Host Governments' Legislative Acts and Unilateral Review of State Contracts in Spite of Stabilization Clauses: a Sovereign Right or Sovereign Wrong?

Ernest Enobun

Research output: Contribution to journalSpecial issue


(CEPMLP) Investment contracts are by their nature, binding on the parties, or suffice to say, intended to be binding. While host Governments are vested with sovereign rights over their resources and the right of governance, foreign investors on the other hand, are vested with investment protection rights; with the former's major interest to be economic benefit, while that of the latter to be basically to make profit.

This suggests a clash of interests, necessitating a pragmatic need to give investment contracts a double-edged interface. Usually, governments in the exercise of their sovereignty make legislative overhauling in the event of unfolding economic circumstances, thereby giving cause for concern to foreign investors adversely affected by such changes and possibly, review of contract terms. This concern has necessitated the need by foreign investors for a contractual status quo by way of 'stabilization clauses', irrespective of future legislative changes. But again, the question of how realistic its freezing effect is on host governments is in issue.

This paper seeks to ascertain the propriety of the exercise of such sovereign powers in relation to the status of such contracts. The approach shall be an analytical study of the concepts of internationalization and localization of state contracts vis-a-vis the concept of sovereignty. The outcome shall unravel the partial potency of stabilization clauses where sovereignty is emphasized
Original languageEnglish
JournalOil, Gas and Energy Law (OGEL)
Issue number3
Publication statusPublished - Aug 2009


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