Document Type : Original Article
Highlights
ABSTRACT
In a foreign investment, the host country has the power of legislation that means it can change the fate of the investment by that power. Stabilization clauses are employed to protect the investor in such situation.Different types of this Clause are applied in investment contracts and Bilateral investment agreements. The authors by descriptive analytical study of the Library resources believe that the economic Equilibrium clause are most efficient and practical one and also compatible with the administrative law.
KEY WORDS: Administrative Law, Economic Equilibrium Clause, Foreign Investment, Stability Clause
INTRODUCTION
As attracting the foreign investment, increases the GDP, it is believed that it leads to the growth and development of countries, so the host countries are motivated to insert such clause in their contract as well as the investors for them an stable legal framework is one of the main criteria for the decision. The classical form of stabilization clause in practice was not successful, furthermore they are challenged form the administrative point of view So, nowadays the modern types of the clause is widespread. The economical equilibrium clause concentrate on the contractual balance, so in case of disturbing the economical order of the investment contract, the host government is obliged to compensate the loss until the balance is re-established although the contrary is possible .
FINDINGS AND ARGUMANT
The investment contract has been considered as an administrative contract as mostly the government or a public entity is a contracting party of it and also it is concluded as a means of public interest. The stability clauses may be inserted in contracts in different ways. It may be the classic one that impede the government from legislation with regards to the investment and surrounding circumstances. The freezing clause is the other type, that exclude the investment from the future legislation and finally the economic equilibrium clause which focus on the economic order of the contract not merely the legislation of the host country. Accordingly as soon as the economic balance of the contract disturb the clause prepare restitution for the affected party.
The validity of the stabilization clause has always been the subject of much legal debate, as the purpose of administrative law is to satisfy the public interest, The legislation power of the government as a vehicle of this transcendent goal can’t be foreclosed. The administration cannot trade its sovereign authority and thereby undermine it. Indeed the governments have the right to legislate, change and amend laws, despite the existence of stabilization clause, because laws and regulations are essentially developed in the context of time. However, the inclusion of this condition can lead to a heavier damages than when this condition does not exist.
The economic equilibrium clause, based on the principle of neither profit nor loss, seek to restore the economic balance of the contract, which has been disturbed due to unilateral actions of the government, such as confiscation or change of tax laws. The clause can apply as a Stipulated Economic Balancing ("SEB"),which is the best form and if there isn’t a clause with regard to the process of balancing, it will be done by negotiation and arbitration or court and it is the point that invoked as a challenge of these kinds of clause .as follows the clause is not an end to the dispute but it is the beginning of a long, fruitless negotiation process
CONCLUSION
The Economic equilibrium clause does not impede the government from legislation with regard to the investment. But it seems that it is desirable in several ways; From the investor's point of view, it provide security for investment and, on the other hand, make the economic balance reliable at the time of concluding the contract and, in turn, provide the ground for the continuation of the contract as a plan for long-term cooperation between the parties. Also, in case of disturbing the balance, make the damage available, accessible and easy for the investor. Also from the host country point of view, it is useful as it supersede the traditional stabilization clause, while not violating the rules of administrative law, additionally it allow the host country to rely on the contractual balance.
