Investing with Confidence

investing
with confidence
UNDERSTANDING POLITICAL RISK
stMANAGEMENT IN THE 21 CENTURY
Kevin W. Lu
Gero Verheyen
Srilal M. Perera
Investing with ConfidenceInvesting with Confidence
Understanding Political Risk
stManagement in the 21 Century
Kevin W. Lu, Gero Verheyen,
and Srilal M. Perera
Editors
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ISBN-13: 978-0-8213-7893-9
eISBN: 978-0-8213-7981-3
DOI: 10.1596/978-0-8213-7893-9
Library of Congress Cataloging-in-Publication Data
Investing with confidence : understanding political risk management in the 21st
century / Kevin W. Lu, Gero Verheyen, and Srilal M. Perera, editors.
p. cm.
Includes bibliographical references and index.
ISBN 978-0-8213-7893-9 (alk. paper) -- ISBN 978-0-8213-7981-3 (ebk.)
1. Country risk. 2. Investments, Foreign. 3. Risk management. I. Lu, Kevin W.
II. Verheyen, Gero. III. Perera, Srilal Mohan.
HG4538.I65438 2009
332.67'3--dc22
2009032582Contents
Preface . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . ix
Foreword . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . xiii
Abbreviations. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . xix
Part I. Global Finance and Potential for
Political Risk Insurance
Toward a Greater Depoliticization of Investment Disputes:
The Roles of ICSID and MIGA . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 2
Ibrahim F. I. Shihata
The Global Financial Crisis and the Future of International
Financial Institutions . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 36
James Bond
Principles and Development of Islamic Finance. . . . . . . . . . . . . . . 43
Zamir Iqbal
Sovereign Wealth Funds, Financial Crisis, and Management
of Noncommercial Risk . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 60
Roxanna Faily, Kevin W. Lu, and Shuilin Wang
The Changing Face of Political Risk. . . . . . . . . . . . . . . . . . . . . . . . . 81
Patrick Garver
vvi CONTENTS
Part II. Advancements in Recurring Issues
and New Dimensions for Political
Risk Insurance
Linking Political Risk Insurance Pricing and Portfolio
Management with Economic Capital Modeling:
A Multilateral Perspective?. . . . . . . . . . . . . . . . . . . . . . . . . . . . 90
Mikael Sundberg, Faisal Quraishi, and
Sidhartha Choudhury
Issues Affecting Pricing in the Political Risk Insurance
Market, and a Probabilistic Approach to Measuring
Country Risk in a Political Risk Insurance Portfolio . . . . . . . . . . 115
Edward Coppola
Public Sector Pricing:How to Balance a Public Mandate
with Adequate Returns for Political Risk . . . . . . . . . . . . . . . . . . . 129
Joanne Palmer
Expropriation and the Share Pledge Dilemma:
An Assessment of Individual Rights and Compensation
Claims. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 146
Srilal M. Perera
Emerging Issues in the Enforcement of Foreign Arbitral
Awards . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 163
Joseph R. Profaizer
To Risk or Not to Risk? The State’s Perspective of
Investor–State Dispute Resolution at the 20th Anniversary
of MIGA . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 173
Ignacio Torterola and Ronan McHugh
Calculating Damages:Arbitrators, Counsel, and Experts
Can Do Better Than They Have in the Past. . . . . . . . . . . . . . . . . . 196
Andrea Saldarriaga and Mark Kantor
An Approach to Financial Valuation for Arbitration
Awards . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 238
Faisal A. Quraishi
Concluding Comments . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 253
Gero Verheyen and Srilal M. PereraCONTENTS vii
Appendixes
I Previous Volumes in This Series . . . . . . . . . . . . . . . . . . . . . . 259
II More About MIGA . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 272
Index . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 277