Permanent Sovereignty over Natural Resources and Contract Stability in Transnational Petroleum Investment Contracts

Abstract

This paper makes a critical analysis of the principle of permanent sovereignty over natural resources and contract stability as applicable to transnational petroleum investment contracts. It considers the extent to which these concepts affect foreign direct investment in the petroleum industry. This work further demystifies the theory of contract stability as a panacea to the tense environment contrived by the principle of permanent sovereignty over natural resources. The doctrine of pacta sunt servanda as applicable to stabilization clauses is considered towards explicating how it procures stability in oil investment contracts. In this wise, other like devices like renegotiation, clausula rebus sic stantibus, etc are not left out, particularly as they introduce some element of flexibility and attenuate the hardships that might arise due to strict insistence on the application of principle of pacta sunt servanda to the dynamics of the petroleum industry. This work adopts the synthesis and analysis as well as the comparative methodology in reviewing the relevant materials consulted in the course of this work. It argues that parties to transnational petroleum contracts should pursue stability in such agreements through the employment of such devices that ensure flexibility within the context of a dynamic petroleum industry.