. 88Id. 89Id. 90 Bishop, supra note 70, at 687. 91Id. 92Id. 93 Kantor, supra note 66, at 113334. PLN also argued that CalEnergy may have used links with former President Suharto to win major contracts in Indonesia. Id. 94 Bishop, supra note 70, at 687. 95Id. 96Id. 97Id. 98Id. 99 Bishop, supra note 70, at 687. 100Id. 101Id. 102Id. 103Id. 104 Bishop, supra note 70, at 687. 105Id. 106Id. 107See Kantor, supra note 66, at 112526. 108See id. 109See Shalakany, supra note 7, at 45253. 110See id. at 45354. 111See id. at 455. 112See id. 113See id. at 45354. 114 Shalakany, supra note 7, at 454. 115Id. 116Id. 117See id. at 464. 118See id. at 454. 119Hunter & Redfern, supra note 59, at 23. 120 Shalakany, supra note 7, at 455. 121See id. at 464 (discussing how the public/private distinction dictated the decisions of the arbiters in the Texaco Award). 122SeeHunter & Redfern, supra note 59, at 23. 123SeeEsa Paasivirta, Participation of States in International Contracts and Arbitral Settlement of Disputes 194 (1990). 124See generallyM. Sornarajah, International Commercial Arbitration: The Problem of State Contracts 533 (1990). 125See id. at 24. 126 Mazzini, supra note 39, at 349. 127Id. at 346. 128Id. at 348. 129See Shalakany, supra note 7, at 45960 (discussing how the Texaco-Libyan Oil arbitrations decisions were indicative of the application of pacta sunt servanda). 130See id. 131See Thomas W. Waelde & George Ndi, Stabilizing International Investment Commitments: International Law versus Contract Interpretation, 31 Tex. Intl L.J. 216, 242 (1996). 132See McCutcheon, supra note 8, at 41314. 133See Nassar, supra note 10, at 65. 134See Waelde & Ndi, supra note 131, at 244 (discussing the doctrinal debate between the application of pacta sunt servanda and the encroachment on national sovereignty over domestic law making in the context of international investment commitments). 135See generally Kantor, supra note 66, at 113436 (discussing the difficulties of the project companies in enforcing the arbitral awards in Indonesia). 136See generally Shalakany, supra note 7, at 46566 (discussing how arbitration limits the sovereignty of Third World countries). 137See Kantor, supra note 66, at 112526 (discussing the resentment of foreign investors by local interests in Indonesia). 138See Award on the Merits in Dispute between Texaco Overseas Petroleum Company/California Asiatic Oil Company and the Government of the Libyan Arab Republic, Jan. 19, 1977, 17 I.L.M. 1, 19 (1978) [hereinafter Texaco Award] (discussing the various reasons which could be envisaged in order to justify a defendant Governments behavior to suspend a private contract). 139See Shalakany, supra note 7, at 462 (noting that a basic issue that had to be resolved in the Texaco decision was whether Libya had contracted in its public law capacity as a superior to the oil companies or whether it had contracted in its private law capacity as an equal to these companies). 140See id. (discussing how the analysis of the issue of Libyas legal capacity in the Texaco award was hinged on the categorization of Libyan actions as either public or private). 141See Himpurna California Energy Ltd. (Bermuda) v. PT. (Persero) Perusahan Listruik Negara (Indonesia), 14 Mealeys Intl Arb. Rep., at A-26 (Dec. 1999) [hereinafter Himpurna-PLN Final Award]. 142See id. 143See id. at A-27. 144Sornarajah, supra note 124, at 2526. 145See id. at 31. 146See Shalakany, supra note 7, at 464 (discussing how the Texaco awards decision on the legality of the principle of permanent sovereignty over natural resources was very much a function of the location of the principle on the public/private divide). 147See id. 148Id. 149See Kantor, supra note 66, at 113334. 150See Patuha Power Ltd. (Bermuda) v. PT. (Persero) Perusahan Listruik Negara (Indonesia), 14 Mealeys Intl Arb. Rep. at B-14 (Dec. 1999) [hereinafter Patuha-PLN Final Award]. 151Id. 152See Shalakany, supra note 7, at 464 (discussing how the Texaco award indicates that new laws and regulations [issued by the contracting state] must, to affect the contracting parties, be agreed to by them.). 153See id. 154 See Paasivirta, supra note 123, at 123 (discussing how contemporary international law recognizes that control over natural resources entails particularly strong considerations of public interest). 155See id. 156See id. at 195. 157See Shalakany, supra note 7, at 459 (discussing how Dupuys decision in the Texaco award was highly predicated on the assumption that pacta sunt servanda governed the contractual relationship between the parties). 158Id. 159See id. at 460. 160See generallySornarajah, supra note 124, at 2427 (criticizing the strict application of pacta sunt servanda by international arbiters in commercial disputes). 161See id. at 24. 162See id. at 25. 163Id. 164Id. 165Sornarajah, supra note 124, at 26. 166SeePaasivirta, supra note 123, at 19495. 167See Patuha-PLN Final Award, supra note 150, at B-31. 