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Geopolitical Risks
BRUSSELS, 20-21 October www.ferma.eu
FORUM 2015Venice, Italy 4-7 October
Content1. Introduction (MRO)
2. Setting the scene (SB):
• Situation: Oil price• Drivers for the drop• Where is affected?
3. Panel discussion:a) The risks from a company perspective (JMGM - PF).b) Political Risk analysis (SB – RL – PF – JMGM).c) The Future: What is next in geopolitical risks? (PF – JMGM – RL).
4. Questions (MRO).
5. Closing: Wrap up 3 ideas to take home (MRO)
BRUSSELS, 20-21 October www.ferma.eu
FORUM 2015Venice, Italy 4-7 October
Content1. Introduction (MRO) This Work Shop is dedicated to Edwin Viktor Meyer,
chair of the programme committee for the FERMA Forum 2015
BRUSSELS, 20-21 October www.ferma.eu
FORUM 2015Venice, Italy 4-7 October
Content 2. Setting the scene (SB):
• Situation: Oil price• Drivers for the drop• Where is affected?
BRUSSELS, 20-21 October www.ferma.eu
FORUM 2015Venice, Italy 4-7 October
Oil Price
BRUSSELS, 20-21 October www.ferma.eu
FORUM 2015Venice, Italy 4-7 October
Drivers for the drop
•!
• China
• KoS
• Russia
• US
BRUSSELS, 20-21 October www.ferma.eu
FORUM 2015Venice, Italy 4-7 October
Consequences - Political Risks
• Growth
• State budgets
• State projects
• Taxes & fees
Regional dependence
BRUSSELS, 20-21 October www.ferma.eu
FORUM 2015Venice, Italy 4-7 October
Where is affected
BRUSSELS, 20-21 October www.ferma.eu
FORUM 2015Venice, Italy 4-7 October
Content
3. Panel discussion:a) The risks from a company perspective (JMGM - PF).
b) Political Risk analysis (SB – RL – PF – JMGM).
c) The Future: What is next in geopolitical risks? (PF – JMGM – RL).
BRUSSELS, 20-21 October www.ferma.eu
FORUM 2015Venice, Italy 4-7 October
The risks from a company perspective
(JMGM) Change in market condition, Risk identification
(PF) Legal reaction from a corporate / finance perspective
BRUSSELS, 20-21 October www.ferma.eu
FORUM 2015Venice, Italy 4-7 October
"When the deal goes down"
-Way out/Renegotiate -The experience of renewables:
Claims for breach/negligence Avoid/delay payments strategies Bankruptcy Investment arbitration PRI triggered
- Be early to avoid, to mitigate,to be successfull
BRUSSELS, 20-21 October www.ferma.eu
FORUM 2015Venice, Italy 4-7 October
Be early doing what?
1. Coordinate (as in crisis management: it is!) 2. Comply (duties,payments,notifications,time limits...) 3. Protect evidence (Check-Key individuals-Discoverable vs. Privileged external counsels) 4. Write little (subjec to contract) 5. Stop (New contracts/in transit) 6. Control corporate stress (de-motivation=seriously increase risks) 7. Exhausting friendly settlements (ADR)
BRUSSELS, 20-21 October www.ferma.eu
FORUM 2015Venice, Italy 4-7 October
If you cannot avoid litigation/arbitration... be aware that...
-Rule: contract duties must be fulfilled -Exceptions?
Force MajeureEconomic HardshipTermination (break/defective performance)
BRUSSELS, 20-21 October www.ferma.eu
FORUM 2015Venice, Italy 4-7 October
The risks from a Political Risk analysis
(SB) Aggraveted risks: current politicalInstability
(PF) Legal reaction from a corporate/ finance perspective
BRUSSELS, 20-21 October www.ferma.eu
FORUM 2015Venice, Italy 4-7 October
The risks from a Political Risk analysis
(RL) Insurance market solutions
Insurable solutions to Geopolitical Risks as a consequence of the fall in oil price.
For countries that have heavy reliance on the export of oil as its main source of revenue, the reduction in oil price could have significant negative impacts on any reforecast economic position and outlook. How a governments reacts or approaches such fiscal deterioration may impact existing or future investments and obligations. Below are a number of scenarios which are currently covered by insurance market:
BRUSSELS, 20-21 October www.ferma.eu
FORUM 2015Venice, Italy 4-7 October
The risks from a Political Risk analysis
(RL) Insurance Market solutions
Scenarios which are currently covered by insurance markets:
• 1. A Government may be forced to default on outstanding payment responsibilities as it no longer has the means to honour such obligations. (Insurance cover that would indemnify against such a risk – Contract Frustration cover)
• 2. A New Government may elect to renegotiates a companies supply or project agreement (that may have been issued
by a former government) or revise royalty previsions for existing and operational concession agreements. - Such renegotiation may be used to generate more favourable terms and additional revenues(Insurance cover that would indemnify against such a risk – Breach of Contract/Selective Discrimination/Arbitration Award Default cover)• 3. A Government may elect to non certify contractors work on a construction project, even though the work
complieswith the terms and conditions agreed to under the project agreement(Insurance cover that would indemnify against such a risk – Breach of Contract/Arbitration Award Default cover)
BRUSSELS, 20-21 October www.ferma.eu
FORUM 2015Venice, Italy 4-7 October
The risks from a Political Risk analysis
(RL) Insurance Market solutions
Scenarios which are currently covered by insurance markets:
• 5. A Government may elect to Expropriate, Nationalise or Confiscate fixed assets or mobile equipment
(Insurance cover that would indemnify against such a risk – Direct Expropriation cover) • 6. A Government invokes changes to legislation, regulation and taxation which collectively over time makes
operating in that country unsustainable (Insurance cover that would indemnify against such a risk – Creeping Expropriation cover)
• 4. A Government decides to introduce an immediate discriminatory tax levy on profits to generate additional revenues
(Insurance cover that would indemnify against such a risk - Indirect Expropriation Risk cover)
BRUSSELS, 20-21 October www.ferma.eu
FORUM 2015Venice, Italy 4-7 October
Midnight Clauses: applicable law & jurisdiction
PRI: never straight forward payment
(Waiting period, burden of proof of loss, suing, enforcing, protecting recovery) Generally law: host country Is the cure on jurisdiction? Arbitration
"Safe harbour" courts
Enforcement: signatories?
"Italian torpedo" risk?
Waiver sovereign inmunity
BRUSSELS, 20-21 October www.ferma.eu
FORUM 2015Venice, Italy 4-7 October
The risks from a Political Risk analysis
(PF) The Impact of “midnight clauses” (jurisdiction legislation)
(JMGM) A risk management perspective
BRUSSELS, 20-21 October www.ferma.eu
FORUM 2015Venice, Italy 4-7 October
The future: What is next in geopolitical risks?
(PF)
(JMGM)
(RL)
BRUSSELS, 20-21 October www.ferma.eu
FORUM 2015Venice, Italy 4-7 October
Closing (MRO) Questions.
(MRO) Wrap up 3 ideas to take home
BRUSSELS, 20-21 October www.ferma.eu
FORUM 2015Venice, Italy 4-7 October
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