*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).
2 See Catherine Pedamon, How Is Convergence Best Achieved in International Project Finance?, 24 Fordham Int’l L.J. 1272, 1272–73 (2001).
3 Id. at 1273.
4 David Blumental, Sources of Funds and Risk Management for International Energy Projects, 16 Berkeley J. Int’l 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 54–55.
6 See Christopher Dugue, Dispute Resolution in International Project Finance Transactions, 24 Fordham Int’l L.J. 1064, 1065 (2001).
7 See Amr A. Shalakany, Arbitration and the Third World: A Plea for Reassessing Bias Under the Specter of Neoliberalism, 41 Harv. Int’l 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 Int’l L.J. 395, 411 (1998).
9 Id.
10 Nagla Nassar, Project Finance, Public Utilities and Public Concerns: A Practitioner’s Perspective, 23 Fordham Int’l L.J. 60, 60 (2000).
11 McCutcheon, supra note 8, at 411.
12 Id.
13 See Nassar, supra note 10, at 60.
14 McCutcheon, supra note 8, at 412.
15 Nassar, supra note 10, at 62.
16 Peter K. Nevitt, Project Financing 1 (4th ed. 1983).
17 Nassar, supra note 10, at 62.
18 See id. at 63.
19 See Pedamon, supra note 2, at 1273.
20 Id.
21 See Blumental, supra note 4, at 270.
22 See Nassar, supra note 10, at 62.
23 Id. at 65.
24 Id.
25 See id. at 63–64.
26 See Dabhol Financing, Int’l Corp. L., Apr. 1995, at 2.
27 Id.
28 Id.
29 See Nassar, supra note 10, at 62.
30 Sozzi, supra note 4, at 447.
31 See Pedamon, supra note 2, at 1273.
32 Blumental, supra note 4, at 270.
33 See id.
34 See Pedamon, supra note 2, at 1274; see also Nassar, supra note 10, at 65.
35 See generally Ken Miyamoto, Measuring Local Legal Risk Premium in Project Finance Bonds, 40 Va. J. Int’l L. 1125, 1127 (2000) (providing background on project finance transactions).
36 Blumental, supra note 4, at 271.
37 See generally Stelwagon, supra note 1, at 55–60.
38 See id. at 60.
39 See Daniel Mazzini, Stable International Contracts in Emerging Markets: An Endangered Species?, 15 B.U. Int’l L.J. 343, 355 (1997).
40 See id. at 352.
41 Id.
42 Id.
43 Id. at 352–53.
44 See Mazzini, supra note 39, at 353–54.
45 See id. at 371.
46 Nassar, supra note 10, at 65.
47 See Stelwagon, supra note 1, at 60 (providing examples of host government policies).
48 See Dugue, supra note 6, at 1074.
49 Id. at 1065.
50 Id. at 1072.
51 Id. at 1076.
52 Id.
53 Dugue, supra note 6, at 1076.
54 Id. at 1077.
55 Id.
56 See id.
57 Id.
58 Dugue, supra note 6, at 1077.
59 Mark Hunter & Alan Redfern, Law and Practice of International Commercial Arbitration 23 (2d ed. 1991).
60 See id.
61 See Nassar, supra note 10, at 65.
62 Hunter & Redfern, supra note 59, at 23.
63 Id.
64 Id.
65 See id.
66 See Mark Kantor, International Project Finance and Arbitration with Public Sector Entities: When is Arbitrability a Fiction?, 24 Fordham Int’l L.J. 1122, 1125 (2001).
67 See id.
68 Id.
69 Id. at 1126.
70 R. Doak Bishop et al., Strategic Options Available when Catastrophe Strikes the Major International Energy Project, 36 Tex. Int’l L.J. 635, 686 (2001).
71 Kantor, supra note 66, at 1126.
72 Id.
73 Id.
74 Id.
75 Id.
76 Kantor, supra note 66, at 1127.
77 Id.
78 Id. at 1128.
79 Id. at 1129.
80 Id. at 1128–29.
81 Kantor, supra note 66, at 1131.
82 Id. at 1132–33.
83 Id. at 1129.
84 See id.
85 Id.
86 Kantor, supra note 66, at 1130.
87 Id.
88 Id.
89 Id.
90 Bishop, supra note 70, at 687.
91 Id.
92 Id.
93 Kantor, supra note 66, at 1133–34. 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.
95 Id.
96 Id.
97 Id.
98 Id.
99 Bishop, supra note 70, at 687.
100 Id.
101 Id.
102 Id.
103 Id.
104 Bishop, supra note 70, at 687.
105 Id.
106 Id.
107 See Kantor, supra note 66, at 1125–26.
108 See id.
109 See Shalakany, supra note 7, at 452–53.
110 See id. at 453–54.
111 See id. at 455.
112 See id.
113 See id. at 453–54.
114 Shalakany, supra note 7, at 454.
115 Id.
116 Id.
117 See id. at 464.
118 See id. at 454.
119 Hunter & Redfern, supra note 59, at 23.
120 Shalakany, supra note 7, at 455.
121 See id. at 464 (discussing how the public/private distinction dictated the decisions of the arbiters in the Texaco Award).
122 See Hunter & Redfern, supra note 59, at 23.
123 See Esa Paasivirta, Participation of States in International Contracts and Arbitral Settlement of Disputes 194 (1990).
