Political risk and the effect of stabilization clauses in concession agreements
In order to ensure the credibility of their agreements, host States and investors will agree to the insertion of stabilization clauses in concession agreements. Stabilization clauses are undertakings on the part of the host State that it will not take any administrative or legislative actions that would adversely affect the contractual interests of the investor. This chapter looks at political risk under international investment law. It covers aspects such as the resource nationalism cycle and the means through which host States protect themselves from its effects. One means through which investors protect themselves against the consequences of the resource nationalism cycle is through political risk insurance. Stabilization clauses are yet another means through which investors protect themselves from the consequences of the resource nationalism cycle. The chapter also looks at stabilization clauses including the types in existence and the case law pertaining to stabilization clauses.