Detriment Of Investors Research Articles

“Solar” cases: could Italy’s withdrawal from the Energy Charter Treaty lead to its collapse?

The article notes that investments in solar energy have already led to a number of arbitration cases related to the subsequent change in investment incentives. The so-called Solar Cases, initiated by investors under the Energy Charter Treaty (ECT) against Kingdom Spain, Italy and the Czech Republic, focused on the question of whether states could adjust incentives (subsidies and feed-in tariffs) to the detriment of investors after these investors relied on these subsidies to make their investments. Following the results of these arbitration proceedings, the European Union in 2019 decided to revise the text of the ECT. Eight rounds of negotiations were held during 2020 and 2021, the last of which took place in November 2021. Many believe that the reform of the existing treaty has taken too long. In February 2021, France sent a letter to the European Commission on the need for a coordinated EU exit from the ECT. Against this background, Italy’s withdrawal from the ECT on January 1, 2016, as well as Russia’s withdrawal of the signature on the treaty in 2018, are actions that determine the inevitable collapse of the ECT in the very near future. This article is devoted to the study of the causes and legal consequences of these events. Since Russia’s withdrawal from the ECT has already been the subject of study by many Russian and foreign scholars, the author focused their attention on the study of Italian arbitration disputes based on the ECT provisions, as well as on the study of foreign doctrine on this issue.

Italian bank crisis: flexible application of BRRD rules, or a bailout in disguise?

Abstract The economic and financial crisis of the year 2008 highlighted the need for banking sector regulation via the creation of the banking union. The Bank Recovery and Resolution Directive (BRRD) represents an important milestone in the formation of the banking union. It is supposed inter alia to replace the existing practice of bailing out failing banks by the opposite principle of bail-in, which makes the bank recapitalized from the internal resources at the detriment of investors and creditors. However, the Italian solution of handling its failing banks took advantage of existing loopholes in the new regulatory system. Eventually, it went against the spirit of the new rules by deploying taxpayers’ money to deal with the banks’ failure. This article evaluates the Italian approach and contemplates the adequacy of the new rules-based system by comparing its potentially beneficial room for flexibility with alleged malfunction and unreliability. Finally, it discusses the potential impact of the Italian approach on the further process of completing the banking union, in particular the establishment of its last pillar, the common deposit guarantee scheme.

Climate Change Policies and Foreign Investment: Some Salient Legal Issues

Climate change has arisen as the most pressing global challenge of our time. In the post-1989 economic consensus based on market mechanisms and eschewing command and control regulation, the concerted global response to this problem has taken the form of flexibility mechanisms harnessing the market in order to steer development in the direction of a low-carbon economy. From this perspective, the flow of foreign investment towards developing countries – and in 2012 for the first time investment flows to developing countries surpassed those between developed countries – can be one of the most effective tools to pursue an environmentally sustainable and climate-friendly economic development. The legal response to climate change, exemplified by the measures contained in the Kyoto Protocol – Clean Development Mechanism (CDM), Joint Implementation (JI) and International Emission Trading (IET) – is designed to harness foreign investment for sustainable development and emission reduction projects by providing economic incentives for the transition to a low-carbon economy. On the downside, the mechanisms, when employed within global value chains for the production of consumption goods for developed countries’ markets, can be used to offshore emissions from developed to developing and least developed countries without achieving an overall reduction in carbon emissions. As these countries do not have emission reduction targets, any failure down the chain of production in projects started under the aegis of the CDM, for example, might result in a net increase of emissions (so-called ‘carbon leakage’). The picture from within the investment regime is equally mixed. Traditionally, the investment regime has been instrumental in reducing the regulatory risk for foreign investors; in the case of environmental measures this meant protection against the ratcheting up of standards to the detriment of investors engaged in highly polluting and/or carbon intensive sectors such as mining and extractive industries. Numerous investment arbitrations have concerned environmental measures and this has been the case especially under the umbrella of the NAFTA. The rise of ‘environmental’ arbitrations has functioned as a catalyst for changes within the investment regime in the direction of its diversification, clarification and hybridisation. In fact, the latest UNCTAD Investment Report confirms the trend towards the inclusion of ‘sustainable-development-friendly provisions’ in International Investment Agreements (IIAs), via the insertion of clauses dealing with environmental, labour and human rights measures. The fact that investors might avail themselves of IIAs to protect climate-friendly investments from non-commercial regulatory risk is certainly not noteworthy per se – the ‘legitimate expectations’ doctrine and contractual stabilization clauses have been developed precisely to deal with this sort of risk – and yet, in the quest for legitimacy of the investment regime, this has been presented as another added value. From this synergic perspective, IIAs are presented as providing a further layer of protection of ‘green investors,’ against loosening/reducing of support mechanisms used to attract low-carbon investments and switching projects. This synergic potential notwithstanding, conflicts arising by regime intersection have attracted more attention. In this chapter, as in much of the available literature, the focus is on the conflicts generated within the investment regime, which, as a consequence of its sophisticated system of dispute resolution, is more likely to have to deal with them and better equipped to do so. This interaction can be read on a purely international plane, whereby climate change legal obligations, enshrined in the 1992 United Nations Framework Convention on Climate Change (UNFCCC) and its 1997 Kyoto Protocol (as amended in the 2012 Doha Amendment), conflict with the obligations contained in IIAs. International law possesses several tools, from interpretation to general rules of conflict resolution and specific conflict clauses in the applicable IIAs, to prevent or resolve these conflicts.

Assessing Risk on Subprime Mortgage Backed Securities: Did Credit Rating Agencies Misrepresent Risk to Investors?

The Securities and Exchange Commission (SEC) has asked whether credit rating agencies (CRA) committed fraud by misleading investors with respect to the default risk on mortgage backed securities (MBS). This paper argues that, to the detriment of investors, the CRA did not incorporate information available to securitizers in their ratings of subprime mortgage backed securities. A test of this proposition utilizes data on CRA ratings of 32 Goldman Sachs MBS issued in 2005-2007 and Moody’s Investor Services projections of loss for these mortgage pools. The percent of principal balances rated triple-A is relatively constant over this period. In contrast, projected losses increase substantially for 2006-2007 MBS issues. A Goldman Sachs presentation to its Board highlights factors that enhanced the risk of default in 2006-2007. Review of a select sample of 2006-2007 MBS prospectuses contain disclosures of market, originator and mortgage characteristics that the securitizer associates with an increased risk of default. These disclosures suggest that the risk of default increased step wise beginning in 2006. While the same information was available to the CRA, their credit risk ratings did not incorporate this information and remained flat. Should the SEC obtain data on the near term performance of these MBS they would be able to establish if this divergence in risk assessment was substantial and if the CRA chose to support their clients to the detriment of MBS investors.

Ethics and Problems of Fortune and Misfortune in the Nigerian Stock Exchange

The spiral price movement of some stocks on the floor of the Nigerian Stock Exchange without any fundamental reason(s) coupled with the after effect which has resulted in the bearish run in the market in recent times has call to question the principles behind best practices in the investment environment. The quest to accumulate a large chunk of funds via purchase and sale of securities without considering the technical and fundamental analysis has resulted in misfortune for many so called investors. This act has exposed the concept of speculation in buying and selling securities as opposed to being an investor with a long term investment objectives. Share appreciation and depreciation leads to the so called fortune and misfortune to the benefit or detriment of investors. The zero-sum game is also at play since one man's loss is another man's gain. All these challenges the regulatory abilities of the authorities in a bid to checkmate any ugly trend(s).