The contract-law thirty years later: an assessment from the perspective of domestic law and international investment protection

Abstract

The legal stability agreement (contrato-ley) was incorporated into the Peruvian legal system in the 1970s and subsequently consolidated at the statutory level through Article 1357 of the 1984 Civil Code. The 1993 Constitution later opted for its constitutionalization in response to a historical context marked by distrust toward state interventionism during the preceding decade. More than thirty years after that decision, this article examines whether the constitutionalization of the contrato-ley provided any genuine added value for foreign investors in terms of legal certainty, as compared to the preexisting statutory framework.
The authors argue that such added value did exist, albeit with differentiated effects depending on the legal framework concerned. From the perspective of domestic law, constitutionalization had a limited impact, as the prior legal framework already precluded the modification of the contrato-ley and protected investors against the application of measures incompatible with the legal regime in force at the time of contracting. By contrast, in the field of international investment law, the impact was more tangible, as constitutionalization reduced the State’s ability to invoke the invalidity of the investment as a defense and more effectively constrained reliance on sovereign powers as a justification for contractual non-compliance.