Using BITs to Protect a Company's Foreign Assets

In essence, many companies now depend on foreign sales to boost their bottom line, while simultaneously seeking to gain greater revenue through capital investments abroad. To accomplish this, companies often need to accept certain risks that such foreign activities can pose as the cost of doing business.

March 18, 2013

Over the past few decades, companies—both large and small—have increasingly become reliant on a dual-track global business model. In essence, many companies now depend on foreign sales to boost their bottom line, while simultaneously seeking to gain greater revenue through capital investments abroad. To accomplish this, companies often need to accept certain risks that such foreign activities can pose as the cost of doing business.

In particular, as companies make significant capital investments in foreign countries, they accept unavoidable political risks to the ongoing stability—or the occurrence of instability—in those countries. The political risks in a given country are usually inversely proportional to the strength of government institutions and the rule of law. Thus, in countries where government institutions and the rule of law are weak, the political risks are highest. These risks can manifest themselves in, for example, the nationalization of a company’s manufacturing facilities; the reneging by a foreign host country on agreements for access to necessary utilities, suvch as water rights; the damage or destruction of a company’s facilities in the course of civil unrest; and the imposition of local laws or regulations which undermine foreign investments in favor of domestic operations.

Reprinted with permission from the March 18, 2013 edition of CORPORATE COUNSEL © 2013 ALM Media Properties, LLC. This article appears online only. All rights reserved. Further duplication without permission is prohibited. For information, contact 877-257-3382 or reprints@alm.com.

The articles on our website include some of the publications and papers authored by our attorneys, both before and after they joined our firm. The content of these articles should not be taken as legal advice. The views and opinions expressed in this article are those of the author(s) and do not necessarily reflect the views or official position of Robins Kaplan LLP.

Disclaimer

Thomas C. Mahlum

Partner

Co-Chair, Health Care Litigation Group

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