Stabilization clauses do something rather remarkable: They stop time itself. More specifically, stabilization clauses freeze the laws and regulations applicable to the foreign investment as they existed at the time the investment was established, and are thus prized by investors. While they are longstanding and ubiquitous in contracts, enterprising host states have more recently retooled stabilization clauses to include them in their legislation. Like their prototype contractual stabilization clauses, legislative stabilization clauses (LSCs) are seen by developing countries as essential instruments for attracting foreign direct investment (FDI). However, what little scholarship there is focuses on whether LSCs, given their unilateral nature, are enforceable in aid of investors, and scant attention has been paid to whether LSCs in fact influence FDI inflows in host states. Because states are potentially liable for any subsequent regulations that violate legislative stability guarantees, LSCs are a singularly poor bargain for host states should they not induce investments. To redress the imbalance, in addition to analyzing the jurisprudence on the enforceability of LSCs, we consider various UNCTAD, OECD and World Bank national investment case studies, parsing for any data linking LSCs and FDI. As with international investment treaties, it turns out to be difficult after the fact to isolate the impact of any LSC on FDI levels. What evidence we have looking backwards is generally inconclusive on whether LSCs influence FDI inflows.LSCs are not born equal, however, and certain LSCs are more forward-looking than others. In particular, what the authors call Contractual LSCs allow for a governmental mechanism to recognize, track and monitor the stability obligations created under the LSC. Host states as such are far better positioned to evaluate the utility and value of the LSC, and make appropriate adjustments. From this perspective, we reconceptualize the LSC by proposing a new taxonomy of LSCs that divides them into three fundamental categories: Aspirational LSCs, Standard LSCs and Contractual LSCs.We argue that host states should avoid Aspirational LSCs, which contain hortatory language providing no stability guarantee and minimal purpose; and should reconsider Standard LSCs, which are stock LSCs that saddle host states with stability obligations without having been shown to influence FDI in-flows. In their place, we recommend that host states adopt Contractual LSCs, which grant investors stability guarantees through contracts approved by the government, often conditional on meeting particular investment profile criteria. Because the architecture of Contractual LSCs enables host states to better target investment projects and administratively manage their stability obligations, governments can more confidently assess the true benefit of such LSCs and respond accordingly. Further, Contractual LSCs signal to investors a more transparent and reliable process to access enhanced stability guarantees by way of stabilization contracts generated under the legislation. In sum, a host state would do well to look to the Contractual LSC as an important tool at its disposal for recalibrating the balance of interests and rights between the state and foreign investors
