Mapa riesgos politicos- Dos Aguas Blog

How to protect my company from political risks?

By | Law, Trade News

Political instability in a country has a direct impact on its trade. In recent years, there have been many elements that have affected trade relations at an international level. As a consequence, global trade protectionism has increased and the position that the President of the United States has been defending has marked a wake of uncertainty in global markets. In Europe, the UK’s negotiations to leave the European Union continue to appear on the region’s political-risk scenario. Likewise, as the negotiations continue, the risk of the UK leaving without a satisfactory agreement increases, and companies may need to be prepared for such an event.

Political risk is defined as the risk arising from the political and economic circumstances of the country with trade interests. In this way, the level of political risk will vary depending on the country. This risk is mainly caused by the political measures of the country’s authorities, which may affect the ability of its residents to carry out transactions, or even to breach the contract.[1] This situation raises the question, how to act in the face of a political risk?

From a business point of view, the types of action against these risks are classified into two different models: active and non-active.

Active modes of action

Active action implies, for example, hiring export credit insurance. This instrument is a hedging mechanism that protects exporters against both ordinary and extraordinary risks arising from international trade. They shall, therefore, be compensated for the damage caused by events which may impede the collection or recovery of credits agreed abroad. For example, in Spain, the Spanish Company of Export Credit Insurance (in Spanish, Compañía Española de Seguros de Crédito a la Exportación-CESCE) offers a wide range of products that enable companies to cover the political and commercial risks they have in their business operations and international investment (export operations, sales on the domestic market, foreign investment, resolution of contracts, work abroad, implementation of securities clearing operations, etc). CESCE covers the short-term commercial risks, both inside and outside Spain, as well as the state long-term commercial and political risks in all its periods, in relation to the external activity of the companies.[2]

Another instrument to take into consideration is forfaiting operations which is a modality of export financing, that consists of the commercial discount that the exporter receives to implement the deferred payment of commercial purchase/sale operations. These are instruments that are likely to be financed such as letters and promissory notes, both with the endorsement of front-line banks. The time allowed is usually between 6 months and 5 years.[3] The virtuality of this instrument is that it implies the assurance of the collection of the export by the exporter.[4]

Non-active modes of action

The non-active mode of action is the observance and analysis of the country risk, that is to say, the study of the country’s qualification with regard to its political risk. Thus, the types of risks to be analyzed are the following:

  • Sovereign risk. The risk of the creditors of the States or of entities guaranteed by them, since any legal action against the borrower could be ineffective.
  • Transfer risk. This is the risk that foreign creditors have against residents in a country when they unable to cope with their debts because they do not have enough currencies for that debt.
  • Risks arising from the international financial activity. These are the risks that can be covered by the export credit insurance.[5]

It must be pointed out that this analysis will always depend on the institution that performs it and the variables that it uses. For example, after the economic crisis of 2008 and the fall of Lehman Brothers (which had obtained the highest qualification), these agencies suffered a great loss of credibility and proved that they may not work as an instrument against the risk generated by Economic and/or political instabilities.

However, beyond big companies, there are also other companies and agencies that are dedicated to the analysis and localization of political risks such as MARSH, which makes a map and detailed study of all countries worldwide. Here we can see the map of the year 2018: Aguas Blog

Source: MARSH

In conclusion, these instruments are useful for identifying and mitigating the effects of political risks on international trade operations, and for providing security in our international activities. Do you have any doubts? Don’t hesitate to contact us!


[1] Guillermo Rivas-Plata Sierra et al.  (2008) ¿Cómo operar en el Comercio Internacional?, Agroleader+, page: 79. Available online (link) [Last accessed: 22.11.2018]

[2] Ministerio de Industria, Comercio y Turismo (2018) Cobertura por cuenta del Estado de los riesgos de la internacionalización de la economía española: CESCE, Gobierno de España’s website. Available online (link) [Last accessed: 22.11.2018]

[3] Fermín Pérez Aguilera (2017) Manual. Puesta en marcha y financiación de pequeños negocios o microempresas, Editorial CEP, page:91.

[4] Consejo Superior de Cámaras de Comercio. Plan Cameral de las Exportaciones (2018) ¿Qué es el Forfaiting?, Cámaras’ website. Available online (link) [Last accessed: 22.11.2018]

[5] Consejo Superior de Cámaras de Comercio. Plan Cameral de las Exportaciones (2018) ¿Cuáles son los instrumentos de cobertura del riesgo político y comercial?, Cámaras’ website. Available online (link) [Last accessed: 22.11.2018]

Joint venture

Joint Ventures in Spain: a viable alternative?

