Enabling Private Ordering - the University of Minnesota Law School

2009] UMBRELLA CLAUSES 27
Accordingly, “[i]f under the latter system of law [i.e. municipal
law] no breach of contract occurs, it is not open to public
international law to assert the contrary.” 60
Despite the categorical divide between municipal and
international law, contract claims and treaty claims, customary
international law settled on an intermediary position that
afforded some limited protection to investor-State contracts.
Due to the lack of reciprocity of international law obligations
between the host State and the foreign investor, the solution
under customary international law was that a breach of an
investor-State contract, while in itself unable to constitute a
breach of international law, could constitute a violation of an
inter-State obligation so long as the breach of contract also
constituted a tort with respect to the investor’s home State. 61
Such torts could exist in cases in which a host State
expropriated an investor-State contract, 62 interfered with the
contract in an arbitrary manner, 63 or committed an independent
breach of international law through a denial of justice, 64 always
provided that the conduct of the State was noncommercial in
character. 65
A simple commercial breach of an investor-State contract by
the host State was, by contrast, considered as insufficient in
order to result in a violation of international law, since such a
breach exclusively concerned the contractual bond, without
touching on the international relations between States. 66 In
sum, the position under customary international law was the
sustains but, because it sustains, may also modify or dissolve the contractual bond.’
. . . If, therefore, the debtor relies on changes in the proper law, he does what he is
entitled to do and cannot be charged with a breach of contract, his undertaking
being limited to perform in accordance with the terms of the contract as sanctioned
by the provisions of the proper law.”).
60. Id. at 582.
61. See Weil, supra note 3, at 137 (“la responsabilité de l’Etat naît en matière
contractuelle d’éléments extérieurs au contrat, constitutifs en eux-mêmes d’un délit
international”).
62. See Jennings, supra note 58, at 173–79 (referencing the relevant case law).
63. Id. at 165.
64. See generally JAN PAULSSON, DENIAL OF JUSTICE IN INTERNATIONAL LAW
(2005).
65. See Stephan M. Schwebel, On Whether the Breach by a State of a Contract
with an Alien Is a Breach of International Law, in INTERNATIONAL LAW AT THE TIME
OF ITS CODIFICATION: ESSAYS IN HONOUR OF ROBERTO AGO, 401, 410–11 (1987)
(providing case law of international tribunals endorsing this view).
66. Weil, supra note 3, at 138 (“inexécution [du contrat] ne constitue jamais per
se un acte contraire au droit international, et il faut toujours quelque chose de plus
et d’autre pour qu’il y ait un acte internationalement illicite”).