Enabling Private Ordering - the University of Minnesota Law School

2009] UMBRELLA CLAUSES 79
subject to a compensation requirement.
2. The State’s Power to Interfere with State Contracts under
Domestic Laws
The power of the State to modify or terminate a contract
with an individual in the public interest has also been accepted
in the major domestic legal systems, lending further support to
the conclusion that the power of the State to interfere with
investor-State contracts in the public interest constitutes a
general principle of law. 217 French administrative law, for
example, recognizes that the administration is entitled, if not
required, to unilaterally modify so-called contrats administratifs
in the public interest, subject to the payment of compensation. 218
Similarly, English law has accepted that the State has the
power to modify or terminate contracts to which it is a party if a
superseding public interest is at play. Following the leading
case, Rederiaktiebolaget Amphitrite v. The King, English courts
consider that “it is not competent for the Government to fetter
its future executive action, which must necessarily be
determined by the needs of the community when the question
arises. It cannot by contract hamper its freedom of action in
matters which concern the welfare of the State.” 219 Even though
Question of Unilateral Change by the State in Contemporary International Law, 9 J.
INT’L ARB., Dec. 1992, at 141, 145 (1992) (“The public interest requires that the
governmental authority be empowered to carry out continuous supervision over the
execution of the contract and it also authorizes the governmental authority to
undertake certain unilateral powers: to suspend, vary or rescind the contract, to
transfer it to another party, or to take it over itself. The public interest not only
authorizes the governmental authority to exercise powers, but also places it under a
duty to exercise such powers as part of its responsibility to the public.”) (emphasis
added); Weil, supra note 3 at 101, 217 et seq. Cf. Colin C. Turpin, Public Contracts,
in VII INTERNATIONAL ENCYCLOPEDIA OF COMPARATIVE LAW 38 (Konrad Zweigert &
Ulrich Drobnig eds., 1981) (“The prerogatives of the administration commonly
include a power of unilateral variation of the conditions of the contract, such that the
contractor may be required to perform more expeditiously, render different services,
conform to different specifications, or otherwise depart from the original stipulations
of the contract.”) (emphasis added).
216. See also Maniruzzaman, supra note 215215, at 146–59. Cf. DOLZER, supra
note 54, at 213 et seq.; Rudolf Dolzer, Indirect Expropriation of Alien Property, 1
ICSID REV. 41 (1986) (regarding the interaction between domestic legal systems and
general principles of law as a way to clarify customary international law as well as
treaty law).
217. Conseil d’Etat [CE] Decisions of March 11, 1910 - Compagnie générale
française des tramways; Conseil d’Etat, Decisions of Feb. 2, 1983 - Union des
Transports publics.
219. Rederiaktiebolaget Amphitrite v. The King, [1921] 3 K.B. 500, 503; see also