Cayetana Santaolalla (Public University of Navarra (UPNA); European Law Institute (ELI); European Association of Private International Law (EAPIL)) has posted A Choice Made Once: Party Autonomy and the Passage of Time in Long-Term State Contracts on SSRN. Here is the abstract:
A choice-of-law clause is an instantaneous act. It is made once and is then asked to govern a relationship that may run for twenty-five years or more. In contracts between a State and a foreign investor that asymmetry is the central difficulty, because the party able to change the chosen law is one of the contracting parties. This paper argues that party autonomy carries an unexamined temporal assumption, and that the assumption fails in three ways over the life of such a contract: the content of the chosen law changes, insolvency changes a party’s capacity to be bound by its own choice, and the assets in which rights are held may change form.
Before asking whether a freezing clause ought to be enforceable, one has to ask what it is: a temporal restriction on the applicable law, or the incorporation of identified provisions of host-State law as contractual terms. The difference decides whether the frozen provisions yield to the mandatory rules of the governing law, and the sources divide. The orthodox definition of a stabilization clause, current since 1966, points to the first reading. The Institut de Droit International left the question open for State contracts at Athens in 1979 and answered it the other way for contracts between private persons at Basel in 1991. Duke Energy v Peru and Aguaytia v Peru, rendered four months apart on comparable guarantees, adopt one reading each. The silence is deliberate rather than accidental: Article 10 of the Hague Convention on the Law Applicable to Trusts of 1985 was drafted, on the express record of its Explanatory Report, so as not to reach changes in the content of the applicable law.
The comparative observation on which the argument rests has not, so far as the author is aware, been made. In the Principles on Digital Assets and Private Law of 2023, UNIDROIT abandoned physical localisation in favour of designation and was therefore obliged to draft an express intertemporal rule inside a conflicts rule. The paper proposes the same technique for long-term State contracts, in two sentences. A choice of law is a choice of that law as it stands from time to time, unless the parties have agreed otherwise. Where that law, or its content, changes after the conclusion of the contract, rights and obligations established under the previously applicable law are not affected by the change, unless the parties have agreed otherwise. The first sentence is declaratory; the second is the proposal.
The argument is tested against the draft UNIDROIT/ICC Principles and Model Clauses for International Investment Contracts, on which UNIDROIT and the ICC consulted in 2026, and which builds an express regime for stabilisation without stating the default against which such a clause is negotiated.
Recommended!
To receive new posts from Legal Theory Blog by email, get a free subscription to Legal Theory Stack.
Lawrence Solum