Legal Regime on Stabilization Clauses in The Extractive Sector in Tanzania

Abstract

This article analyses stabilization regime in the
extractives sector in Tanzania from the perspective
of the State’s sovereign legislative and regulatory
rights. Inherently, stabilization clauses are
mitigation tools that seek to limit host States’
legislative and administrative actions to the
respective agreements in enhancing investors’
legitimate expectations and protections.
This paper advances the argument that a
government of a sovereign State cannot, as a
matter of principle, fetter its duty to act for the
public good and interest by binding itself through
stabilization clauses. However, the government
must do so while also honouring its international
contractual commitments. It must therefore act
fairly, reasonably and equitably under the power of
eminent domain and public powers against the illgotten
unbalanced terms including investment
agreements.
This article also discusses the concept of
unconscionability including the practical limitations
for the States to use it as a defense, especially, in
investment treaty claims. The principle of pacta sunt servanda as it relates to the stabilization
clauses in the extractive sectors arrangements is
also discussed. In this context, this paper argues
that stabilization clauses cannot blindly be enforced
against a State under the auspices of the pacta
sunt servanda principle.

Key words: stabilization clauses, legitimate expectations,
unconscionable terms, regulatory autonomy, pacta
sunt servanda.