Multilateral Investment Guarantee Agency
A World Bank Group institution, created in 1988, that insures foreign investments in developing countries against political risks and whose presence deters the host state from acting.
The Multilateral Investment Guarantee Agency is one of the World Bank Group institutions. Established by a convention signed in Seoul in October 1985 that entered into force in April 1988, it guarantees cross-border investments in its developing member countries against five families of risks: transfer restriction and inconvertibility, expropriation, war and civil disturbance, breach of contract, and non-honoring of sovereign financial obligations. Its distinctiveness lies not in its capacity, modest compared with the private market, but in its status. The host state is itself a member and shareholder of the agency, and often a World Bank borrower: expropriating an investor the agency guarantees means entering into conflict with the institution on which it depends for financing. That deterrent effect explains why most disputes are settled through mediation before becoming claims. For the private political risk market, the agency is at once a competitor, a coinsurer and a reinsurer, and its participation in a program improves recovery prospects well beyond its share.
Textbook case: a European investor finances a 300 million dollar power plant in West Africa and has it guaranteed half by the agency, set up in 1988, and half by London syndicates. If the host state terminates the concession without compensation, the agency, subrogated after payment, turns against one of its own members: that prospect, more than the limit of cover, protects the whole program.
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