Countercyclical Financing as a Tool for Facilitating Investment Activity in Russia: An Overview of Approaches

Aim. The presented study aims to investigate the use of the project financing mechanism to increase the investment activity of businesses and to identify opportunities for the allocation of cyclical risks and the corresponding development of project financing conditions.Tasks. The authors briefly overview the investment climate and investment activity of large businesses in Russia; provide a general description of the project financing mechanism in the implementation of investment projects and the allocation of risks among participants; consider the factor of price volatility and the proposed structuring of project financing with allowance for potential changes in prices for the project’s products.Methods. This study uses general scientific research methods (analysis, synthesis, induction, deduction), including analysis of public information through the example of major Russian companies, analysis of the key indicators of investment activity, analysis of risk allocation options in the financial flows of projects. Specific methods of financial analysis are also used to examine the results of the implementation of investment projects.Results. The key indicators of investment activity of the major Russian companies are presented. The possibility of using the mechanism of project financing and risk allocation among participants is determined.Conclusions. The investment activity of a considerable part of large Russian businesses is moderate. At the same time, there is a huge potential for growth using either internal funds (profits, accumulated cash balances) or project financing instruments. An example of using the mechanism of accelerated repayment of debt financing is provided.

‘PERICULUM VERBUM GENERALE EST’: RISK ALLOCATION IN THE COMMENTARIES OF JACQUES CUJAS

Jacques Cujas was a French humanist and one of the most distinguished 16th-century legal experts. This paper analyses the rules governing liability and the meaning of periculum (risk) in his commentaries to Roman law. My study is focused on two examples which offer surprising interpretations of risk. The first case concerns a person who lost an object given for valuation. Here Cujas uses the term periculum in two different meanings. The first is general and covers all types of irresistible events. The second is limited to only one type of event – theft. This distinction is fundamental for the evaluation of the legal consequences arising from the loss of the object. Te inspector would have had to bear the risk of theft (periculum furti), but not other risks, especially not those related to force majeure. The second case I discuss deals with the complexities of risk allocation in the contract of sale. In one of his earlier commentaries, Cujas accepted the Roman legal principle of periculum emptoris – that the risk of the loss of the object sold should be on the buyer. At the same time, in his discussion of particular cases Cujas was flexible in allocating various risks to either of the parties, thus paving the way for his future change of mind on periculum venditoris.

Determination of government guarantee and revenue cap in public–private partnership contracts

PurposeConsidering there is a lack of research in determining the optimal levels of government guarantee and revenue cap, the objective of this research is to determine their optimal levels to achieve a reasonable financial risk allocation between governments and private investors while avoiding overly lucrative conditions for private investors.Design/methodology/approachExpanded net present value (NPV) analysis and bargaining game theory are employed to construct the core of the determination process. The risk gap between governments and private investors is assessed via an expanded NPV analysis to see if the financial risk has been shared reasonably, based on which the range of the government guarantee is decided. A bargaining model is then created to help locate the optimal level of the government guarantee. Finally, a revenue cap, often combined with the government guarantee in public–private partnership (PPP) agreements, will be determined if overly lucrative conditions for private investors are observed or governments suffer a risk spillover.FindingsReferring to a real PPP project in Australia, Project BA is created to validate the applicability of the proposed determination process. The outcome shows that the proposed determination process in this paper is capable of determining the optimal levels of government guarantee and revenue cap. The government preferences towards risk allocation will influence the values of the optimal levels. Governments may also consider to alleviate the control over investors' net profits to mobilise private investors into PPP projects.Research limitations/implicationsThere is a potential possibility that the revenue cap fails to control the financial risk for governments or the overly lucrative condition for private investors. In other words, even though the revenue cap is set at the minimal level, the financial risk for governments still beyond their tolerance range or the overly lucrative condition for private investors still occurs. Future research may focus on other financial protective schemes which help to better control the financial risks for governments and profits for private investors.Originality/valueGovernment guarantees are frequently used as an investment incentive to reduce the probabilities of suffering loss for private investors. Nevertheless, the financial risks for governments may increase after providing guarantees and, as a result, revenue cap is required by governments to avoid placing themselves in an unprotected situation. By recognising the importance of the two contractual parameters, many scholars dig into their option values. However, there are very rare research works focussing on the method of determining the specific levels of government guarantee and revenue cap. To overcome the limitations of existing models and enrich the methodology for government guarantee and revenue cap determination, this paper contributes to the body of knowledge by developing a government guarantee and revenue cap determination process which contributes to a reasonable allocation of financial risks between governments and private investors.