By | Law

In a previous post titled How to bring a foreign company to Spain, Dos Aguas Team discussed the three most common ways to start a company in Spain: a Representative Office, Subsidiary or a Branch Company. Being these three the famous and regular ones, in this blog, we would also like to introduce another formula that can be as effective and beneficial as the other three: the Joint Venture.

In Spain, the most common case for a Joint Venture to take place is when a foreign company wants to enter the Spanish market. The reason for this is that the growing demand for services and products in the international market generates a greater need for collaboration and corporate restructuring in order to carry out a specific commercial operation. These commercial operations mean investments and responsibilities that are easier to take over if the risks are distributed into two different companies.
The Joint Venture is therefore structured as a temporary strategic partnership, a business collaboration that maintains its individuality and legal independence. However, it acts under the same direction and standards. The most common example of a Joint Venture is when a foreign company associates with another company that is already established in Spain and therefore, knows the market. In this case, both companies can combine resources and knowledge, at the same time that they spread risks. The local partner contributes to the personnel, the knowledge of the economic and social context of Spain, and the expertise of the access to the Spanish market. In this scenario, Dos Aguas helps the foreign company to find the right local partner, as well as it elaborates the contract of the Joint Venture. This contract includes the following aspects: the initial contribution of each of the companies, their goals, the logistics of the operations, the consequences that both the benefits and the losses will have for each of the companies. The importance of this contract being supervised by Dos Aguas Consulting lies in the fact that this will prevent from having legal problems during the entire time that the companies are united.
Next, we are going to break down the advantages and disadvantages of creating a Joint Venture in Spain.

Joint Venture

The main advantage of the Joint Venture is that both companies share the risks and costs of operations and marketing. This allows them to be more competent, cover more different markets and increase their economic power. In addition, the joint venture allows them to share the know-how and thus manage more information.
The main disadvantages of a Joint Venture are the possible conflicts of interest between the two contracting parties, as well as the dependence of the other partner to make the important decisions. This is coupled with the necessary adaptation to a different culture as it is the Spanish, as well as its market which might be unknown to the company outside of Spain. Therefore, there is a possibility that the integration and communication are poor between both partners. However, these disadvantages can be easily solved with the participation of Dos Aguas, that act as a mediator and is in charge of taking corrective measures and correct strategic decisions, so that the relationship is excellent for the interests of both companies.
Company in Spain-Office-subsidiary-branch

How to bring a foreign company to Spain

By | Law

Photo: Michael Gaida (

This post describes the basic aspects of the main formulas for crafting a company in Spain, as well as the essential procedures that the foreign investor must comply within each of its modalities.

Establishing a company in Spain is simple. The types of companies are in line with those existing in the OECD countries and there is also a wide range of possibilities to pick from. Each type of company responds to the needs of the different types of investors wishing to invest in Spain. In this post, we are going to explain three of these modalities that we believe are the most common and useful ones.

Open a representative office in Spain

A representative office can carry out all those activities that are not directly involved in the realization of the activity of the company. That is to say, it can carry out auxiliary tasks, such as market studies, advertising, promotional activities, information compilation, preparing all kind of activities for the company, etc.
A representative office has no legal personality separate from its parent company. It does not need to be included in the Commercial Register neither it needs to issue of a public deed of the constitution before a notary. Furthermore, a representative office does not have a minimum share capital.
If you choose to open a representative office in Spain, Dos Aguas could represent your company and carry out all the activities aforementioned. In this case, your company would not have an administrative body in Spain since we would only act according to the powers granted by your company. Therefore, it is important to mention that these representative offices cannot conduct economic operations (issue an invoice). In fact, they are usually the first step before making the decision to settle permanently.

Bring a foreign company to Spain by opening a branch

The creation of a branch is the most common way to bring a foreign company to Spain. A branch has autonomy and can exercise economic activity. It is a secondary establishment that develops the activities of the parent company. However, it does not have its own legal personality.
If you pick this alternative, Dos Aguas could not only do the things described in the representative office but also carry out the following procedures:
– Obtaining a certificate that proves that the parent company complies with the laws in its country of origin,
– entering the share capital in the bank,
– establishing the branch before a notary,
– obtaining the NIF (tax identification number in Spain),
– paying the Spanish tax on property transfers and
– registering the branch in the Spanish Commercial Register.

Bring a foreign company to Spain by opening a subsidiary

This method means the integration of a foreign company in the Spanish market to the greatest possible extent. The main difference between a subsidiary and a branch company is that the subsidiary does have its own legal personality. Subsidiary companies are constituted with foreign capital but for practical purposes are considered Spanish companies. This means that to open a subsidiary company, the process is very similar to creating a new company in Spain.
If you pick this alternative, Dos Aguas could implement the scenarios seen in the other two type of companies plus the following procedures:
– obtaining a definitive CIF (the CIF is the tax identification number of the company, which we will only be assigned after having obtained the provisional NIF),
– adding the name of your company in the Central Commercial Register (giving the name to – the new company so that it does not coincide with the companies that are already registered in Spain),
– registering the subsidiary company in the Foreign Investments Register of the Ministry of Economy.

