Legal Regime on Stabilization Clauses in The Extractive Sector in Tanzania

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This article analyses stabilization regime in the extractives sector in Tanzania from the perspective of the State’s sovereign legislative and regulatory rights. Inherently, stabilization clauses are mitigation tools that seek to limit host States’ legislative and administrative actions to the respective agreements in enhancing investors’ legitimate expectations and protections. This paper advances the argument that a government of a sovereign State cannot, as a matter of principle, fetter its duty to act for the public good and interest by binding itself through stabilization clauses. However, the government must do so while also honouring its international contractual commitments. It must therefore act fairly, reasonably and equitably under the power of eminent domain and public powers against the illgotten unbalanced terms including investment agreements. This article also discusses the concept of unconscionability including the practical limitations for the States to use it as a defense, especially, in investment treaty claims. The principle of pacta sunt servanda as it relates to the stabilization clauses in the extractive sectors arrangements is also discussed. In this context, this paper argues that stabilization clauses cannot blindly be enforced against a State under the auspices of the pacta sunt servanda principle. Key words: stabilization clauses, legitimate expectations, unconscionable terms, regulatory autonomy, pacta sunt servanda.