$0.00 – $6.00
Jeswald W. Salacuse, Arun Venkataraman, and Fritz von Carp
ENCO is a Texas-based power company that has begun to move aggressively into emerging markets. The Indian government has approached ENCO to build an electrical generating plant to increase the power supply to Maharashtra State, one of India's most economically developed states. ENCO is willing to undertake the project if it can be assured of a credible, long-term purchaser that will buy the electricity t a price profitable to ENCO. Toward this end, ENCO has negotiated but not yet signed a long-term "Power Purchase Agreement" (PPA) with the Maharashtra State Electricity Board, a state enterprise that distributes electricity to consumers.
Since the negotiation of the PPA, however, developments in Maharashtra State have raised some concern. Communal rioting has begun and the local media has changed the ENCO project with corruption and foreign exploitation. Elections are scheduled for next year and the Congress Party, which controls the Maharashtra State Government and negotiated the PPA, might lose.
ENCO's CEO Janet Thron, is scheduled to fly to India next to sign the PPA. She has asked her top five associates for advice on how to proceed. All five associates have offered differing advice, and Thorn must make a series of decisions in response to deteriorating circumstances.
All international contracts are potentially unstable, especially when governments are parties.
Political change is a prime cause of contractual instability.
- Contract enforcement mechanisms (such as international arbitration) can be important, but at best they are alternatives that strengthen a party's position.
- Because international deals involve continuing negotiations, parties need to develop strategies to help cope with change even after a contract is signed.
- The legal and political context of a deal can influence its stability.
- When the net benefits to one party of not having a contract become greater than maintaining the contract, one can expect that party to reject or seek to re-negotiate the contract.
- Standard contracting practices in one country may not work effectively in other countries.
Teacher's Package Includes:
- Participant Materials
- Teaching Note
- Charts that can be used as overhead transparencies
|Authors:||Jeswald W. Salacuse, Arun Venkataraman, and Fritz von Carp|
|Publisher:||Program on Negotiation|
|Time required:||2 - 2.5 hours|
|Number of participants:||10 - 200 (broken into smaller groups)|
|Neutral third party present:||None|
|Teaching notes included:||Yes|