4 Contractual Liability

The classic problem: a state breaches a contract with an alien — is that an international wrong (state responsibility) or a municipal matter (breach of contract, remedy in the local courts)? The doctrines:1. The general rule: contracts are governed by the law chosen/applicable (usually the host state's law); breach is not per se an international delict — the international minimum standard(below) is breached only by denial of justice, arbitrariness, discrimination or uncompensated takings;2. The Calvo clause: the contract term (Latin America's doctrine — Argentina's jurisprudence) by which the alien renounces diplomatic protection and agrees to local remedies only — its checkered career: tribunals accepting it as binding on contract claims but not extinguishing the state's right of espousal for international wrongs;3. Internationalized contracts: concession and investment contracts "internationalized" by choice of international law or arbitration clauses — the concession jurisprudence era (the Anglo-Iranian Oil and Texaco lines) — making contractual breach arbitral under international standards;4. The modern regime: BITs and investment chapters — the umbrella clause debates (contract upgraded to treaty breach by the clause's text) and ISDS's world (the investor's direct treaty claims — the state responsibility's privatized enforcement); Nepal's investment-treaty practice placing its contracts within this architecture;5. Expropriation of contractual rights — the taking of rights (concessions, licences) as compensable under the takings rules below.