Edited by Kate Miles
Chapter 14: Stabilization clauses in long-term investment contracts in the energy sector in Africa
This chapter examines current trends in the use of stabilization clauses in long-term investment projects in Africa’s energy sector and considers the implications of this use for Africa’s environmental and sustainable development trajectory. Previous empirical studies have found that the broadest forms of stabilization clauses are found in Africa’s energy sector and the broad scope of the stabilization clauses has the potential to limit governments’ abilities to enact and implement environmental and sustainable development laws. The review of current trends, however, reveals some significant changes. In the first place, there is a lack of uniformity in the use of stabilization clauses across Africa, as practices vary widely from country to country. Despite the variations, however, two general trends can be observed. First, there is a marked move away from the broader forms of stabilization clauses to narrower models, which were previously rare in Africa, while a few countries have even stopped granting stabilization clauses altogether. The narrower versions of the clauses usually exclude health, safety and environmental laws from the scope of stabilization clauses. Second, contemporary formulations of the clauses in several countries include provisions that give African governments greater flexibility to alter the terms and conditions of contracts when faced with the legitimate need to do so. The narrower and flexible forms of stabilization clauses thus significantly reduce the constraints that stabilization clauses impose on governments’ abilities to alter their environmental policies and development plans in line with line with changing needs and circumstances.
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