You cannot imagine how difficult it is to write about a purely Turkish legal topic in English that is also supposed to be attractive enough to be read. To me, the Multilateral Investment Guarantee Agency (MIGA) is a very interesting topic. Some may think otherwise, but attraction is a very personal thing -- it is very subjective. For instance, the topic of MIGA may be very interesting for some people but a totally alien thing for most everyone else.
MIGA was founded in April 1988 and is a member of the World Bank Group. It provides political risk insurance to investors and creditors. Moreover, it aims to support FDI. The agency also protects foreign capital investments against non-commercial risks due to political instability and the breach of investment contracts.
MIGA already has 175 members, one of which is Turkey. The member nations of the World Bank can join the agency directly and can drop out at any time.
MIGA aims to protect FDI against four main risks: foreign exchange risk, the risk of expropriation, breach of contract, and the risk of war or civil strife.
In brief:
1. Currency inconvertibility and transfer restriction: Investors should exchange their money when they need to transfer it out of the investment country. In some cases, it is not easy to convert vast sums of money and investors have to wait on the bank to acquire the amount of currency they are seeking to exchange. Damages arising from such cases fall under the scope of MIGA. However, currency depreciation is not insured.
2. Expropriation: In recent years, many investors have preferred developing countries such as Turkey, Brazil, Mexico and India for several reasons. If required arrangements are not implemented effectively, investors face many problems. The government of the country being invested in may restrict the rights of foreign ownership as a means of investment. MIGA also guarantees against such damages.
3. Risks on breach of contract: The contract forms the legal relationship between the investor and the country being invested in. It is the legal basis of investment. Developing countries have signed a lot of contracts in recent years to encourage FDI. In the case the government of the country being invested in is in breach of the contract, the investor is protected under MIGA.
4. Risk of war and civil disturbance: This item includes sabotage, terrorist attacks and coups. It is important insurance for investors in the volatile, insecure regions of Africa and the Middle East. Material damages arising out of these circumstances are covered by MIGA.
In this way, the agency aims to encourage foreign capital investment and to help globalize capital.
NOTE: Berk Çektir is a licensed attorney at law and available to answer questions on the legal aspects of living in Turkey. Please kindly send inquiries to b.cektir@todayszaman.com. If a sender’s letter is published, names may be disclosed unless otherwise expressly stated by the sender.
DISCLAIMER: The information provided here is intended to give basic legal information. You should get legal assistance from a licensed attorney at law while conducting legal transactions and not rely solely on the information in this column.
