Making Projects Bankable: Legal Due Diligence and MIGA Coverage in Practice

In today’s project finance landscape, legal structuring and risk allocation are inseparable from the political risk insurance that underpins bankability in emerging markets. For the World Bank’s Multilateral Investment Guarantee Agency (MIGA), the challenge is twofold: first, to ensure that the due diligence aligns with its policy triggers – ranging from environmental and social compliance to anti-money laundering, sanctions screening and anti-corruption safeguards – and second, to anticipate how evolving legal developments, such as foreign exchange controls or regulatory instability, may crystallize into claims under its coverage. This article covers both dimensions and provides a practical checklist to guide legal due diligence through MIGA’s lens as well as a deeper dive into recent trends in currency convertibility restrictions – an issue at the heart of many recent transactions – illustrating how contractual and insurance solutions can work in tandem to mitigate exposure.

A. MIGA Policy Triggers

Effective risk mitigation begins well before a project is signed or a guarantee is issued. For MIGA, the cornerstone of that process is a comprehensive due diligence exercise that not only evaluates the commercial viability of a transaction but also ensures alignment with its policy triggers. A structured checklist approach allows counsel and sponsors to systematically identify red flags (whether in relation to environmental and social performance, anti-money laundering, sanctions and anti-corruption exposure, or the enforceability of key contractual protections) while also mapping these risks against the coverage MIGA is uniquely positioned to provide. Examples of such due diligence items – which are non-exhaustive – are enumerated below.

1. Political Risk, Expropriation and Breach of Contract

At the heart of MIGA’s mandate is protection against political risks that can derail otherwise bankable projects. The first area of focus in due diligence is the risk of expropriation and breach of contract. Counsel must examine whether host-country laws allow governments to unilaterally alter concessions, licenses or regulatory frameworks, and whether stabilization clauses and enforceable arbitration provisions are in place (International Centre for Settlement of Investment Disputes (ICSID), United Nations Commission on International Trade Law, New York Convention signatory). A robust legal foundation here ensures that investors have recourse if state action undermines their contractual rights.

2. Currency Convertibility and Transfer Restrictions

Closely linked is the question of currency convertibility and transfer restrictions, which has become increasingly prominent in jurisdictions facing balance-of-payment crises. Legal teams must assess whether dividend payments, debt service or other financial flows can be converted into hard currency and repatriated. The availability of offshore escrow accounts, priority payment structures and clear commitments from the central bank are critical factors that can determine whether a project is ultimately financeable.

3. Environmental, Social and Governance Standards

Another central policy trigger for MIGA is environmental and social compliance, reflecting the agency’s reliance on International Finance Corp. Performance Standards and the World Bank’s Environmental, Health, and Safety Guidelines. Due diligence must confirm that environmental, social and governance impact assessments have been carried out; that resettlement and community engagement obligations are being fulfilled; and that biodiversity, water use and indigenous rights are not left unresolved. Gaps in these areas often translate into operational delays, reputational risk and potential ineligibility for MIGA support.

4. Anti-Money Laundering Risks

Anti-money laundering (AML) risks also generally determine a project’s bankability from MIGA’s perspective. At a high level, such risks include (i) customer risk (i.e., the type and nature of the customer or entity, including those with complex ownership structures (shell companies), those seeking anonymity, or those whose officers have questionable backgrounds (like convictions for financial crimes)); (ii) geographic risk (i.e., transactions involving countries or regions known for high levels of corruption, weak financial regulations, political instability or those without sufficient AML controls); (iii) product/service risk (i.e., the inherent vulnerability of certain financial products or services performed through project operating companies that can be used to disguise the origin of funds – this includes products that are complex or less transparent, such as certain investment vehicles or virtual assets); (iv) transaction risk (i.e., the characteristics of transactions themselves, such as their volume, size, frequency and patterns – this includes large cash transactions, structuring such as multiple small deposits to avoid detection, rapid fund movements, or transfers to unusual or high-risk jurisdictions); and (v) distribution channel risk (i.e., how products and services are delivered to customers, particularly when third-party relationships are involved, which may mask the true origin or purpose of transactions).

