Pages: 10-19

Abstract

Constancy principle is a commitment that host government accepts through a contract not to have any right to change the contract or terminate it unilaterally out of the terms and conditions of agreement between, during execution of the contract. Such terms, noting sensitive nature of exploration and extraction in oil fields, are not only parts of foreign investors’ interests, but also they are in line with some interest of host government, too, in some cases (like terms of second negotiations and conformity). Constancy terms are in different types including direct constancy term, imperceptible, economic ones and second negotiations, that have been ruled in many court’ s votes and judge’ s rote, although development countries have criticized it based on theory of contract requirements and developing countries have criticized it using doctrine of basic principle of stale sovereignty over natural resources. Constancy principles could protect the contract content during execution of project completely constant and unchanged. It would be an unrealistic view to know when and why constancy terms were used in the past and how judges treat with constancy terms that are important for both companies and host countries. Registering constancy terms and economic balance in international oil contract are contract mechanism for economic and political risk management ruling over such contracts that have been focused by legal experts of international oil companies from the first year after nationalization and confiscation of large-scale actions in the nineteenth and twentieth century. In later years, many disputes were referred to the court of international/Arbitration regarding nationalization in developing countries and confiscation of property of foreign companies. The experts from oil companies claimed that since the topic dispute (oil contract) contains constancy terms, the host countries are not allowed to nationalize or confiscate property of foreign companies. In one hand, host countries also claimed that states’ ownership over natural sources is considered to be a jus cogens and no commitment against it is not deemed valid. The international judges have tried in oil claims of decades 70 and 80 B.C. to indicate legal validation of constancy terms. In line with international transaction changes and evolutions (the tendency was from benefit toward. Collaboration and service contract); constancy terms have been changed, too and moved forward economic equilibrium terms. Since the terms are generated recently, arbitrary procedure is not made yet. Most of international lawyers rely on international conventions like convention of 1969 in Vienna regarding international contracts and international known terms like promise-keeping principle, to interpret legal validation of the terms. The international oil companies have relied on principles like proper and fair manner or non-discriminatory behavior in disputes announced to international arbitrary courts against host states in recent years, instead of relying on constancy terms.