168Id. at B-33; Himpurna-PLN Final Award, supra note 141, at A-41. 169 Himpurna-PLN Final Award, supra note 141, at A-38. 170Id. at A-39. 171Id. 172Id. 173Id. 174 Himpurna-PLN Final Award, supra note 141, at A-39. 175Id. 176Id. 177Id. 178Id. 179 Himpurna-PLN Final Award, supra note 141, at A-39. 180Id. 181Id. 182Id. 183Id. 184 Himpurna-PLN Final Award, supra note 141, at A-39. 185Id. at A-41. 186Id. at A-40. 187See generally id. at A-39 to A-40 (discussing how the political and financial situation in Indonesia cannot relieve PLN of its liability under the ESC under the doctrine of pacta sunt servanda). 188SeePaasivirta, supra note 123, at 16869 (discussing the arguments of proponents for stabilization clauses in international contracts with state entities). 189 Himpurna-PLN Final Award, supra note 141, at A-41. 190SeePaasivirta, supra note 123, at 169 (discussing the flaws in the argument that violations of stabilization clauses in state contracts constitute an internationally unlawful act). 191SeeSornarajah, supra note 124, at 25 (discussing the lack of a basis for arguing that pacta sunt servanda should be rigorously applied to state contracts with foreign private parties). 192 Kantor, supra note 66, at 1129; Himpurna-PLN Final Award, supra note 141, at A-39. 193SeePaasivirta, supra note 123, at 169 (discussing how a strict adherence to stabilization clauses may lead to violations of state sovereignty). 194See id. at 170. 195See id. at 18384 (discussing the concept of permanent sovereignty over natural resources and how it has been incorporated as a principle of international law). 196See id. at 19495 (discussing the prevalence of administrative contracts in many countries). The ESC and other agreements in the Himpurna and Patuha transactions could be construed as administrative or public contracts, which reflect a necessary accommodation of public or state interests and the interests of individuals. Id. 197SeeSteven M. Schwebel, International Arbitration: Three Salient Problems 111 (1987). This view of equality can be extrapolated from the view of some scholars that, in a contract between a state and an alien, the use of the sovereign authority of the state, contrary to the expectations of the parties, to abrogate or violate a contract with an alien, is a violation of international law. Id. 198SeePaasivirta, supra note 123, at 16869 (discussing how the incorporation of stabilization clauses restricts the use of state prerogatives in a contract with a foreign private party through the law of treaties). The public/private distinction is couched in this case within the context of stabilization clauses, which are express waivers by a state to use its legislative or sovereign authority in connection with a contract with a foreign private party. Id. 199See id. at 168. 200See Shalakany, supra note 7, at 46162 (criticizing the decision of the Texaco arbitral tribunal to dismiss the argument that the concession agreements constituted an administrative contract). 201Id. at 461. 202Id. 203Id. 204See Nassar, supra note 10, at 65. 205See Patuha Power Ltd. v. Republic of Indonesia, 15 Mealeys Intl Arb. Rep. at B-28 (Jan. 2000). 206See id. (discussing how the Indonesian Civil Code does not provide for valid impediments for a non-performing party unless those impediments are insurmountable, irresistible, and external to the will of the defendant); Himpurna-PLN Final Award, supra note 141, at A-40 (discussing how PLN cannot rely on the Indonesian Civil Code to excuse its non-performance under the ESC because it had already expressly fashioned a contractual allocation of risk with Himpurna in case of governmental action). 207See Himpurna-PLN Final Award, supra note 141, at A-40. 208See id. at A-39. 209SeeSornarajah, supra note 124, at 1314. (noting the speciousness of the claim that an agreement between a foreign private entity and state is binding because the state, pursuant to its sovereignty, had limited its sovereignty by agreeing to be so bound). 210See id. at 14 (arguing that municipal law of the state, and not an international law of contract, should govern the contractual relationship between a foreign private entity and a state entity). 211Paasivirta, supra note 123, at 175. 212Id. 213SeeSornarajah, supra note 124, at 14. 214See Himpurna-PLN Final Award, supra note 141, at A-39 (discussing PLNs claim that doctrine of changed circumstances under Indonesian law relieved PLN from liability under the ESC). 215SeeSornarajah, supra note 124, at 12 (noting how foreign investors who were increasingly frustrated with domestic courts attempted to fashion a new set of norms emphasizing the primacy and immutability of the investment contract). 216See id. at 13. 217See id. 218See id. at 14. 219See Nassar, supra note 10, at 65; Paasivirta, supra note 123, at 184. 220See Himpurna-PLN Final Award, supra note 141, at A-39. 221See id. at A-22. 222See id. at A-40. 223SeeSornarajah, supra note 124, at 14.