Evolving Standards on Stabilization
A practical guide to the Organisation for Economic Co-operation and Development's Guiding Principles on Durable Extractive Contracts, Principles VII and VIII
International standards on stabilization clauses are evolving. The latest Organisation for Economic Co-operation and Development (OECD) Guiding Principles encourage narrower use of these clauses and highlight alternatives, particularly between fiscal and non-fiscal issues. This report offers practical guidance for governments and companies to transition from outdated practices, helping them draft clauses in line with standards for more balanced and predictable mining contracts.
Key Messages
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Stabilization clauses are evolving: The use of stabilization clauses should not be a given in mining contracts. The latest OECD standards point to reduced and narrower uses, moving away from presumptive stabilization toward more responsive frameworks.
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This report supports the transition from the presumptive use of stabilization to a structured approach toward changes in fiscal and non-fiscal stabilization clauses, providing clear guidance on how to translate these normative principles into legal text.
The latest OECD Guiding Principles on Durable Extractive Contracts, developed through years of consultations, represent the most inclusive and comprehensive consensus on stabilization clauses in a decade. These principles call for a more limited use of stabilization clauses and emphasize alternatives, particularly distinguishing between fiscal and non-fiscal issues.
This practice note explores the historical context behind stabilization clauses and the growing controversy surrounding their use. It then delves into the evolution of international standards on the subject, culminating in the 2020 OECD principles. Offering practical guidance, the note helps governments and companies navigate the complexities of stabilization clauses and align their contracts with these new standards, paving the way for a more balanced, predictable, and adaptive approach to mining agreements.
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