International Journal of Research in Education Humanities and Commerce

RENEGOTIATION VERSUS STABILISATION CLAUSES IN PRODUCTION SHARING AGREEMENTS, (PSAs) AND THE SOVEREIGN RIGHTS OF HOST COUNTRIES: A LEGAL APPRAISAL

Authors: Tosin Ezekiel Ayo* & Aderonke Abimbola Ojo Ph.D**

ABSTRACT

Host States are found in the habit of shifting the goal post of commercial oil and gas transactions they have with International Oil Companies in the middle of the game. Legal Draftsmen have therefore found ways of holding the host States in concession and production sharing contracts to their word, barring incidences of political instability. One of the most notable ways of doing this is by the insertion of a ‘stabilisation clause’ in the Production-sharing Agreement which attempts to freeze the rights and provisions of a national system of law chosen as the law of the contract as to the date of the contract in order to prevent the application to the contract of any future alterations of this system by the host States. This clause has been observed to be rendered largely ineffective due to the defiance of host States who willfully renege on contractual agreements and circumvent simple contracts. This paper therefore seeks to examine the viability of the insertion of a renegotiation clause as a suitable replacement to a stabilisation clause in Production Sharing Contracts between (IOCs) and Host countries as a way of securing the balance of maximizing IOCs’ profits and retaining the host State’s sovereign rights.

Keywords: Renegotiation, Stabilization, IOCs, PSAs, Sovereign rights, Host States.

Author’s Profile

Tosin Ayo is qualified to practice Law in Nigeria. He is a Legal Practitioner and was a Law Teacher and Faculty Staff Adviser at the Department of Jurisprudence and International Law, Ekiti State University, Ado-Ekiti, Nigeria where he taught Oil and Gas Law and Environmental Law. He holds a LL.B, University of Ado-Ekiti, BLand LL.M Energy Law from the University of Aberdeen. He is currently a PhD Candidate at the maturity stage of his PhD program at the Ekiti State University, Ado-Ekiti, Nigeria.

Aderonke Abimbola Ojo, PhD is a Senior Lecturer and Head of the Department of Private and Propery Law at the Faculty of Law, Ekiti State University, Ado-Ekiti, Nigeria. She holds a LL.B (Hons) of the University of Ado-Ekiti, BL, LL.M of the University of Ibadan, Nigeria and a PhD of the Ekiti State University, Ado-Ekiti, Nigeria.