‘The Stabilization Clause’ of The Baku-Tbilisi-Ceyhan Pipeline Agreements: A Legal Review

International investment contracts usually involve stabilization clauses that are prevalently used in infrastructure, telecommunication, and energy sectors, especially in the oil and gas extraction industries. In the petroleum industry, foreign investors providing advanced technology and substantial financial capital for oil development often face political risks in developing countries such as expropriation of pipeline investments, increased taxes, and other fees for projects throughout the contractual performance. These stabilization provisions disincentive host states from enacting new laws or enhancing their laws and regulations on environmental, public health, labor, and human rights standards. The stabilization clause of the Baku-Tbilisi-Ceyhan (BTC) Pipeline Agreement was criticized as a great obstacle to Turkey's regulatory ability to enhance environmental, health, labor, and human rights standards. Indeed, the BTC's stabilization clause neutralizes Turkey's laws and regulations for forty years. This paper proposes some important legal tools to alleviate these concerns over stabilization clauses in pipeline investment contracts.