5. Anti-Corruption Standards

Equally important is the need to vet counterparties for anti-corruption and integrity risks. A project tainted by procurement irregularities, past enforcement actions or weak compliance programs risks both legal liability and the invalidation of insurance coverage. Comprehensive screening against debarment lists, robust contractual anti-bribery representations, and effective whistleblowing or grievance mechanisms provide safeguards that are as much about good governance as they are about insurability.

6. Sanctions and Export Controls

Due diligence also requires a careful review of sanctions and export control exposure. In an increasingly fragmented geopolitical environment, the involvement of sanctioned entities, or reliance on goods and services subject to export restrictions, can halt a project outright. Legal structuring should therefore ensure regular sanctions screening, contractual protections allowing for disengagement in case of violations and clarity around the sourcing of sensitive equipment.

7. Force Majeure, Termination and Security

The structuring of force majeure, termination and security arrangements represents another layer of scrutiny. Legal advisers must evaluate whether project contracts adequately cover risks such as war, civil unrest and pandemics, and whether compensation formulas in the event of early termination are both clear and enforceable. Lender step-in rights and the physical security of project sites are equally critical in ensuring continuity in volatile operating environments.

8. Dispute Resolution and Enforcement

The ability to resolve disputes effectively underpins all of these considerations. Thus, dispute resolution and enforcement mechanisms form a core due diligence area. Investors and lenders will look for arbitration clauses that point to credible forums such as ICSID, explicit waivers of sovereign immunity and a demonstrable track record of the host state enforcing arbitral awards. Without these assurances, contractual remedies may prove illusory in practice.

9. Insurance and Risk Allocation

Finally, an integrated review of insurance and risk allocation is essential. Counsel must examine the sufficiency of existing insurance programs – including political violence, property and cyber coverage – and assess how MIGA’s guarantees will sit alongside private insurers or reinsurers. Ensuring that premium payments are secure, reinsurance capacity is reliable and coverage terms align with financing agreements allows MIGA to complement rather than duplicate existing protections.

Together, these areas of inquiry form the backbone of legal due diligence under MIGA’s policy framework. By analyzing them holistically, counsel can identify red flags and also structure projects in a way that maximizes both insurability and long-term resilience.

B. Currency Convertibility Issues

By embedding safeguards around expropriation, currency convertibility, environmental and social obligations, AML, anti-corruption, and dispute resolution into the legal architecture of a transaction, investors and lenders can reduce uncertainty while aligning with MIGA’s underwriting requirements. In this way, MIGA’s framework does more than insure against loss – it guides the design of projects that remain commercially viable in complex jurisdictions. Against this backdrop, certain risks merit closer attention, particularly those that have emerged repeatedly in recent transactions. Chief among these is the tightening of currency convertibility and transfer restrictions, a challenge with direct implications for both investors and MIGA’s coverage mandate.

Among the wide range of risks MIGA is asked to insure against, few have proven as persistent and consequential as restrictions on currency convertibility and cross-border transfers. In markets where governments face fiscal pressure, foreign exchange shortages or political imperatives to preserve hard-currency reserves, capital controls are often one of the first tools deployed. For international investors, such measures strike at the very foundation of project economics: the ability to repatriate dividends, service hard-currency debt and maintain predictable cash flows. For MIGA, they represent a recurring trigger for claims and one of the most complex areas of coverage to structure.

Recent developments illustrate the scale of the challenge. In Argentina, investors have faced prolonged delays in dividend repatriations, with debt service often forced through local-currency channels. In Nigeria, persistent mismatches between official and parallel market exchange rates have left sponsors unable to access sufficient foreign currency to honor offshore obligations. In Egypt, periodic suspensions of foreign-currency transfers for infrastructure projects underscore how sudden liquidity shortages can upend long-term contractual commitments. Each of these examples underscores a common theme: Host-country monetary policy can fundamentally alter the risk landscape even where contracts and permits remain formally intact.

