Dispute Resolution
As a member of the World Bank Group, MIGA routinely provides an umbrella of deterrence against government actions that could disrupt insured investments and helps resolve potential disputes to the satisfaction of all parties—both of which enhance investor confidence in the safety of investments and encourage the flow of foreign direct investment. In order to prevent a potential claims situation from escalating, MIGA provides free dispute resolution services to all its clients. This service has been very effective to date, with all cases but three reaching an amicable resolution.
In addition to ensuring the safety of projects guaranteed by MIGA, the agency helps countries improve their investment climates by working to remove the obstacles to the flow of foreign investment. One of these obstacles is the existence of disputes between investors and the countries that host the investments.
See Dispute Resolution Highlights for examples of MIGA’s work to help investors and governments keep investments on track.
Helping clients keep projects going Investment disputes can entail a government being accused of breaching its contract with an investor or expropriating an investor’s concession, or an investor being accused of violating its contractual obligations to the host country. Both sides disagree about which is at fault and about how the damaged party should be compensated. MIGA uses its “good offices” in these cases to examine areas of responsibility and potential liability, and to help the parties reach an agreement that would settle the dispute to the satisfaction of both sides.
If the parties are unable to settle their dispute and a claim for compensation is brought by an investor under a MIGA guarantee, the agency will review the facts of the dispute and make a formal determination. If MIGA finds for the insured investor, it will pay the compensation to which the investor is entitled under the guarantee. Under the terms of the international convention establishing MIGA, the agency is then permitted to seek reimbursement of such payments from the host government. To mitigate against the risk of loss in the case of investment disputes, investors are required to notify MIGA as early as possible of difficulties with a host government that might give rise to a claim of loss under the guarantee.
Finding creative solutions to investment disputes Until recently, there was no facility to which foreign investors or sovereign states could turn for informal professional help to resolve disputes. But in 1996, MIGA began offering dispute resolution services to help governments and foreign investors find creative solutions to their disagreements. MIGA believes a festering investment dispute will scare off investors, and that it is in everyone's interest to resolve conflicts over investment.
The drafters of MIGA's charter were aware that unresolved disputes between investors and countries could be just as much an obstacle to foreign investment as political risk or an unsatisfactory investment climate, and MIGA was specifically directed to encourage the amicable settlement of disputes.
Mediation is an alternative to litigation, which isn't always feasible. Litigation is rarely attractive, considering the high costs and amounts of time usually involved in arbitration and other forms of litigation.
Regardless of whom the claimant is, MIGA satisfies itself that the dispute is of sufficient significance to jeopardize the country's ability to attract foreign investment. Cases of lesser importance are not taken up by the agency.
MIGA has resolved a considerable number of cases since it began offering its dispute resolution services and currently has active cases in a dozen countries.
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