Introduction

The investment of foreign private capital in a state may be effected by contractual arrangements in three major ways:

1. (a) contracts between nationals (including companies) of the host state and foreign private investors, which contracts are governed by rules of private international law;

2. (b) inter-state agreements, that is treaties governed by principles of public international law (see chapter 6);

3. (c) contracts between states and foreign private investors. It is this last type of agreement that has been the subject of extensive study by scholars. The present chapter is devoted to the legal problems pertaining to such contracts.

First, this chapter will examine the nature and functions of economic development agreements, then discuss critically and analytically their legal effect, and try to ascertain to what extent they provide protection to foreign private investments. As there is some dispute about the international rules governing economic development agreements, some attention will be given to the practicalities of the matter, besides the views of scholars, the practice of states, and decisions of international and national tribunals. The arbitration award between Turriff Construction (Sudan Ltd) and the Sudan assumes a special place in this connection.

2. Nature and functions of economic development agreements

(a) Form and characteristics

There is no established legal definition of the term ‘economic development agreement’. It is said that the term itself contains a functional description of an economic rather than a legal character.