The extent to which USIJI participants will find contracts necessary will be influenced by a number of factors, including the nature of the projects, the respective parties' objectives, the relationship of the parties to each other, and the political stability of the host country. Unlike traditional development assistance contracts, IJI contracts are constrained by the fact that IJI is a new phenomenon, that the entire process revolves around an intangible commodity (greenhouse gas reductions or sequestrations), and that the contracts must encompass timeframes as long as many decades into the future. IJI projects also tend to involve smaller amounts of money than traditional international development projects, raising the relative importance of transaction costs. These conditions require that IJI contracts be simple and loosely structured. The more thought that is put into designing contracts upfront, the fewer problems that will be experienced further down the road.
Of course, the best strategy for minimizing risk is to do ample research before commencing any project. However, once a decision to act has been made, it is important to put as much in writing as possible and to document all negotiations leading up to the final contract. While it certainly will not be possible to plan for every contingency, developers can avoid future headaches by designing agreements with some flexibility. Finally, one cannot emphasize enough the importance of consulting a lawyer experienced in international transactions.
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