Three years after being indemnified for an expropriation, a group receives from the same state a proposal for a new concession, on a neighbouring site. The situation looks absurd and it is frequent: governments change, investment needs remain, and an operator that knows the country is still an operator that knows the country. The question posed is not moral, it is technical, and it bears on two things that intersect: what an insurer will agree to cover, and what the pending recourse forbids signing.
The second point is the more urgent and almost nobody sees it coming. In paying, the insurer took the group's place on its claim against that state, by subrogation or assignment, and that claim is often still alive: a pending arbitration, an open negotiation, an unenforced award. The group is therefore about to contract with its own insurer's debtor. The state sees the configuration perfectly, and will make abandonment of that recourse a condition of the new concession, expressed or merely understood.
What the group has no right to do must then be stated, and it is clear. It cannot compromise a claim that no longer belongs to it. Nor can it accept stipulations that would render it unenforceable, a general waiver of all prior disputes, a global settlement clause, a release covering the facts of the expropriation. Every policy carries an obligation to do nothing prejudicing the insurer's recourse, and a group signing a new concession with a waiver attached breaches that obligation as surely as by settling directly.
The practical consequence is an order of operations to be kept. Negotiation with the insurer comes BEFORE signature with the state, not after. It is moreover easier than supposed, because the interests converge: a claim against a state is worth something uncertain and distant, and an insurer often prefers to monetise. Three constructions exist and are negotiable: repurchase of the claim by the group at an agreed price, a share of the proceeds of the waiver, or a waiver by the insurer against consideration the group obtains from the state in its place. None of the three is possible after signature.
Then comes the question of the new cover, and it holds a paradox worth being able to defend to a committee. Intuition says an insurer will refuse a group already expropriated in that country. The reality is less simple. An operator that was taken, indemnified, and that the state is calling back has three things a new entrant does not: fine knowledge of the administration, a precedent making a second taking politically costly for the state, and often written undertakings obtained in the course of the new negotiation. Those undertakings are exactly what founds legitimate expectations, and they are worth more than a speech.
That is obviously no absolution, and honest analysis also looks at the other reading. A state that expropriated once has shown that it could, the precedent is a fact of the file, and an underwriter taking the risk on will do so on terms reflecting it. The group's work therefore consists in presenting both readings rather than one, and in bringing what distinguishes the second situation from the first: a change of legal regime, a treaty since entered into force, a multilateral carrier in the syndicate, an ownership structure that now opens a remedy.
Disclosure deserves particular emphasis here, because the temptation to present things favourably is at its maximum. The prior loss is disclosed, that goes without saying. What goes less without saying and must equally be disclosed: the state of the subrogated recourse, the existence of a negotiation under way with the state, and the conditions it attaches to the new concession. An underwriter discovering afterwards that the new business was tied to settlement of the old will treat that omission as an inaccuracy, and it will be right, because that is precisely the fact that would have altered its assessment.
Three steps close this module and their order is the substance. Settle the subrogated recourse question with the insurer before entering negotiation with the state, and not after reaching an agreement. Have the state's undertakings written in a form creating legitimate expectations, a permit with a term, a stabilisation clause, a letter addressed to the group, rather than in an inauguration speech. And disclose to the new underwriter the whole context, including what is still under discussion, because it is the one fact that would really have counted for it.
A European group was expropriated in 2023 of a hydroelectric plant in a South American country and indemnified 118 million euros in 2024. Its insurer, subrogated, commenced arbitration in 2025 under the bilateral treaty, claiming 190 million; the proceedings are at the memorial stage. In May 2026 a new government offers the group a thirty year concession on a second site, with a guaranteed offtake tariff and a customs exemption on equipment. The draft convention contains, at article 31, a mutual waiver of all disputes arising from prior relations between the parties. The development director wants to sign before quarter end. What must be done, and in what order?
Article 31 is the subject of the file and must be dealt with before the concession itself is discussed. A mutual waiver of all disputes arising from prior relations covers the 2023 expropriation, yet the group no longer holds the claim arising from it: it belongs to its insurer, which is asserting it at this very moment in a 190 million arbitration. Signing that article would amount to disposing of another's property and, at the least, rendering the recourse unenforceable or seriously contestable. Every policy carries an obligation to do nothing prejudicing the insurer's recourse: signature would therefore trigger a claim by the insurer against its own insured, measured by what the arbitration could have produced. That risk very probably exceeds the value of the new concession, and the development director must hear it in those terms rather than in terms of prudence. The order of operations is therefore constrained and not negotiable. Discussion with the insurer is opened first, and it is more workable than it appears because the interests converge: an arbitration at the memorial stage is worth an uncertain sum five or eight years out, and many insurers prefer to monetise. Three constructions are negotiable: repurchase of the claim by the group at an agreed price, a share of the proceeds of the waiver the state is asking for, or a waiver by the insurer against consideration the group obtains from the state in its place, for instance on the offtake tariff. None is possible after signature, and that is what governs the timetable rather than quarter end. On the new cover, the group is in a better position than it believes provided it shows it. A bilateral treaty is in force and has been invoked, which proves it opens a real remedy; the state has a known precedent, which makes a second taking costly for it; and above all the convention in preparation can carry written undertakings, a guaranteed tariff and a thirty year term, which are exactly what founds legitimate expectations. They must be drafted as undertakings addressed to the group and not as a general regime. Finally, disclosure to the new underwriter must include the pending arbitration and the link between the two matters: that is precisely the fact that would have altered its assessment, and concealing it is the one thing capable of destroying an otherwise good position.
- 01In paying, the insurer took the claim against the state: the group is about to contract with its own insurer's debtor, and the state sees it perfectly.
- 02The group cannot compromise a claim that is no longer its own, nor sign a general waiver rendering it unenforceable: that breaches the duty not to prejudice the recourse.
- 03The order is constrained: negotiation with the insurer comes BEFORE signature with the state, and all three possible constructions become impracticable after.
- 04An already expropriated operator is not necessarily a bad risk: it knows the administration, the precedent makes a second taking costly for the state, and the new negotiation can produce written undertakings.
- 05Disclose the prior loss, the state of the subrogated recourse, the negotiation under way and the conditions the state attaches: it is that link between the two matters that would have altered the assessment.