Contractual Risk Allocations in International Power Projects

The following paper is an analysis of the article titled "Common Contractual Risk Allocation in International Power Projects" by John Mauel. Mauel is a partner in the Houston, Texas law firm of Fulbright & Jaworski, L.L.P. The purpose of the paper is to identify the contracting parties in build-own-operate and build-own-transfer international power projects and to determine their ability to bear certain risks associated with the development and implementation of such a project. To determine which parties are best suited to bear certain risks, Mauel analyzes the risks associated with international power projects and determines the likely causes of the risked events. He then argues that the party in the best position to prevent the occurrence of the risked event is the party that should be allocated the risk of the occurrence of that event.

Mauel's analysis is based on the sound principle that the party best able to prevent an event should be the party responsible for ensuring that the event does not occur. The article thoroughly identifies each contracting party in international power projects and each risk associated with such a project. Mauel's analysis appears complete and logically sound. The article is not intended to discuss the intricacies of obtaining insurance against such risks; it is only concerned with identifying the risks and demonstrating how the cost of such risks is calculated.

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t about by a variety of causes. . . . The various causes associated with a risk must be identified in order to properly allocate the risk. Since different parties have different abilities to prevent a causal event or condition from occurring, causation should be coupled with risk when documenting which party or parties should bear the risk (Mauel, 1996, p. 41). This is Mauel's basic argument and the sum total of his conceptual contribution in the article. The remainder merely identifies the various parties who may be best suited to bear the risks of non-completion of various stages in the development of the project. Nonetheless, Mauel's article is helpful because it does direct the reader interested in the subject to the likely problem areas of risk allocation. A person involved in a project such as the one he describes must be aware of the risks associated with the project. Contracting parties must be careful that they are not allocated risks for which they are not best-suited. Generally, international power projects involve a great deal of money. It can prove extremely costly for a contracting party left holding the bag based on non-completion due to the occurrence of a risk that party was ill-equipped to prevent in the
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Approximate Word count = 1525
Approximate Pages = 6 (250 words per page)