Companies can use existing legal mechanisms to enforce judgments against a contracting government outside its home country in cases where local courts have frustrated attempts to collect arbitral awards. Firms can also state that obtaining political-risk insurance or other types of insurance is a condition for proceeding with a contract. When changed circumstances or attitudes destabilize long-term agreements, companies have two choices: Renegotiation or formal dispute resolution. Contracts that combine shock-absorber and safety-net clauses can guarantee a better outcome in either case. For companies looking at the high-risk, high-reward prospect of taking on major projects abroad, these types of contracts provide the starting point for a trust-based partnership – and an ending point should trust ultimately fail.


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Editor: Arindam Chaudhuri

Source: IIPM Publication