The Stabilization Clause / Regulatory Power Antinomy and Sustainable Development: An Introduction
In international investment law, stabilization clauses are used as an important tool for addressing the regulatory risk that foreign investors face when investing in a host country. These host state promises for stability made to incoming foreign investors are typically included in the contractual and legislative regime governing foreign direct investment (“FDI”) in natural resources and infrastructure. Foreign projects in such areas are characterized by long-term, large-size, and late-return investments. Additionally, they are highly regulated by the host state. Because of these features, FDI in such areas is prone to a high risk of subsequent regulatory changes potentially affecting the performance and economic viability of the project.
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