Professor Dr. Klaus Berger, in Renegotiation and Adaptation of International Investment Contracts: The Role of Contract Drafters and Arbitrators, proposes that international investment contracts include a clause allowing the parties to renegotiate the terms of their contract if certain events take place.' If they are unable to reach an agreement, Professor Berger advocates that the parties agree to permit an arbitral tribunal to modify the terms of the contract to restore the economic equilibrium assumed by the parties when they concluded the agreement. Although commentators have often championed these clauses, private parties involved in international transactions have included them infrequently. This hesitancy may stem from fears that these clauses will make the contractual relationship unpredictable, raise the overall costs of the transaction, and be unenforceable or, if a tribunal is called upon to adapt the terms of the contract, will result in an unenforceable decision, or in the tribunal modifying the contract in a way that neither party intended. Despite these concerns, I agree with Professor Berger that such clauses may be beneficial in international investment contracts, but in more limited circumstances than he posits. Specifically, I argue that renegotiation clauses should not be included when one of the parties controls the event that triggers renegotiation and adaptation. The renegotiation and adaptation clause should provide a tribunal with criteria to guide any adaptation of the agreement.
John Y. Gotanda,
Renegotiation and Adaptation Clauses in Investment Contracts, Revisited,
36 Vanderbilt Law Review
Available at: https://scholarship.law.vanderbilt.edu/vjtl/vol36/iss4/11