Scholarly literature (and political discussion) of stabilization clauses tends to assume that the aim of these clauses is to place limits on the exercise of sovereign power by States who are contracting parties. It is then argued either that this works to evil, in restraining due development of ethical, environmental and human rights standards in the countries concerned or else that they are ineffective, since sovereignty cannot be contractually limited, and are therefore useless. This article argues that neither of these positions is correct; rather, the clauses provide for financial adjustment between contracting parties when legal changes are made by the State co-party, thus facilitating risk management on the part of the non-State co-party. The greater certainty thereby engendered permits the non-State party to agree to the contract at a cost more favourable to the State party than might otherwise be the case.