Overview of Representative Office, Subsidiary and Branch’s differences

Bring a company to Spain-Dos Aguas Blog


EU-Japan Economic Partnership Agreement

By | International Relations, Law, Trade News
An answer against trade protectionism
An ambitious trade agreement between the European Union and Japan was signed in July 2018. The negotiations began in 2013, when the EU governments commissioned the European Commission to start negotiations with the Japanese country. Negotiations have been delayed during 18 rounds, the last one was held in April 2017. On July 6, the European Union and Japan reached a principle of agreement on the main elements of the EU-Japan Economic Partnership Agreement.[1]According to some experts, the signing of this agreement not only has a commercial purpose but also implies a message and a reaction against the protectionist retreat of the US president.[2]
However, an analysis of the content of the Agreement in figures shows much more since EU companies export more than 58,000 million euros in goods and 28,000 million euros in services every year to Japan. This instrument will eliminate most of the 1,000 million euros of rights paid annually by EU companies that export to Japan, as well as a series of long-standing regulatory barriers. At the same time, this agreement will open the Japanese market of 127 million consumers to the main agricultural exports of the EU and increase the opportunities for EU exports in a range of other sectors.
On the one hand, regarding the EU’s agricultural exports, the Agreement affects the tariffs of many cheeses, such as Gouda and Cheddar (which currently stand at 29.8%), as well as wine exports (currently with an average of 15%). Moreover, it allows the EU to increase its exports of beef to Japan. In fact, there will be duty-free trade for processed pork and almost duty-free trade for fresh meat. It also guarantees the protection in Japan of more than 200 high quality European agricultural products (Geographical Indications, GI). A selection of Japanese GIs in the EU will also be protected.
In addition, it establishes transition periods before opening markets that are particularly sensitive for the EU, such as the automotive sector[3] which, as can be seen in the following image, consists of the second category of products that the EU exports to Japan, and represents 14.38% of the trade involving 9,941,226 thousand euros. Nevertheless, imports from Japan of motor vehicles amounted to 20,986,186 thousand euros (accounting for 24.38% of imports). In the following image you can see the main categories of products imported / exported between both regions:

Bilateral Commerce Japan EU

On the other hand, the Agreement opens markets of services, in particular financial services, electronic commerce, telecommunications and transport. The aim is to guarantee EU companies access to Japan’s large supply markets in 48 large cities and eliminate barriers to contracting in the rail sector of economic importance at the national level.
Differently from the climate of uncertainty in international trade due to protectionist waves as well as possible trade wars, the EU has opted to continue with its agenda and its focus on commercial liberalism and its commitment to its main trading partners.
If you are interested in the Japanese market and are thinking of exporting to the country of the rising sun, from Dos Aguas we can give you the support and the necessary guidance to the export path. Do not miss the opportunity!

A brief overview of the Agreement between the EU-Japan


[1] European Commission (2018) Negotiations and agreements EU-Japan Economic Partnership Agreement. Available online (link) [Last access: 07.08.2018]
[2] Alastair Gale and Emre Peker (July 17, 2018) Japan, EU Sign Trade Deal: ‘We Stand Together Against Protectionism’. The Wall Street Journal. Available online (link) [Last access: 07.08.2018]
[3] European Commission (December 8, 2017) EU and Japan finalise Economic Partnership Agreement. Available online (link) [Last access: 07.08.2018]

Recommended reading:

Agreement between the European Union and Japan for an economic partnership (Full text)
Reports from the negotiating rounds. They are available in the following link: (link)
EU-Japan EPA – The Agreement in Principle (July 2017) (link)

Methodological note:

The image uses data from the International Trade Centre. EU’s data are from the 28 member countries.

Commercial arbitration in Spain

By | Law

One of the main uncertainties, when a company decides to export, is which law will be applied and which court will be competent in case of litigation. Commercial arbitration is becoming the first option among companies that need to resolve a conflict. This can be a useful tool and therefore, we decided to write a post about its advantages and disadvantages, compared to the ordinary jurisdiction.