124 See generally M. Sornarajah, International Commercial Arbitration: The Problem of State Contracts 5–33 (1990).
125 See id. at 24.
126 Mazzini, supra note 39, at 349.
127 Id. at 346.
128 Id. at 348.
129 See Shalakany, supra note 7, at 459–60 (discussing how the Texaco-Libyan Oil arbitrations decisions were indicative of the application of pacta sunt servanda).
130 See id.
131 See Thomas W. Waelde & George Ndi, Stabilizing International Investment Commitments: International Law versus Contract Interpretation, 31 Tex. Int’l L.J. 216, 242 (1996).
132 See McCutcheon, supra note 8, at 413–14.
133 See 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).
135 See generally Kantor, supra note 66, at 1134–36 (discussing the difficulties of the project companies in enforcing the arbitral awards in Indonesia).
136 See generally Shalakany, supra note 7, at 465–66 (discussing how arbitration limits the sovereignty of Third World countries).
137 See Kantor, supra note 66, at 1125–26 (discussing the resentment of foreign investors by local interests in Indonesia).
138 See 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 Government’s behavior to suspend a private contract).
139 See 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).
140 See id. (discussing how the analysis of the issue of Libya’s legal capacity in the Texaco award was hinged on the categorization of Libyan actions as either public or private).
141 See Himpurna California Energy Ltd. (Bermuda) v. PT. (Persero) Perusahan Listruik Negara (Indonesia), 14 Mealey’s Int’l Arb. Rep., at A-26 (Dec. 1999) [hereinafter Himpurna-PLN Final Award].
142 See id.
143 See id. at A-27.
144 Sornarajah, supra note 124, at 25–26.
145 See id. at 31.
146 See Shalakany, supra note 7, at 464 (discussing how the Texaco award’s 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).
147 See id.
148 Id.
149 See Kantor, supra note 66, at 1133–34.
150 See Patuha Power Ltd. (Bermuda) v. PT. (Persero) Perusahan Listruik Negara (Indonesia), 14 Mealey’s Int’l Arb. Rep. at B-14 (Dec. 1999) [hereinafter Patuha-PLN Final Award].
151 Id.
152 See 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.”).
153 See 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).
155 See id.
156 See id. at 195.
157 See Shalakany, supra note 7, at 459 (discussing how Dupuy’s decision in the Texaco award was highly predicated on the assumption that pacta sunt servanda governed the contractual relationship between the parties).
158 Id.
159 See id. at 460.
160 See generally Sornarajah, supra note 124, at 24–27 (criticizing the strict application of pacta sunt servanda by international arbiters in commercial disputes).
161 See id. at 24.
162 See id. at 25.
163 Id.
164 Id.
165 Sornarajah, supra note 124, at 26.
166 See Paasivirta, supra note 123, at 194–95.
167 See Patuha-PLN Final Award, supra note 150, at B-31.
168 Id. at B-33; Himpurna-PLN Final Award, supra note 141, at A-41.
169 Himpurna-PLN Final Award, supra note 141, at A-38.
170 Id. at A-39.
171 Id.
172 Id.
173 Id.
174 Himpurna-PLN Final Award, supra note 141, at A-39.
175 Id.
176 Id.
177 Id.
178 Id.
179 Himpurna-PLN Final Award, supra note 141, at A-39.
180 Id.
181 Id.
182 Id.
183 Id.
184 Himpurna-PLN Final Award, supra note 141, at A-39.
185 Id. at A-41.
186 Id. at A-40.
187 See 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).
188 See Paasivirta, supra note 123, at 168–69 (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.
190 See Paasivirta, supra note 123, at 169 (discussing the flaws in the argument that violations of stabilization clauses in state contracts constitute an internationally unlawful act).
191 See Sornarajah, 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.
193 See Paasivirta, supra note 123, at 169 (discussing how a strict adherence to stabilization clauses may lead to violations of state sovereignty).
194 See id. at 170.
195 See id. at 183–84 (discussing the concept of permanent sovereignty over natural resources and how it has been incorporated as a principle of international law).
196 See id. at 194–95 (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.
197 See Steven 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.
198 See Paasivirta, supra note 123, at 168–69 (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.
199 See id. at 168.
200 See Shalakany, supra note 7, at 461–62 (criticizing the decision of the Texaco arbitral tribunal to dismiss the argument that the concession agreements constituted an administrative contract).
201 Id. at 461.
202 Id.
203 Id.
204 See Nassar, supra note 10, at 65.
205 See Patuha Power Ltd. v. Republic of Indonesia, 15 Mealey’s Int’l Arb. Rep. at B-28 (Jan. 2000).
206 See 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).
207 See Himpurna-PLN Final Award, supra note 141, at A-40.
208 See id. at A-39.
209 See Sornarajah, supra note 124, at 13–14. (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).
210 See 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).
211 Paasivirta, supra note 123, at 175.
212 Id.
213 See Sornarajah, supra note 124, at 14.
214 See Himpurna-PLN Final Award, supra note 141, at A-39 (discussing PLN’s claim that doctrine of changed circumstances under Indonesian law relieved PLN from liability under the ESC).
215 See Sornarajah, 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).
216 See id. at 13.
217 See id.
218 See id. at 14.
219 See Nassar, supra note 10, at 65; Paasivirta, supra note 123, at 184.
220 See Himpurna-PLN Final Award, supra note 141, at A-39.
221 See id. at A-22.
222 See id. at A-40.
223 See Sornarajah, supra note 124, at 14.