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Dead End for Stabilization Clauses? The Effects of the Concessions Directive on Investor Protection Mechanisms

The 2014/23/EU Directive on concessions introduces a new definition for concession contracts and a new set of rules concerning contract design and contract modification. The paper seeks to determine the effects of the Directive on concessions concerning oil and gas or energy production, mainly the clauses providing for fiscal and political investor protection mechanisms. By analyzing the black letter provisions of the Directive, the existent CJEU case law and relevant arbitral awards, it concludes that the new EU regime of concessions is incompatible with stabilization clauses and other mechanisms of investor protection that, on the one hand, limit the state’s regulatory powers and, on the other hand, guarantee investor’s profit arising from a concession, on the state’s expense. However, such change of regime is likely to stir a new wave of arbitration cases with unforeseeable results regarding the application of EU law and to drive away foreign investment altogether.