Research Handbook on Environment and Investment Law
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Research Handbook on Environment and Investment Law

Edited by Kate Miles

The Research Handbook on Environment and Investment Law examines one of the most dynamic areas of international law: the interaction between international investment law and environmental law and policy. The Research Handbook takes a thematic approach, analysing key issues in the environment–investment nexus, such as freshwater resources, climate, biodiversity, biotechnology and sustainable development. It also includes sections which explore regional experiences and address practice and procedure, and offers innovative approaches and critical perspectives, including the interface between foreign investment and the environment with human rights, gender, indigenous peoples, and economics.
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Chapter 14: Stabilization clauses in long-term investment contracts in the energy sector in Africa

Sotonye Frank

Abstract

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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