Regulatory takings, stabilization clauses and sustainable development

Journal (part) article
Published: March 2008
Product code:X00009
Source publication:
OECD Investment Policy Perspectives

Paper prepared for the OECD Global Forum on International Investment VII “Best practices in promoting investment for development” Paris, 27-28 March 2008. This article examines the implications of the regulatory taking doctrine and of stabilisation clauses for host state regulation in pursuit of sustainable development goals – specifically, for regulation raising the social and environmental standards applicable to investment projects. First, the article recalls the key elements of the international law on regulatory takings, and compares them to the legal standards applicable under a selection of stabilisation clauses. This analysis reveals that increasingly broad stabilisation clauses tend to ensure a level of regulatory stability that far exceeds that accorded by general international law under the regulatory taking doctrine. Second, the article analyses options to mitigate the constraints on host state regulation by limiting the scope of stabilisation clauses through a "compliance with international law" exception, and by building into these clauses some degree of evolution of applicable social and environmental standards.