The Right of Public Authority to Unilaterally Amend an Investment Contract

Dr. Saqer Al Ruwais
Assistant Professor of Public Law
College of Law – University of Bahrain


This paper examines the right of public authority to unilaterally amend an investment contract by discussing the legal basis, scope, underlying reasons, and extent of this right in the light of contractual clauses and international agreements in relation to investment contract.
Moreover, the paper studies the topic by refereeing to the relevant legal principles, jurisprudence, and judicial judgments. The study concludes that the public authority has the power to unilaterally amend investment contracts for reasons related to the public interest, or to achieve contractual balance in contingencies or in case of any change in economic, social or political circumstances, or any other circumstances that could substantially affect the contract.
The exercise of the unilateral power is not affected by a clause in the contract that deprives the public authority of such right; it needs neither legal provision nor consent from the other contracting party, provided that such unilateral amendment is reasonable and does not amount to being a new contract.
In addition to that, one should keep in mind that the other party to the contract is entitled to compensation with respect to the harm suffered as a result of amendment. Nevertheless, the public authority has no power to unilaterally amend an investment contract that is protected by an international agreement that deprives the public authority from such right.
Otherwise, international liability is triggered. The power of the public authority shall not affected by contractual conditions that aims at restricting this power, such as a condition of the stability of the contract (no prejudice to the contract) or the condition of renegotiation.

Key words: administrative contracts, unilateral amendment, investment contract.

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