Specifics of the Stability Condition in International Oil and Gas Transportation Contracts

Abstract

A stabilization clause is a general contractual guarantee that insures an investor against the possible negative consequences of future changes in the national legislation of the host country. A “stabilization clause” may be referred to as a “stabilization clause,” “proviso,” “article,” or “clause.” The difference between the terms is formal. Given that the term in question is one of the contractual terms mutually agreed upon between the parties, it is appropriate to present it in the form presented in this publication.

As a rule, the parties to international oil and gas transportation contracts are representatives of the executive authorities of a particular country and the relevant investors involved in the implementation of the project. Such investment agreements, along with many provisions, include a number of statements and guarantees by the relevant country, which aim to create a sustainable, profitable, safe and attractive investment environment for investors. The stability condition is one of the contractual mechanisms for achieving this goal.

This publication covers the meaning of the stability condition and its main types, using the example of the model agreement with the government of the country owning the territory developed by the Energy Charter Secretariat and the agreement between the Government of Georgia and a group of investors with the government of the country owning the territory within the framework of the Baku-Tbilisi-Ceyhan pipeline project.