Choice of Law in Host Government Agreements -

Choice of law stands as the second “pillar” of contract stabilization, together with stabilization clauses and international arbitration. In fact, choice of law provisions sometimes consist of stabilization clauses in the form of “freezing” by incorporation and inopposability provisions. Brown emphasizes the importance of choice of law for contract stability:

[The anxieties of the foreign investor] are more likely to focus on the possibility that the contractual obligations of the government may be discharged or modified by an exercise of the legislative competence of the State. If such an event occurs the contract as originally agreed between the parties no longer exists, and remedies for breach of it may not be strictly in point. It follows that in a situation in which the dominant concern of the foreign investor is with the legislative competence of the State, attention, in the first instance, at least, must focus on questions concerned with the proper law of the Contract.