Part II The National Legal Framework, 7 The Challenges of Legal Change
From: The Three Laws of International Investment: National, Contractual, and International Frameworks for Foreign Capital
Jeswald W. Salacuse
- International economic law — Foreign Direct Investment — Investor — Creeping expropriation — Control — Settlement of disputes — Arbitration
By virtue of their sovereignty, states not only have the power to make laws but they also have the power to change the laws that they have made. This power to effect legal change creates challenges for both foreign investors and host country governments. On the one hand, host governments seek to assure foreigner investors, as a means to encourage inward capital flows, of the stability of the existing national legal framework for investment. They know that legal stability, predictability, and “calculability” encourage investment while legal instability discourages...