Anchoring Stabilization Clauses in International Petroleum Contracts

Periods of high gas prices, as recently witnessed, herald repudiation of international petroleum contracts as host governments seek a greater share of the profits under various legitimate and flimsy theories, raising the question of the utility of stabilization clauses in such agreements. Stabilizat...

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Bibliographic Details
Published in:The International lawyer 2008-12, Vol.42 (4), p.1317-1338
Main Author: EMEKA, J. NNA
Format: Article
Language:English
Subjects:
Agreements
Arbitration
Arbitration clauses
Arbitration law
Commercial arbitration agreements
Contract negotiations
Contract provisions
Contracts
Governing laws clause
Host country
International agreements
Interpretation and construction
Law
Legislation
Petroleum
Petroleum industry
Political parties
Political risk
Politics
Risk capital
Tribunals
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Summary:Periods of high gas prices, as recently witnessed, herald repudiation of international petroleum contracts as host governments seek a greater share of the profits under various legitimate and flimsy theories, raising the question of the utility of stabilization clauses in such agreements. Stabilization clauses were introduced to reduce political risk and preserve the fiscal regime in international petroleum contracts. While practitioners and clients derive comfort from stabilization clauses based largely on international arbitrations precedents, this article notes that such comfort may be misplaced absent the requisite international anchor, which could be missing in international petroleum, and accordingly stresses the need for such anchor, proposes drafting, client management, and litigations considerations for the practitioner.
ISSN:0020-7810
2169-6578