Renegotiating contracts in major projects: Legal foundations, FIDIC principles, and a case study of the “Attarat” project
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Abstract
Renegotiating long-term contracts has become increasingly important in major engineering and infrastructure projects, where unexpected economic, technical, or regulatory developments may undermine the contractual balance originally agreed upon by the parties. Although the principle of pacta sunt servanda continues to anchor contractual stability, contemporary legal doctrines—such as hardship, unforeseen circumstances, and gross unfairness—provide limited pathways for corrective intervention when strict enforcement produces inequitable results. In parallel, FIDIC contract forms integrate structured mechanisms for variations, price adjustments, and extensions of time, offering a practical framework for managing evolving project conditions while maintaining continuity and minimizing disputes. This paper examines the legal foundations of renegotiation and evaluates their practical application through an in-depth case study of the Attarat oil shale project in Jordan, a large-scale public–private partnership that became the subject of international arbitration. The analysis focuses on the state’s claim that the power purchase agreement had become grossly unfair and on the arbitral tribunal’s assessment, which relied heavily on financial indicators such as return on investment to determine whether the alleged imbalance met the threshold for legal intervention. The findings reveal that compelled renegotiation remains exceptionally narrow in scope, requiring robust and objective evidence of severe contractual distortion. The study further highlights the importance of embedding adaptive mechanisms into long-term contracts—such as periodic review clauses and clear rebalancing triggers—to safeguard both contractual stability and fairness. These insights contribute to the broader understanding of how legal principles and engineering contract practices can interact to support project resilience in dynamic operational environments.
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