Political Risk

Practical Law Glossary Item 3-383-2210 (Approx. 3 pages)

Glossary

Political Risk

Risks faced by investors involved in cross-border transactions, including currency inconvertibility, expropriation, war and insurrection (such as a coup d’etat), terrorism, and actions of non-government activists, paramilitaries, or revolutionaries. To protect themselves from these risks, foreign investors can take several actions including:

Obtain political risk insurance.
Negotiate a stabilization clause (for example, an economic equilibrium or freezing clause with the local government).
Structure the transaction to take advantage of a bilateral investment treaty.

For more information on political risks, see:

Practice Note, Political Risk Insurance: Is It Necessary?
Practice Note, What Lenders Need to Know About Political Risk Insurance.
Practice Note, Issues to Consider When Submitting a Claim Under a Political Risk Insurance Policy.
Standard Document, Project Finance Risk Matrix.

End of Document

Resource ID 3-383-2210

Maintained

Resource Type Glossary

Jurisdiction

United States