Section 1- The stabilization clause
The issue that we are tackling is in the field of
international investment law and we must be aware that any investor who wants
to explore and produce oil in any host country always looks for "legal"
formulas that will minimize the risks that may be happened in the case of the
breach of contract by the State. The host country is a sovereign state and
holds legislative powers which enable it to amend the law to any event or
affect any law of contract or of the property right within its territory. We
have also know that every host state which wants to attract foreign investors
should provide to the petroleum companies some stable conditions for
development and in this case, the clause which is often referred is the
stabilization clause. That's the reason we can ask ourself the question to know
what is a stabilization clause used for and what is a stabilization clause?
It's very important for us to know that «a
stabilization clause aim at freezing the law of the a host state and thus
preventing a State from using its legislative power to modify the contract in
its own favor», otherwise talking, «the aim of the
stabilization clause is to ensure that future changes in the legislation of the
home state do not vary the terms of contract on the basis of which entry was
made». This definition simply means that the
stabilization clause in the petroleum contracts is a kind of clause which is
used for the interest of petroleum companies to begin or to continue the
petroleum operations, or even their petroleum activities in a host country with
the guarantee of maintaining certain existing basic
conditions at the moment of the conclusion of contract. This
clause aims a certain number of areas well determined and relating to the
profitability of this investment, it is about the: tax law, company law,
exchange controls, and more particularly in the framework of repatriation of
capital. This provision can lead the State to the formal commitment to not
expropriate or not impair the private foreign investor (i.e. the foreign
petroleum company). A stabilization clause in an investment agreement is
generally seen as an insurance against the risk of investment. Like any other
contract or agreement which, according to the contracting parties, aims to
stabilize the investment thank maybe to this clause called stabilization
clause. A stabilization clause is used to prevent the State from any new
legislation that may come into effect in order to alter the terms of the
contract34. Here are some examples of stabilization
clauses negotiated in the petroleum contracts at the signing of some contracts
of investment in the framework of state contract:
* In a petroleum concession contract and in its original
version called "Aminoil Concession»» of 1948 and in its
Article 17, it's stated that «The
Shaikh shall not by general or special legislation or by administrative
measures or by any other act whatever annul this Agreement as provided in the
Article 11. No alteration shall be made in the terms of this Agreement by
either the Shaikh or the company except in the event of the Shaikh and the
company jointly agreeing that it is desirable to in the interest of both
parties to make certain alterations, deletions or additions to this
Agreement»35. It is really important thus to
acknowledge here that this clause of concession had somewhat its limits or
exceptions. According to Article 11 of this clause, the Kuwaiti law could
repeal this concession, which however could be expired after the stipulated
period 60 years, if only the following events could arrive:
«-failure by the company to perform its obligations in respect
of geological or geophysical exploration or drilling; -failure by the company
to make any of the payments due (under Article 3) ; and - default of the
company under the arbitration provisions of Article
18»». This clause could also be flexible i.e. that both
contracting parties had the possibility to re-negotiate the terms of the
concession from a mutual agreement;
* In Article 11 of the investment
agreement36 between the former Popular Republic of
the Congo, now known as the Republic of Congo, and Italian petroleum company
AGIP, the government had promised «to take certain measures to ensure the
petroleum company that no future amendments to company rights could be applied
to impair the structure and composition of the company». Article 4 of the
same agreement also shows us that «the former Congolese government had
promised to not apply certain laws or decrees as well as any other subsequent
law or decree which will aim to change the status of the company as an LLC
(Limited Liability Corporation) in private law».
34 (According Paul E. Commeaux
& N. Stephan Kinsella in their article « Political Risk and Petroleum
Investment in Russia », there are many other considerations that must be
taken in account when negociating agreements with States, which are beyond the
scope of this article. See generally Detlev F.Vagts `Dispute-Resolution
Mechanism in international Business', 3................... ).
35 Journal of International
Arbitration, Vol. 5. 1988, "the stabilisation clause in Investment Agreements
Myth," SK Chatter Jee.
36 «AGIP and the Popular
Republic of the Congo (1982)»
* In a petroleum contract called of concession between Iran
and the Anglo-Iranian Oil Company (1933), its Article 21
states that: «Concession shall not be annulled
by the Government and the terms therein contained shall not be altered either
by general or special legislation in the future or by administrative measures
or any other acts whatever of the executive
authorities»37.
Apart from the expression of the stabilization clause that we
know well now, there is also «a national stabilized
law». This expression is often in the majority in several
petroleum contracts. This will involve:
- The combination of state law with the principles of
international law; - The general principles of law or Pacta Sunt Servanda;
- The transnational law upheld by a big network of BITs and
IMI.
This subsection will be examined further in the third part of our
work.
We can note through these two examples of petroleum investment
agreements signed in the petroleum contracts, that one of the characteristics
of the stabilization clauses is to freeze the law of the host State at the time
of coming into force of the investment, and to cool down the law, the law that
controls foreign investment. How about the arbitration clause?
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