Investment Climate in the MENA Region: Are the Stabilisation Clauses in Foreign Direct Investment Agreements an Obstacle to Progress?

Abstract Foreign direct investment agreements between Western corporations and the countries of the Middle East and North Africa region ( MENA ) deserve attention. On one side, the MENA region is a developing region rich in natural resources and therefore a destination interesting to Western investors. On the other, the MENA region is perceived as a volatile and unstable investment environment. Therefore, international investment agreements in the said region often include stabilisation clauses that serve as contractual mechanisms protecting investors from any changes in the laws and acts of nationalisation and expropriation by the host states. As stabilisation clauses have serious adverse effects on the sovereignty of the host states and the development of human rights, this article will take a deeper view of the stabilisation practice and aim to reveal how this contractual mechanism might represent a Catch 22 with respect to the further development of the MENA region countries, especially with respect to human rights and internal governance.