Article from: TDM 2 (2007), in Editorial
Over the past decade-and-a-half, the developing world has been witness to a boom-bust cycle of private investment in infrastructure projects-roads, power plants, water projects, railroads, and the like. Many projects that were initiated during the 1990s were subsequently renegotiated at a loss to investors or even abandoned. The General Counsels' Roundtable, formed under the aegis of the Collaboratory for Research on Global Projects at Stanford University, was established to examine the legacy and lessons of distressed and failed projects, with a special emphasis on the legal paradigm that supports such projects.
The Roundtable discussions-co-chaired by Professor Thomas C. Heller of the Stanford Law School and Barry Metzger, a senior partner of Baker & McKenzie and the former General Counsel of the Asian Development Bank-addressed several motivating questions. What were the factors that led to distressed and failed projects during the 1990s? Can we divine any trends? How did the renegotiations and workouts unfold? Can we "engineer" a more stable legal-contractual framework for emerging markets' infrastructure investments?
Participation in the Roundtable was by invitation only and involved senior legal advisors and business executives from a cross-section of project sponsors, investment funds, engineering firms, multilateral financial institutions, export credit agencies and private law firms as well as academics from across the disciplines of law, engineering, sociology, economics and political science.
In conjunction with the Roundtable, several background articles and proceedings documents were distributed to the participants. It is the purpose of this special issue to synthesize these various background articles and proceedings documents into a unified collection. The goal of disseminating the articles in this integrated format is both to make the material more accessible to a larger readership and to invite feedback.
The collection of articles presented here will be of interest to academics and practitioners interested in large-scale infrastructure development, long-term investment agreements, public-private partnerships, project finance, political risk management, renegotiation, dispute resolution, international arbitration, and bilateral investment treaties.
The first four articles were distributed in association with the first Roundtable, held January 20-21, 2005.
- Article One summarizes the rise and fall of private infrastructure in emerging markets during the 1990s, the subsequent wave of distressed and failed projects, and the global legal paradigm under which such projects have generally been arranged.
- Article Two offers a 100 page examination of the experience of independent power producers across thirteen developing countries during the 1990s; this innovative analysis took more than two years to complete and was supported by a global team of more than 15 researchers associated with the Stanford Program on Energy and Sustainable Development.
- Article Three reviews the extensive literature on the risks of private investment in infrastructure.
- Article Four summarize key insights and implications from the First Roundtable, based on transcripts of the discussions.
Articles five through ten are those that were circulated in conjunction with the second Roundtable, held February 27-28, 2006.
- Article Five both summarizes the findings of the first Roundtable and reviews the incidence, determinants and resolutions of legal-contractual breakdowns in infrastructure investment agreements.
- Articles Six and Seven provide a rich empirical analysis of more than 1000 infrastructure concessions granted in Latin America and the Caribbean during 1985-2000, discuss policy implications based on evidence that more than 40% of these concessions were ultimately renegotiated, and illustrate the concessionaires logic when entering renegotiations.
- Article Eight compares the decisions of several recent ICSID tribunals, to examine whether ICSID interpretations of investor rights under bilateral investment treaties are converging on a stable regime for the protection of international property rights.
- Article Nine describes the new public management skills, procedures and institutions that government agencies can put in place in order to successfully implement public-private partnerships for infrastructure, and offers a benchmarking framework to measure progress within the key areas of transparency, public accountability and sustainable development, with the view that good governance can prevent investment disputes.
- The proceedings of the 2nd Roundtable are presented as Article Ten.
Article 11, prepared as a background paper for the third Roundtable, to be held April 27-28, 2007, reviews the changes in the investment landscape in the emerging markets since the end of the 1990s, the focal issue being the rise of "new players" from within the emerging markets themselves and the competition that this creates for traditional Western players.
The remaining articles, although not presented at the Roundtable, are included here because they are of great relevance to the topic of private infrastructure investment in emerging markets.
- Based on the study of more than 1000 infrastructure concessions in the Latin America and the Carribean cited above, Articles 12, 13 and 14 respectively, test the impact of regulation of private infrastructure operators on sector performance, estimate the returns that investors in private infrastructure projects really made, and review the impact of price cap regulation on costs of capital, tariff-rates and levels of investment.
- Finally, Article 15 and 16 assess the evolving system of international arbitration under the BIT framework, the first offers a detailed analysis of the multi-factor approach adopted by the Tribunal of the Azurix vs. Argentina arbitration, and the second reviews an email discussion that played out on the OGEMID electronic discussion list under the title, "Do Investors now Ignore BITs?"
Dr. Ryan J. Orr
Collaboratory for Research on Global Projects
Peterson Lab, Room 556i
Stanford, CA 94305-4020
About Collaboratory for Research on Global Projects
CRGP is a collaborative undertaking between Stanford University, partner universities, private industry, and government affiliates, to advance the science and practice of planning and implementing large, complex, global projects. CRGP serves as Stanford University's primary forum for research on the organizational, legal, financial, political, social, institutional and project management aspects of global projects, and the linkages and interdependencies between various project design parameters.
The word "Collaboratory" literally means "multiple laboratories" and part of the vision of CRGP is to support a worldwide network of researchers and practitioners across the disciplines of engineering, law, sociology, economics, and finance. CRGP researchers use multiple research frameworks-ethnographic, case study, survey and computational modeling-to develop, test and deploy innovative theories, methodologies and tools.
Results of CRGP research enable leaders in government and industry to analyze and design the organizations and institutions needed to deliver complex global projects more effectively, with more sustainable outcomes.