From a legal perspective, these measures raise difficult questions about indirect expropriation and the breach of treaty or contractual obligations. International arbitral tribunals have addressed these issues in cases such as Alpha Projektholding v. Ukraine1 and Occidental v. Republic of Ecuador,2 where state restrictions on capital movement or changes in fiscal frameworks were found to impair investors’ protected rights. While each dispute turns on its specific facts, the broader lesson for investors and insurers alike is clear: Currency transfer restrictions are not merely commercial setbacks but legal events that can give rise to enforceable claims.

Quantifying the exposure highlights why this issue deserves heightened scrutiny. A 12-month delay in dividend payments or debt service can erode a project’s internal rate of return by several percentage points, undermining its bankability. For lenders, interruptions in hard-currency flows may trigger cross-defaults across financing arrangements, accelerating repayment obligations and threatening the stability of entire portfolios. In these circumstances, MIGA’s coverage becomes not just a protective instrument but a critical enabler of continued financing in affected markets.

Mitigating this risk requires careful alignment between contract drafting and insurance structuring. On the contractual side, sponsors and their counsel can negotiate stabilization provisions, central bank undertakings and offshore escrow mechanisms to safeguard access to foreign currency. Priority payment arrangements, where available, further strengthen lenders’ ability to service external debt even under stressed conditions. On the insurance side, MIGA’s coverage can be tailored with shorter waiting periods for claims, co-insurance partnerships with private political risk insurers and bespoke carve-ins for temporary delays that align with project cash flows. When combined, these measures not only reduce investor exposure but also enhance the predictability of outcomes in the event of host-state intervention.

Ultimately, the tightening of currency convertibility and transfer regimes highlights the broader role of MIGA as both insurer and policy partner. By signaling its willingness to stand behind investors in markets where capital controls are prevalent, MIGA not only facilitates continued private investment but also helps host governments calibrate measures in ways that preserve credibility and attract long-term capital. For legal advisers, the task is to anticipate these dynamics and structure projects so that MIGA’s coverage can operate most effectively. In doing so, the objective is not merely to insure against adverse outcomes but to design financing structures that remain resilient in the face of shifting economic and political realities.

C. Conclusion

The exercise of mapping legal due diligence to MIGA’s policy triggers shows how comprehensive risk analysis can serve both as a gateway to coverage and as a blueprint for sound project structuring. From environmental and social safeguards to anti-corruption and sanctions screening, the checklist highlights the breadth of issues that must be addressed to align projects with MIGA’s standards. At the same time, the deeper examination of currency convertibility and transfer restrictions demonstrates that certain risks recur so frequently – and with such material impact – that they require sustained legal and contractual innovation.

Together, these perspectives underscore a central point: MIGA is more than an insurer of last resort. Its framework provides investors, lenders and host governments with a disciplined approach to identifying, allocating and mitigating political and regulatory risks. By embedding MIGA’s policy triggers into legal due diligence and addressing specific vulnerabilities such as capital transfer restrictions through both contractual protections and tailored guarantees, stakeholders can create projects that are both bankable and resilient. In this way, MIGA’s guarantees are not simply reactive instruments but active tools in shaping sustainable investment in complex jurisdictions. For more information, contact Daniel Leslie.

About the Author

Daniel Leslie is a partner in the New York office of Hughes Hubbard & Reed LLP. He is a member of the Project Finance practice group, where he advises various development finance institutions on energy and infrastructure project finance transactions and focuses on energy projects, including mining and critical minerals, renewables, and other investments supporting the energy transition, particularly in the United States, Canada, Latin America, the Middle East and Africa.

1. ICSID Case No. ARB/07/16.

2. ICSID Case No. ARB/06/11; LCIA Case No. UN3467.