Renegotiation and adaptation of foreign invesment agreements

Foreign investment agreements can be briefly defined as agreements signed between a host state and a foreign investor, envisaging the transfer of tangible and intangible assets to the host state and via which the foreign investor intends to earn a profit or benefit from such investment. Protection is typically provided to foreign investors through treaties signed between states concerning the reciprocal promotion and protection of investments. Provisions regarding the settlement of disputes are also included in the aforementioned treaties. Clauses in foreign investment agreements on renegotiation, stability, hardship, and force majeure, on the circumstances set forth in the agreement, impose obligation on the renegotiation of the agreement by the parties depending on their content. In this case, parties are obliged to act in good faith for efficient renegotiation and to consider the other party's interest in resolution. If the agreement remains silent on renegotiation, the renegotiation obligation is controversial. Generally, renegotiation of the agreement would be expected from a prudent counterparty due to changes in circumstances as foreign investments require substantial contribution and are generally not short-term in nature and concern the host state and the foreign investor as well as many other parties such as subcontractors, service providers, project employees and financial institutions. Indeed, provisions are frequently embedded in the investment treaties to the effect that negotiations will be carried out to resolve any dispute between the host state and foreign investor amicably before such dispute is referred to a court or arbitral tribunal. While a party is not obliged to accept any proposals made by the other party during renegotiation, one cannot say that proposals made during such renegotiation have no importance or are useless. It could be stated that these proposals would guide the competent court or the tribunal with dispute where renegotiation has failed.