Professional Documents
Culture Documents
Subject(s):
Settlement of disputes Overseas Private Investment Corporation (OPIC) International organizations
Multilateral Investment Guarantee Agency (MIGA) Law of treaties BITs (Bilateral Investment
Treaties) International economic law Insureds violation of the insurance contract
From: Oxford Public International Law (http://opil.ouplaw.com). (c) Oxford University Press, 2015. All Rights Reserved. Subscriber:
Chinese University of Hong Kong; date: 06 January 2016
From: Oxford Public International Law (http://opil.ouplaw.com). (c) Oxford University Press, 2015. All Rights Reserved. Subscriber:
Chinese University of Hong Kong; date: 06 January 2016
As for competition between domestic insurers, private and public, and MIGA, they differ in their
willingness to accept various types of risk and offer different rates for different packages of
insurance. Altogether, overlapping elements exist among the policies and activities of the different
insurers, and the divergences are explained by the different goals and institutional settings. The
various existing regimes diverge in part in regard to the types of investment covered. Exports are
covered by MIGA if they contribute significantly to a specific investment.4 Activities of the host
state when acting as a purchaser, supplier, manager, and creditor are excluded from coverage by
OPIC.5 MIGA is only prepared to insure an investment that satisfies its understanding of economic
soundness and has received host country approval.6 The rules of MIGA do not, however, require
specific standards of protection of foreign investment in the host country. This is because MIGA
only insures (p. 230) risk in MIGA member countries where there is a bilateral agreement between
MIGA and the host government.
It has been the general practice of government insurers to conclude agreements with host
countries that provide for subrogation. This means that the investors rights against the host
country are assigned to the insurer upon payment under the insurance contract. Some countries,
such as Germany, include clauses to this effect in bilateral investment treaties (BITs), whereas
others, such as the United States, conclude specific agreements for this purpose. In Germany,
governmental insurance will only be granted for investments in countries that have concluded a BIT
with Germany or in which a similar degree of legal security exists.
With regard to the types of risk covered, these are similar to those addressed in BITs. Beyond the
protection of assets, most programmes offer protection against non-compliance with contracts.
Also, the risks of currency inconvertibility and restrictions on currency transfer are covered. Of
course, all schemes provide for protection against direct and indirect expropriation, and some
government insurers, for example OPIC, and most private insurers also cover cases of business
interruption. Remarkably, the MIGA Convention in Chapter III, Article 11(a)(ii) specifically provides
that no loss is covered arising from non-discriminatory measures of general application which
governments normally take for the purpose of regulating economic activity in their territories. Risks
of war and civil disturbance are generally covered. OPIC (and most other government insurers and
the larger private sector underwriters) will not cover projects that violate international
environmental standards, create unreasonable health risks, or fail to respect human rights, in
particular workers rights.7
Concerning protection of non-compliance with contracts, repudiation or breach is covered by MIGA
if the holder of the guarantee does not have access to a judicial and arbitral forum or the decision
of such a forum is not rendered within a reasonable period as defined by MIGA, or such a decision
is not enforced.8 Non-payment of an obligation under an arbitral award may constitute an
expropriation as understood in international law and as covered by an insurance contract, even if
the host country considers that it is not able to pay the amount due under the arbitral award.9
Disputes have arisen between insured investors and the insurer when the two sides have
disagreed on the interpretation or application of the insurance contract. Typically, such disputes
are resolved through arbitration provided for in the insurance contracts. Often, the resulting
decisions deal with legal issues that appear (p. 231) similar to those that arise in the relationship
between the host state and the investor in the context of a BIT. For instance, the investor may claim
that its treatment by the host state amounts to an indirect expropriation as covered by an
insurance contract.
In a number of disputes, tribunals set up under insurance contracts have addressed legal issues of
expropriation, currency inconvertibility, breaches of contract, the consequences of political
violence, and attribution. Some decisions of these tribunals set up under insurance contracts have
been relied upon in disputes between investors and states.10 The authority of arbitral awards
rendered under insurance contracts to disputes between states and foreign investors will depend,
not least, on whether the provisions in insurance contracts and the standards of protection in
treaties and customary international law are the same.
From: Oxford Public International Law (http://opil.ouplaw.com). (c) Oxford University Press, 2015. All Rights Reserved. Subscriber:
Chinese University of Hong Kong; date: 06 January 2016
Footnotes:
1 According to a report published in 2009, only 14 per cent of the total global flow of foreign direct
investment is covered by insurance, see MIGA Report, World Investment and Political Risk (2009)
34.
2 See I Shihata, Regional Investment Insurance Project (1972) 6 J World Trade Law 185.
3 See USC 2194.
4
See Art 4.03(b) of the OPIC Contract of Insurance Against Inconvertibility, Expropriation, Political
Violence (Form 234 KGT 1285, 2nd rev), reprinted in R D Bishop, J Crawford, and W M Reisman,
Foreign Investment Disputes (2005) 517, 519.
6
See Convention Establishing the Multilateral Investment Guarantee Agency, Arts 12(d) and 15.
See generally M Perry, A Model for Efficient Aid: The Case for Political Risk Insurance Activities of
the Overseas Private Investment Corporation (1996) 36 Virginia J Intl L 511 ; see USC 22, 2199
et seq.
8
See eg MidAmerican Energy Holdings Company v OPIC, citing the Restatement (Third) of
Foreign Relations Law (1999), 712, cmt h and the Harvard Draft Convention on the International
Responsibility of States for Injuries to Aliens; an excerpt of the case is reprinted in D Bishop, J
Crawford, and M Reisman, Foreign Investment Disputes (2005) 563 et seq. But see also the
position that non-payment of debts will not amount to an expropriation (Waste Management), p
129.
10 The Award in Revere Copper v OPIC, Award, 24 August 1978, 56 ILR (1980) 258, is often cited in
From: Oxford Public International Law (http://opil.ouplaw.com). (c) Oxford University Press, 2015. All Rights Reserved. Subscriber:
Chinese University of Hong Kong; date: 06 January 2016