How is Convergence Best Achieved in International Project Finance?

This Essay will first review and then analyze the characteristics of each of three possible routes of convergence in light of three features. The first is stability and predictability of the legal environment. It is the main benefit that private investors look for before investing in a country. The second is the scope of influence and lobbying of interest groups. This feature is extracted from an analysis of the adoption of uniform laws proposed by the National Conference of Commissioners on Uniform State Laws ("NCCUSL") by Professors Ribstein and Kobayashi. These authors find evidence of enactment by states of NCCUSL's proposals despite a cost-benefit analysis suggesting that these proposals are not efficient. This inefficiency results from the influence of interest groups and NCCUSL's reliance on ill-informed generalists. The third feature is the respect for, or promotion of, public interest considerations. This analysis may reveal a tension between the economic efficiency and the social desirability of these routes, between market-driven policy and public interest concerns. This tension plays out in different ways. The more commonly addressed conflicts of interests are between public players and private investors; between (1) the interests of the host country in obtaining adequate financial and technical safeguards and assurances from the private participants that the project will be carried out safely, on time, and in the public interest and (2) the interests of private participants in limiting the type and number of guarantees that they give. The less explored tension addresses the respect for standards, such as human rights standards, that the host country itself may be reluctant to promote, but that affect private investment in terms of reputation or expense. This Essay disregards the tension between economic efficiency and social desirability, and rather focuses on the goal of reconciling private and public interest concerns. It will seek to determine whether one of these routes is better than the others, or whether a combination of the three is the best way to achieve convergence in international project finance. In conclusion, this Essay will show that all three routes to convergence are necessary to both foster and control international project finance. The twin goals of balancing private and public interests are best fulfilled at the international level, since this level can generate clear, balanced, and uniform rules by promulgating a suitable model law yet to be prepared. State initiative is then required to enact these rules and adapt them to domestic specificities. The establishment of a legal framework at the state level should be general and flexible enough not to suffocate private initiative since the latter brings innovation and evolution of norms in project finance. No one route can therefore be preferred over any other. If one is used alone, it is more likely to be inefficient.