Hi Shira, thank you for asking!
Answer choice (E) is incorrect because it fails to capture the author's point that it is flawed to assert that governments retain inherent power to modify/terminate contracts and that this power is a general principle of law (lines 20-29). In fact, (E) seems to be asserting the opposite of that point. Taking a look back at answer choice (E), we can see that (E) summarizes the main conclusion as "contracts between governments and private investors can be secured
only by reliance on general principles of law." If we refer to the aforementioned lines, it seems the author is indicating that it is
flawed to consider general principles of law as the only way to secure contracts between the government and private entities.
We can find additional evidence that (E) is incorrect in the end of the passage, starting around line 57. Here, the author writes that "a government's capacity to modify or terminate agreements unilaterally derives from specific contract provisions, not from inherent state power." Thus, it seems the author is arguing that specific contract provisions would be a way (arguably the better way) to secure contracts, so it cannot be the case that only general principles of law secure contracts.
Turning now to answer choice (D), let's discuss why this is correct. At the beginning of the passage, we are presented with information regarding governments attempting to minimize risk to investors by including clauses that specify contracts are governed by "general principles of law." Then, we learn that some advocates believe that the ability for governments to freely terminate or modify contracts is a general principle of law. The author takes issue with this for two reasons: even under French law, this is not unilaterally true, and French administrative law is not universally accepted to the extent that it can be considered a general principle. Answer choice (D) nicely sums this point up, effectively restating that one cannot consider some inherent power of the government to modify/terminate contracts to be a general principle of law.
I hope this helps!
Kate
