Presentation on Geopolitical risks linked to an oil case study during FERMA Forum 2015

1. Geopolitical Risks

2. BRUSSELS, 20-21 October
www.ferma.eu
FORUM 2015
Venice, Italy 4-7 October
Content
1. 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)

3. BRUSSELS, 20-21 October
www.ferma.eu
FORUM 2015
Venice, Italy 4-7 October
Content
1. Introduction (MRO)
 This Work Shop is dedicated to Edwin Viktor Meyer, chair of
the programme committee for the FERMA Forum 2015

4. BRUSSELS, 20-21 October
www.ferma.eu
FORUM 2015
Venice, Italy 4-7 October
Content
 2. Setting the scene (SB):
• Situation: Oil price
• Drivers for the drop
• Where is affected?

5. BRUSSELS, 20-21 October
www.ferma.eu
FORUM 2015
Venice, Italy 4-7 October
Oil Price

6. BRUSSELS, 20-21 October
www.ferma.eu
FORUM 2015
Venice, Italy 4-7 October
Drivers for the drop
!
China
KoS
Russia
US

7. BRUSSELS, 20-21 October
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FORUM 2015
Venice, Italy 4-7 October
Consequences - Political Risks
•Growth
State budgets
State projects
Taxes & fees
Regional
dependence

8. BRUSSELS, 20-21 October
www.ferma.eu
FORUM 2015
Venice, Italy 4-7 October
Where is affected

9. BRUSSELS, 20-21 October
www.ferma.eu
FORUM 2015
Venice, 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).

10. BRUSSELS, 20-21 October
www.ferma.eu
FORUM 2015
Venice, 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

11. BRUSSELS, 20-21 October
www.ferma.eu
FORUM 2015
Venice, 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

12. BRUSSELS, 20-21 October
www.ferma.eu
FORUM 2015
Venice, 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)

13. BRUSSELS, 20-21 October
www.ferma.eu
FORUM 2015
Venice, Italy 4-7 October
If you cannot avoid litigation/arbitration...
be aware that...
 -Rule: contract duties must be fulfilled
 -Exceptions?
Force Majeure
Economic Hardship
Termination (break/defective performance)

14. BRUSSELS, 20-21 October
www.ferma.eu
FORUM 2015
Venice, Italy 4-7 October
The risks from a Political Risk analysis
 (SB) Aggraveted risks: current political
Instability
 (PF) Legal reaction from a corporate/ finance
perspective

15. BRUSSELS, 20-21 October
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FORUM 2015
Venice, 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:

16. BRUSSELS, 20-21 October
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FORUM 2015
Venice, 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 complies
with 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)

17. BRUSSELS, 20-21 October
www.ferma.eu
FORUM 2015
Venice, 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)

18. BRUSSELS, 20-21 October
www.ferma.eu
FORUM 2015
Venice, 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

19. BRUSSELS, 20-21 October
www.ferma.eu
FORUM 2015
Venice, Italy 4-7 October
The risks from a Political Risk analysis
 (PF) The Impact of “midnight clauses” (jurisdiction
legislation)
 (JMGM) A risk management perspective

20. BRUSSELS, 20-21 October
www.ferma.eu
FORUM 2015
Venice, Italy 4-7 October
The future: What is next in geopolitical risks?
 (PF)
 (JMGM)
 (RL)

21. BRUSSELS, 20-21 October
www.ferma.eu
FORUM 2015
Venice, Italy 4-7 October
Closing
 (MRO) Questions.
 (MRO) Wrap up 3 ideas to take home

22. BRUSSELS, 20-21 October
www.ferma.eu
FORUM 2015
Venice, Italy 4-7 October
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