Understanding the Decisive Causes of PPP Project Disputes in China

Disputes are inevitable in public-private partnership (PPP) projects and generate great losses of time and money in practice. If an in-depth understanding of dispute sources can be obtained beforehand, the process of PPP may become more smooth. This paper aims to identify and assess the causes of PPP disputes between the public and private sectors. First, 15 causes are explored based on the PPP litigation cases from China Judgments Online. Second, the Decision-Making Trial and Evaluation Laboratory (DEMATEL) method is utilized to provide a holistic understanding of the relative importance and define the cause-effect categories among PPP dispute sources. The results demonstrate that the top three decisive causes of PPP disputes are the repudiation of contracts (result category), lack of expertise and experience (reason category), and unreasonable risk allocation (result category). Further, dispute avoiding strategies are proposed to minimize or completely avoid the occurrence of PPP disputes. The outputs are expected to add meaningful insights to potential sources of dispute and dispute prevention mechanisms in PPPs. To some extent, the investors can develop strategic measures through the findings before entering into PPP markets.

The world commerce & contracting principles: Can Asia embrace them?

Negotiating a contract with Asian lawyers for the first time could be a baffling experience. Used to clarity on risk allocation and financial obligations, a Western lawyer is confronted with negotiations driven by consensus and contract provisions based on flexibility and good faith discussions. Musyawarah-mufakat (deliberation and consensus in Bahasa Indonesia) goes beyond ASEAN multilateral agreements and pervade doing business as well. Embracing the World CC Principles is a constructive step in Asian contract drafting: they are not alien in concept and have counterparts in domestic civil or common law. The ability to quickly agree on the provisions covered by the World CC Principles provides a sense of collaborative relationship — an essential aspect of doing business in Asia. But Asian lawyers have yet to be familiar with the World CC Principles, be willing to embrace them, and advocate the benefits of imbedding the World CC Principles in their business culture.

RISK AND THE MANAGEMENT OF A HEALTHCARE UNIT – A LITERATURE REVIEW

Due to its specific nature, the provision of medical services is associated with considerable risk; and it is extremely important to diagnose and manage this same risk. Healthcare entities should be covered by appropriate instruments that reduce risk and support quality. In addition to legal regulations that must be met by entities providing such services, there are systemic solutions that are being implemented by more and more healthcare entities. The article analyses the risk that occurs in the management of a health care unit. In the first part of the article, the literature on the topic is reviewed, whereas what follows thereafter analyses risks in the management of a healthcare unit, including risk factors and risk allocation. The conclusion points to the risks which play the greatest role in the management of medical service providers; and enumerates some of the most important issues of risk management in medical entities.

Standardized PPP Contract in Korea and its Implications for Latin America and the Caribbean

The standardization of PPP contracts in Korea has played a key role in establishing PPP institutional frameworks in the civil law system in which there must be legal and institutional safeguards for the long-term PPP contracts. The reliability of standardized contracts is secured due to the fact that the standardized PPP contract has been prepared by the statutory PPP agency under the approval of the Ministry of Economy and Finance, an influential ministry within the government. The standardization of PPP contracts has been of great utility for both the competent authorities and private partners. The standardized contract has streamlined negotiations. The private partner was able to trust in the major risk allocation declared through the standardized contract in handling land acquisition, construction completion, operation and demand, and termination. We found out through our survey that there are similarities between Korea and LAC countries in that most LAC countries have adopted the civil law system and the countries have developed similar payment types for PPP and risk allocation principles. The experience and lessons on standardized PPP contract in Korea can be of great utility to LAC countries.