Principles of Project Finance

§10.5 WAR AND CIVIL DISTURBANCE

Investors and lenders have to face the risk of internal political instability, in-

cluding civil unrest, sabotage or terrorism, or a war against the Host Country caus-

ing physical damage to the project, or preventing its operation, and so causing ad-

ditional capital costs or a loss of revenue. (These risks are collectively described

as “political force majeure” or “political violence.”)

There is also the possibility of a blockade or other sanctions against the Host

Country that do not cause physical damage to the project, but prevent its comple-

tion because equipment cannot be imported, or prevent its operation because its

products cannot be exported or its input supplies imported. A war outside the Host

Country may ...