Introduction
Today’s column concludes my discussion of fiscal stabilization clauses (FSCs) in Production Sharing Agreements (PSAs). My main purpose is drawing attention to some key results/ observations/lessons, which the referenced Oxford Institute of Energy Economics’ (OIES’) survey of such clauses reveal. In the next paragraph, I wrap-up last week’s analysis of the political economy of FSCs.
The literature reviewed on FSCs last week reveals three primary features: First, there are variations in the wordings of FSCs, but their main intent remains in no doubt. Such variations reflect cultural, historical, legal and other features of the host country.
These variations apart, there has been an historical evolution in constructing these clauses, which is examined in the next Section. Second, continuous resort to these clauses invariably reflects fractures in the legal and other relations between the Host country and the Contractor, which is invariably self-defeating. Third, while over time FSCs have evolved, such evolution has been widely unpredictable.