The Legal Allocation of Currency Exchange Risk in Foreign Direct Investment

Journal article


Saghir, W. (2019). The Legal Allocation of Currency Exchange Risk in Foreign Direct Investment. Financial Law Review. 16 (4), pp. 17-28. https://doi.org/10.4467/22996834FLR.19.020.11276
AuthorsSaghir, W.
Abstract

Currency exchange risk is one of the major risks foreign investors may be exposed to while investing overseas. Such risk takes place when the host state’s currency appreciates or depreciates in value affecting negatively the investor’s investment. Since investors are concerned with losing the value of the host state’s currency once an investment is made using that currency, it might be helpful for them to clearly understand when such risk occurs due to demand on the currency or due to manipulation of the host state in the exchange rates. For that, the paper clearly defines the nature of currency exchange risk in foreign direct investment where such financial risk may easily be regarded as a political one. The paper aims to add value through introducing a new approach in understanding the components that makes currency exchange risk considered as purely political risk or as purely financial. It aims to introduce the cases where such threat may be regarded as a political financial risk in order to assist investors in understanding what kind of a risk they could experience. The paper proves that currency exchange threat may take one of three forms through examining nature of financial regulations in host states and through probing recent cases settled by ICSID.

Year2019
JournalFinancial Law Review
Journal citation16 (4), pp. 17-28
PublisherSciendo
ISSN2299-6834
Digital Object Identifier (DOI)https://doi.org/10.4467/22996834FLR.19.020.11276
Publication dates
Print30 Oct 2019
Publication process dates
Deposited31 Oct 2022
Publisher's version
License
File Access Level
Open
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