One of the fundamental principles of finance is that with
greater risk comes the possibility of greater returns. This can
certainly be true for companies looking to invest outside of the
markets that they are familiar with, such as in the fast-growing
economies of certain developing regions. Unfortunately, the
downside to this strategy is the need to manage the uncertainty and
potentially disastrous consequences of political risk.
Investment Guarantee Agency, a member of the World Bank Group,
defines political risk as the negative
consequences arising from the adverse actions or inactions of
governments. These risks are often unpredictable and hard to
If a company is looking to invest in an environment where
political risk is a concern, political risk insurance
(PRI) is a tool that can mitigate some of that
risk. In fact, according to Export Development Canada, a major Canadian
political risk insurance provider, PRI can insure a company for up
to 90 per cent of its losses resulting from:
breach of contract by a foreign government;
expropriation by a foreign government;
political violence in a foreign country;
currency conversion or transfer problems;
difficulty repossessing or re-exporting physical assets;
a foreign government's default on financial
For companies considering a foreign investment, qualified legal
counsel should always be retained for advice and assistance with
the transaction, and thorough due diligence must be performed.
Also, Representation and Warranties (R&W)
insurance can be used to minimize risks arising from the
transaction that may affect the buyer or seller. However, for
political risks, which by their nature are out of the parties'
control, PRI should be considered as a possible tool to ensure
continued success once the transaction has been completed.
(For a more detailed review of R&W insurance, see Laura
post on this blog.)
Norton Rose Fulbright Canada LLP
Norton Rose Fulbright is a global legal practice. We provide
the world's pre-eminent corporations and financial institutions
with a full business law service. We have more than 3800 lawyers
based in over 50 cities across Europe, the United States, Canada,
Latin America, Asia, Australia, Africa, the Middle East and Central
Recognized for our industry focus, we are strong across all
the key industry sectors: financial institutions; energy;
infrastructure, mining and commodities; transport; technology and
innovation; and life sciences and healthcare.
Wherever we are, we operate in accordance with our global
business principles of quality, unity and integrity. We aim to
provide the highest possible standard of legal service in each of
our offices and to maintain that level of quality at every point of
Norton Rose Fulbright LLP, Norton Rose Fulbright Australia,
Norton Rose Fulbright Canada LLP, Norton Rose Fulbright South
Africa (incorporated as Deneys Reitz Inc) and Fulbright &
Jaworski LLP, each of which is a separate legal entity, are members
('the Norton Rose Fulbright members') of Norton Rose
Fulbright Verein, a Swiss Verein. Norton Rose Fulbright Verein
helps coordinate the activities of the Norton Rose Fulbright
members but does not itself provide legal services to
The content of this article is intended to provide a general
guide to the subject matter. Specialist advice should be sought
about your specific circumstances.
To print this article, all you need is to be registered on Mondaq.com.
Click to Login as an existing user or Register so you can print this article.
Under B.C.'s former and current Limitation Act, the limitation period for a Plaintiff's claim can be extended on the basis of a Defendant having acknowledged in writing some liability for the cause of action.
Automobile drivers, like fine wine, tend to get better with age. Older drivers can draw on a wealth of experience from their years on the road to assist them when faced by a variety of dangerous conditions.
The insurance industry will be interested in Ledcor Construction Ltd v. Northbridge Indemnity Insurance Co because of principles the Supreme Court of Canada applied to the "faulty workmanship" exclusion in a Builders' Risk policy.
For the first time in BC, a Court has decided that an insured is entitled to special costs, rather than the lower tariff costs, solely because they were successful in a coverage action against their insurer.
Register for Access and our Free Biweekly Alert for
This service is completely free. Access 250,000 archived articles from 100+ countries and get a personalised email twice a week covering developments (and yes, our lawyers like to think you’ve read our Disclaimer).