Now that the West's ‘we love him, we love him not' affair with Muammer Gaddafi has settled on ‘not', those who have done business in and with Libya are in a difficult position.
The increasingly global nature of investment means that the job of tracing assets belonging to the Libyan government, now frozen, is more complex than looking for concealed bank accounts and extends to a myriad of companies who have seen money come in from Libya, through vehicles which may or may not be linked to the current regime, which, in the hotel sector, has been International Hotel Investments, the Malta-listed owner and developer.
The UK's position as politically safe and a containing key global financial markets makes it an attractive proposition, both as an investment and potential residence when regions become unstable. One of those affected was Pearson, owner of the Financial Times, which counts the Libyan Investment Authority amongst its shareholders. Dame Marjorie Scardino, CEO of Pearson, said: "We're in a terrible position. This is pretty abhorrent to everybody who works in Pearson. We don't choose our shareholders, they choose us, so there is a very limited amount of things we can do".
The LIA's investments weren't limited to the media, however, and IHI has come under increased scrutiny since the start of demonstrations in Libya, scrutiny made more intense because it is due to open the Corinthia London next month.
The involvement of the Libya Foreign Investing Company (a subsidiary of the LIA) with Corinthia Hotels goes back to the early 1970s, when it was created as a 50/50 joint venture with the Pisani family of Malta.
In 2001, the group's hotel assets were floated on the Maltese stock exchange, with LIA taking a 35% stake, the Pisani family 35%, and Isthithmar a 22% holding, the remaining 8% being held by smaller investors. This ownership structure has, the group said, been replicated at the Corinthia London, which is described as an IHI-led investment project.
Under an order issued by the European Union, LFICO was one of five entities against whom the EU imposed "restrictive measures" because the entities were under control of Gaddafi and his family, and were a potential source of funding for his regime.
IHI has said: "The asset-freezing orders announced by national governments and the EU are having no effect on any hotels in IHI. It is business as usual."
A source close to the situation told Hotel Analyst that the group viewed the actions of the LIA as investing Libya's oil money on behalf of the Libyan people, rather than the Gaddafi family.
Under the terms of the orders, LFICO cannot sell the assets or receive income or returns from them. However, operationally, there is no impact and the fit-out of the Corinthia London and its opening will go ahead. IHI's spokesman said that it had sought and obtained clarification from the UK government that it could trade as normal.
Similarly, at CHI, the hotel management company in which Wyndham Hotel Group is a 30% joint venture partner with IHI, there has been no change to the day-to-day operations of the group.
The group said: "It is Wyndham's policy to comply with all applicable laws and regulations. We continue to monitor the Libyan situation, any and all potential applicable sanctions related to Libya and the potential implication for our business."
At the panel discussing development in Libya held at the International Hotel Investment Forum in Berlin earlier this month, it was felt that short-term disruption was almost a small price to pay for what could be long-term stability and the chance for a more open trading environment.
However, this was before the decision to set up a no-fly zone and the increased likelihood that it would be a long time before the hotels which had recently-opened – in the case of Starwood Hotels & Resorts, for only a matter of days – could open again and developments would remain on hold.
IHI is playing the long game, with an anonymous source pointing out that the LIA had held the stake for the past 30-odd years. IHI was, they added, eager to see the will of the people of Libya adhered to.
Their actions may not, however, mean any sudden changes in ownership at IHI.
HA Perspective: The point about country risk coming back has been previously made by Hotel Analyst but it bears repeating. What is interesting right now is that the previous darling geography of North Africa now looks less appealing on some measures than sub-Saharan Africa, a region few have previously considered as a growth opportunity.
Such sudden flip-flops rightly scare investors and substantial premiums on expected returns will now be demanded in comparison with more stable territories. Operators too face a challenge in ensuring that the investment they make in establishing a management or franchise operation delivers a sufficient return to compensate for the additional risk.
The likely immediate effect is probably to slow growth in developing countries. But if aggregate economic growth continues to outpace the West, as it surely must, this will only be a temporary setback.
The bad news ought to be seen as a welcome reality check rather than as a reason to turn tail and avoid emerging markets altogether.