List of advantages:
Neutral forum. It is a jurisdiction that does not correspond to the country of any of the parties as it is dissociated from any court.
Specialized arbitrators in the matter of the conflict. Availability of arbitrators that can study the case, while in ordinary courts cases are accumulated and it is impossible for the judges to study and analyze each case with due diligence and sufficient time.
Free choice of the number of arbitrators. Depending on the complexity, the number of arbitrators that make up the arbitral tribunal can be agreed upon.
Simplicity. Both parties know beforehand the conflict resolution system, dispensing with the study of the particularities of the agreed judicial system.
Quickness. This is a rapid system, in contrast to jurisdictional systems of all countries that face a delay in the processes.
Confidentiality. In many cases, companies have to provide sensitive information about accounts, contracts, etc. In the absence of a principle of public access to official records, companies feel more comfortable resorting to this method.
Flexibility. The formalisms that characterize judicial processes are not necessary. Furthermore, there is also the freedom to choose the language of the procedure.
Maintenance of business relationships. When faced with a rapid and confidential process, the confrontation between the parties is minimized, and the damage caused to present and future commercial relationships is less. In addition, there is usually a preliminary stage of negotiation or mediation, so there may be a negotiated outcome that avoids the arbitration process.
The arbitral awards cannot be appealed and are enforceable like a regular sentence, not only in the country in which they are issued. As established in the New York Convention that makes possible its execution.
List of disadvantages:
High cost. Statistics set in an average of two million euros the costs of resolving a dispute in an international court, while the arbitral awards imply a real cost that can exceed 8 million (Expansión 2017).
Even-handed decisions. Some experts argue that arbitrators tend to make decisions that partially give reason to both parties, thus fleeing decisions that are completely favorable to only one of them (Ortiz, 2015, 5).
Risks of a poorly drafted arbitration clause. Every clause must be negotiated and drafted carefully. Otherwise, they can cause many problems.
Submission to courts or arbitration institutions not recommended. Not all arbitration courts are equally recommendable. It must be found the court that suits the needs of the case, with sufficient guarantees of professionalism, independence, and impartiality.
Difficulty in the appointment and constitution of the arbitral tribunal. There may be obstructionist attitudes by one of the two parties that hinder the appointment and constitution of the arbitral tribunal.
Necessity of the intervention of the jurisdiction. Arbitrators lack the coercive power to enforce their decisions, which means that in situations of rebellion there is no alternative but to go to the ordinary courts.
Dispute with several parties involved. If there are more than two parties involved, submission to arbitration may be complicated.
Difficulty of appealing the arbitral awards for an infraction of the legal system. The lack of “reviewability” of the awards is an inherent risk to the arbitration process, which the parties have to assess and assume at the time of submitting to arbitration.
At the national level, there is in Spain the Court of Arbitration. This is the body in charge of administering the commercial arbitrations that are entrusted to it. The Spanish Court of Arbitration is also dean of the Spanish arbitration institutions, operating as an independent service attached to the Chamber of Commerce of Spain.
In addition, in Spain there is a large number of institutions that perform this work, such as: the Court of the Chamber of Commerce of Madrid, the Civil and Commercial Court (CIMA), the Arbitral Tribunal of Barcelona (TAB), the Spanish Court of Arbitration of the Chamber of Spain, the Court of the Chamber of Commerce of Valencia and the European Arbitration Association. All these institutions are progessively getting more companies and lawyers that look for arbitration as a tool for conflict resolution.
At the international level, the main agency is the International Court of Arbitration of the Paris International Chamber of Commerce. This institution had a record number of arbitration cases in 2016. 966 new cases that also meant the largest number of cases in the 94-year history of this institution. The number of new arbitrations in the International Chamber of Commerce has increased slowly but steadily over the past two decades, becoming the preferred method for the resolution of certain commercial disputes.
Going to an arbitration court must be a thoughtful decision. However, the important thing when choosing this option is that the Arbitration Court is renown and creditworthiness. This will guarantee their impartiality.
If you have any doubts about going to commercial arbitration or writing a commercial clause correctly, do not hesitate to contact Dos Aguas team.

Useful addresses:

– Spanish Court of Arbitration (Corte Española de Arbitraje de Cámara de España) (link)
– Court of Arbitration of the Official Chamber of Commerce, Industry and Services of Madrid (Corte de la Cámara de Comercio de Madrid) (link)
– Civil and Commercial Court of Arbitration (Corte Civil y Mercantil-CIMA) (link)
– Barcelona Arbitration Court (Tribunal Arbitral de Barcelona-TAB) (link)
Corte de la Cámara de Comercio de Valencia (link)
Asociación Europea de Arbitraje (link)


– David A Ortiz Gaspar (2015) El arbitraje: ¿Qué es y cuáles son sus ventajas e inconvenientes? Bepress. Available online (link)
– ICC Belgium (2017) ICC reveals record number of new Arbitration cases filed in 2016. Available online (link)
– Sergio Saiz (2017) Cuánto cuesta acudir a un arbitraje internacional. Periódico Expansión. Available online (link)