Sanctity of Contracts in Foreign Investment Regime: Case of Tanzania Foreign Investment Practice

Abstract

This study reviews Tanzania foreign investments practice on the issue of upholding the doctrine of sanctity of contracts. The study does this by assessing general practices of foreign investment in Tanzania and again by assessing the Tanzania Natural Resources laws, which grant the National Assembly powers to review and advice the government to renegotiate investment contracts whenever they consider the terms of the contract unconscionable. The study before embarking on the issue of upholding the doctrine of sanctity to contracts, it looks at protection of foreign investment under international investment law. Here the study observes that foreign investors are faced with two risks, these risks are commercial risks and non-commercial risks. In order to minimize or even eliminate the two risks, international investment law has in place Bilateral Investment Treaties, and Multilateral Investment Treaties, to protect the interests of the investors and host state during investment venture, further to that foreign investors sign state investors contracts with countries they go to invest. Then, the study looks at what entails Sanctity of Contract Doctrine and lastly the study makes an overview of the Tanzania foreign investment practice and violation of the Doctrine of Sanctity to contract. In the overview, the study discovers that Tanzania has been having a tendency of violating such a doctrine and the reasons of violation are poor negotiation of investment contracts by the Tanzanian officials, political directives that disregard international investment law and unstable investment legal regime. The study concludes that sanctity of contract doctrine has been violated in several occasions by Tanzania practices that violate the international investment law. Further to that, sanctity of contract doctrine is jeopardized by Sections 5, 6 and 7 of the Natural Wealth and Resources Contracts (Review and Re-negotiation of Unconscionable Terms) Act No. 2017 . Violation of sanctity to contracts doctrine has led to consequences to Tanzania. These consequences are loss of foreign investors, the country sued and losing cases in international tribunals and foreign investors coming with strictly and harsh investment terms. The study recommends that, state investor contracts should be subject to stakeholders’ scrutiny before signing. Moreover, the study recommends that the provisions of Sections 5, 6 and 7 of the law above should be implemented to contracts that are not yet signed, to avoid violation of legitimate expectations of the investor.