Legal Regime on Stabilization Clauses in The Extractive Sector in Tanzania

Abstract

This article analyses stabilization regime in theextractives sector in Tanzania from the perspectiveof the State ' s sovereign legislative and regulatoryrights. Inherently, stabilization clauses aremitigation tools that seek to limit host States ' legislative and administrative actions to therespective agreements in enhancing investors ' legitimate expectations and protections.This paper advances the argument that agovernment of a sovereign State cannot, as amatter of principle, fetter its duty to act for thepublic good and interest by binding itself throughstabilization clauses. However, the governmentmust do so while also honouring its internationalcontractual commitments. It must therefore actfairly, reasonably and equitably under the power ofeminent domain and public powers against the illgottenunbalanced terms including investmentagreements.This article also discusses the concept ofunconscionability including the practical limitationsfor the States to use it as a defense, especially, ininvestment treaty claims. The principle of pacta sunt servanda as it relates to the stabilizationclauses in the extractive sectors arrangements isalso discussed. In this context, this paper arguesthat stabilization clauses cannot blindly be enforcedagainst a State under the auspices of the pactasunt servanda principle.Key words: stabilization clauses, legitimate expectations,unconscionable terms, regulatory autonomy, pactasunt servanda.