Production Sharing Agreements in Africa: Sovereignty and Relationality

This paper considers Desta’s critique of how contracts in the extractive industries involving host nations in Sub-Saharan Africa and international companies have been drafted and adjudicated. It first sets out the options that the state has in setting out a legal framework for the development of its hydrocarbon sector before going on to examine the dynamic risk matrix that characterises oil and gas projects. It then sets out the principles underpinning the design of fiscal systems for upstream oil and gas. With these foundations laid, the paper goes on to complexify the understanding of stabilisation in modern state-investor contracts, first, in terms of self-adjustment mechanisms and, secondly, in terms of the shift towards economic equilibrium clauses. It then examines the extent to which these contracts are best understood as relational in nature and concludes by proposing the development of principles to guide arbitral adjustment of contract terms based on this observation.