Arrested ambition? Foreign investor protections, stabilization clauses and fossil‐fuelled power generation in developing countries

Abstract

AbstractStates introducing measures to transition away from fossil‐fuelled power generation might be obliged, under international investment treaty provisions, to compensate affected foreign investors in that sector. Treaty‐based investor protections may be augmented by broad entitlements in ‘stabilization clauses’ in project contracts between host States and foreign investors in the sector. This article explores the extent and scope of such clauses with regard to host developing countries, as well as the capacity of the clauses to hold back the transition by these countries. Much literature has focused on the exposure of fossil fuel‐rich developing countries to investor claims for compensation. This article concentrates on the arresting effect of investor protections on the ambition of fossil fuel import‐dependent developing countries to make a robust transition. Information is required urgently about the exposure of these countries to compensation claims, particularly under stabilization clauses, by foreign investors in the fossil‐fuelled power generation sector.