Political risk covers a range of risks that arise from the possible actions of government. A classic example of political risks – which are generally insurable risks – are nationalisation events; for example, the oil and mining nationalisations seen in South America and Libya. This type of risk is often referred to as “expropriation” and may give rise to a right of compensation for affected foreign investors. To be lawful, generally, expropriations must be carried out in a transparent, non-arbitrary manner, be done in accordance with due process and – crucially – with payment of adequate compensation.
There are numerous areas around the world where companies may experience political risk, for example, South East Asia, China and the US. The US’s economic sanctions and potential trade wars also provide a potential hurdle for business. Environmental factors such as climate change will also affect companies looking to trade in areas that have significant weather and physical feature changes. Audley Chaucer has experience of advising commercial enterprises looking to establish themselves in areas of political change. For example Audley Chaucer has assisted with commercial matters in The Gambia and Sierra Leone.
For advice on international investment and legal assistance in countries and regions often regarded as a potential political risk, Audley Chaucer can advise and guide your business.
Ian Lake
