The legal consequences of breach of government undertakings to investors

Abstract

For all countries, attracting foreign and private sector investment for development projects is a key strategy for nation building. As far as developing countries are concerned, there is high competition to attract investors. In order to encourage investors to chose their jurisdictions as investment destinations, developing country governments provide various investment protection undertakings. Legal consequences of breaching such undertakings can be severe as it is well established in international investment law that States should not breach promises made concerning the stability of investments. However, sometimes developing country governments take decisions that adversely affects the interests of the investors, without due consideration of the legal consequences. This paper examines the undertakings given by Sri Lanka to investors and the legal consequences of the breach of such undertakings.