OPIC’s Shadow Claims History
undertaken in emerging-market economies, where legal systems were in flux, that there was a lack of experience with private investment and pricing mechanisms, and the profit motive was initially suspect.
Relationship of Shadow Claims History to Paid Claims History OPIC’s history of shadow claims is dominated by potential expropriation claims. In that respect, it somewhat reflects OPIC’s published claims history of the past 20 years: the incidence of payment of expropriation claims has increased, and they cannot all be avoided, even with timely notice and intervention. Since 1971, expropriation claims paid by OPIC account for 23 percent of total claims paid, whereas in the past 20 years, they account for 38 percent of the total. However, the larger shift in the character of claims paid is away from inconvertibility and toward political violence, and that shift is not reflected in the shadow claims history. Overall, inconvertibility claims account for 60 percent of the total claims paid but only 7 percent of claims paid in the past 20 years, whereas political violence claims account for 18 percent of the overall total but 55 percent of the claims paid in the past 20 years. Except for countrywide monitoring in a period of heightened risk, one would not expect political violence claims to be part of the shadow claims history, because the events of recovery so often occur without notice and because neither the investor nor the insurer can prevent them or reverse their consequences, as might occur in the case of an investment dispute. The substance of many expropriation claims that OPIC paid during this period reflects the same type of conflicts that characterize the shadow claims, namely, the conflicts that can arise when projects that once would have been undertaken by governments (with their own funds or with bilateral or multilateral assistance) are instead structured as public-private partnerships, with (a) lenders who expect to be repaid on time at market rates of interest, (b) contractors who expect to be paid for services rendered, and (c) equity investors who seek a return on their investment. The Alliant TechSystems claims in Belarus (1997) and Ukraine (1999) were related to projects to recycle obsolete munitions by selling the components, particularly metals, on world markets. Using a foreign contractor so close to the defense sector may have been part of the problem, even though foreign investment in defense conversion was thought to be in the common interest. The D. Joseph Companies claim in Jamaica (1999) arose from an investment agreement that was made when the country was a closed economy and that was no longer viable under free market conditions. The MidAmerican claim in Indonesia (2000), several Dabhol Power Company–related claims in India (2003/04), and the Bank of America and AES Corporation claims in Colombia (2004) arose from power projects. The SAIC (Science Applications International Corporation) claim in the República Bolivariana de Venezuela (2004) was
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