International Investment Law and Development
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International Investment Law and Development

Bridging the Gap

Edited by Stephan W. Schill, Christian J. Tams and Rainer Hofmann

Foreign investment is meant to contribute to the host country’s development, and yet international investment law has often been seen as an obstacle to (sustainable) development. So are investment and development friends or foes? Combining critical reflection and detailed analysis, this timely volume explores the relationship between the two concepts and explores options of harnessing investment for development.
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Chapter 11: Investment treaties and democratic transition: Does investment law authorize not to honor contracts concluded with undemocratic regimes?

Walid Ben Hamida


In investment law, democratic transitions raise mainly two issues. The first, especially linked to violent transitions, is the request for compensation for some damages (destruction, theft, fire) due to the revolutionary events. The second is the revocation of contracts concluded by old regimes. Damages arising from revolution are governed by a special clause provided in many investment treaties that are called ‘clauses relating to the loss of investment owing to a natural phenomenon, civil disturbance, revolution or armed conflict.’ In Libya, the popular protests against long-term authoritarianism transformed themselves into a military conflict. Many foreign investors that lost their investment have considered possible indemnification claims for harm and loss owing to these violent events. In customary international law, it was asserted that the State is not responsible for damages that are owed to a popular revolution, natural catastrophe, war, national emergency and insurrection. Indeed, it has been observed that damage caused by such events are the result of either acts the State has found itself forced to carry out to ensure its own protection (wars and insurrection) or from events that are beyond human control (natural catastrophes). Consequently, these acts constitute an accidental event or a force majeure which cannot be attributed to the State. Investment treaties limit the scope of this non-liability rule. Bilateral investment treaties (BITs) contain specific provisions that address the consequences of armed conflict, state of emergency, revolution, insurrection, civil disturbance or similar events.

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