The “Business Case” For and against International Arbitration
. Operating in a given country
A. What are the business risks?
Cross-border transactions by definition involve multiple jurisdictions. Frequently, the subject of the investment or transaction will be located in a country other than a corporation's home country. The degree of risk posed by operating in a given host-country varies. The degree of risk is likely to be lesser in stable or so-called developed countries such as those in North America and Western Europe and is likely to greater in unstable or so-called developing countries such as Algeria, the Congo, Venezuela, China or Kazakhstan. The risks of operating in a given country can be categorized as follows:
• Political and legislative risks
• Industry risks
• Judicial risks
Political and legislative risks are caused by government acts or other events including expropriations, the imposition of exchange controls, revolutions and other civil disturbances that may have an adverse impact on transactions or investments.3 An example of a government act falling into this category is Argentina's decision in April 2012 to renationalize Repsol's 57% shareholding in the oil company YPF SA.4 An example of an event is the “Arab Spring”, which may adversely impact international projects in the Middle East and Africa.
[11-3] Industry risks result from a given government's t
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