Enabling Private Ordering - the University of Minnesota Law School

2009] UMBRELLA CLAUSES 77
of a concession and the expulsion of the investor were justified
in the public interest, because the investor was suspected to
have cooperated with revolutionary factions. However, the
Commission required compensation of the investor because “a
nation, like an individual, is bound by its contract and although
it may possess the power to break it, is obliged to pay the
damages resultant upon its action.” 209 Similarly, the French-
Venezuelan Claims Commission in Company General of the
Orinoco Case accepted the entitlement of the host State to
unilaterally terminate a mining concession that had created
political tensions with a neighboring State. According to the
Commission, as the government’s “duty of self-preservation rose
superior to any question of contract, it had the power to
abrogate the contract in whole or in part . . . . It considered the
peril superior to the obligation and substituted therefore the
duty of compensation.” 210
Similarly, the Tribunal in Czechoslovakia v. Radio
Corporation of America confirmed that “any alteration or
cancellation of an agreement . . . as a rule should only be
possible subject to compensation to the other party.” 211 Notably,
this case did not only refer to the cancellation of an investor-
State contract but a modification of the content of a contract.
Furthermore, the Tribunal emphasized that States could not
restrict their obligation to regulate and interfere with investor-
State contracts in the public interest by means of a contract
with private individuals, but were restricted to make use of this
power, subject to the requirement of compensation, in order to
protect “public interests of vital importance.” 212 Similarly,
several other arbitral decisions recognized the entitlement of the
State to terminate public contracts subject to paying
compensation to affected foreign investors. 213
More recently, the Iran-United States Claims Tribunal in
Amoco International Finance Corporation v. Iran dealt with the
relationship between the stability of investor-State contracts
and the responsibility of the State to attend to the public
209. Oliva (Italy v. Venez.), 10 R.I.A.A. 600, 609.
210. Company General of the Orinoco (Fr. v. Venez.), 10 R.I.A.A. 184, 280.
211. Admin. of Posts and Tel. of the Republic of Czechoslovakia v. Radio Corp. of
Am. (Czechoslovakia v. Radio Corporation of America), 1932 Hague Ct. (Apr. 1), 30
AM. J. INT’L L. 523, 531 (1936).
212. Id.
213. See Shufeldt Claim (Guatemala v. U.S.), 2 R.I.A.A. 1079, 1095 (1929);
Norwegian Shipowners Claims (Norway v. U.S.), 1 U.N.R.I.A.A. 307, 338 (1922). See
also Weil, supra note 3, 101 & 217 et seq.