Case Study 2.docx - Running head ISSUES IN CROSS BORDER...

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Running head: ISSUES IN CROSS BORDER FINACING AND CAPITAL MARKETS 1 Case Study 2 Texaco Oil Company was sued in the USA Federal Court by citizens from Ecuador in 1993, and Peru in 1994 for environmental pollution in Oriente region. In 2002, both cases were dismissed and the plaintiff advised to file them in Ecuadorian Courts. In 2003, after, Chevron had acquired Texaco, a lawsuit was launched in Ecuador. The case was rules against Chevron, but Chevron appealed several times and requested for both legal assistance and termination of relations between the USA and Ecuador. Chevron insisted that the company could not pay fines, and that the rulings were illegitimate (Robertson, 2012). The case was discussed by the arbitration court at The Hague, for violation of US-Ecuador investment treaty, and ruled in favor of Chevrolet. The case has oscillated in international, USA, Canada, and Ecuadorian courts to date without a conclusive solution. Findings of Case Study 2 Chevron incurred risks and expenses of lawsuits when it acquired Texaco. There is discrepancy in the local, regional, and international laws regulating cross-border financing, trade, and capital markets. There are third parties for example Canada, valuation companies, and law firms who advanced the litigations for a share of the recovery. There is transnational litigation affecting cross-border financing and trade. Trade treaties between countries play a significant role as security against investment risks such as litigations. There is a need for proper, standardized litigation procedure and coordinated regulations to resolve investment disputes as well as enforce cross-border judgments. Interpretation of Results Cross-border financing is challenged by litigations which have increased in the emerging markets. The case of Chevron is one of them, and from the case study it has affected the business
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ISSUES IN CROSS BORDER FINACING AND CAPITAL MARKETS 2 activity of the company, Chevron has incurred expenses on the lawsuits, and its reputations as well as profits are declining. In cross-border merger and acquisition, the investing or acquiring company is exposed to various risks being inherited from the investing being acquired. In this case, Chevron inherited an environmental lawsuit which has seen the company struggling in the annals of justice for more than two decades. Such risks impact negatively on the capital market because foreign investors cannot be attracted to establish assets in a nation or an emerging market where losses are likely to be incurred as a result of lawsuits.
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