Enter to open, tab to navigate, enter to select
Freezing Clause
Practical Law Glossary Item 3-501-7254 (Approx. 2 pages)
Glossary
Freezing Clause
A type of stabilization clause contained in a host government agreement (HGA) or other international investment agreement between a local or host government and a foreign investor concerning a project or other investment which fixes or freezes for the term of the project, domestic legislation or regulations affecting the foreign investor and the project or other investment to those in effect as of the date of the HGA or other agreement. As a result, the foreign investor is not required to comply with or abide by any subsequent legislation or regulation the host government may adopt. There are two types of freezing clauses:
- Full freezing clauses: These clauses fix all laws concerning the project.
- Limited freezing clauses: These clauses fix only certain laws.
Freezing clauses have been widely criticized by human rights organizations because they:
- Exempt certain investors from complying with valid laws intended to protect the rights of the host country's citizens.
- Are more likely (and continue) to be used in poorer countries with more limited negotiating power.
As a result, freezing clauses have fallen out of favor and have mostly been replaced by economic stabilization clauses which do not freeze applicable legislation, but could nonetheless impose significant costs on the host government.
For more information on stabilization clauses, see Practice Notes, Understanding Stabilization Clauses in International Investment Agreements and Securing Investment Protection.