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ProjectFinanceReport2014

IFLRinternational financial law review

PROJECTFINANCE REPORT 2014

Lead contributor: John Marciano

REPORT PARTICIPANTS

IFLRinternational financial law review

ANGOLA BOTSWANA INDONESIA

MEXICO MOZAMBIQUE NIGERIA

PORTUGAL SOUTH KOREA TANZANIA

THAILAND UNITED STATES VIETNAM

INTRODUCTION

WWW.IFLR.COM IFLR REPORT | PROJECT FINANCE 2014 1

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O ver the past 12 months, an increasing number of banks have dusted off their long-term lending programmes and dived back into project financing. Their liquidity hasincreased in line with their growing comfort with post-crisis capital requirements,

and they are ready to compete with the new array of lenders that have sprung up in their ab-sence.

But competition is tough. Private debt platforms are said to be building dry powder. Projectbonds can now be structured with a monoline-like wrap. And structured finance solutions arebeing devised to better spread the cost and risk attached to large-scale developments.

In some regions, such as Europe, the number of projects coming to market falls far short of thedebt that is now available.

This new dynamic has been a difficult adjustment for many sponsors and financers. But it hasprompted the move towards a more balanced and innovative industry.

The US is a case in point. Much of this market’s recent activity is attributable to yieldcos’ ag-gressive drive to vacuum up assets. A yieldco is a separate company set up by a sponsor with atleast $500 million in operating assets. The sponsor moves those assets into the yieldco, andthen sells 20% to 40% of its shares. The development pipeline remains with the sponsor, withthe yieldco having the option to buy development projects as they come to fruition.

Moving the operating assets into a separate company allows the sponsor to raise equity morecheaply, since investors will pay a premium for de-risked assets and liquid ownership intereststhat can be traded readily on a stock exchange. Dividend yields on yieldco shares have beenlow; down to a little over three percent. Investors are looking for yields that are comparablewith what they can get on alternative investments. The yieldcos have to make up the differencethrough growth and capital gains. Six yieldcos have been formed to date in the US market,and their low cost of capital has made them the winning bidders in many of this year’s assetauctions.

Rooftop solar is also an area to watch. Companies are in a race to build national brands and re-duce costs, so that the industry can remain competitive after US tax incentives for solar arescaled back after 2016. They are experimenting with securitisation and back-levered portfoliodebt as a way of reducing the cost of capital. To date, the US has seen four solar asset securiti-sations. By packaging together the payment streams under leases or power contracts with 5,000to 15,000 customers, and receiving a rating, these can be borrowed against at interest rates alittle over four percent. Tax equity has been the dominant form of financing to date for renew-able energy projects. Securitisations have now been successfully combined with tax equity in atleast two large deals.

Looking forward, all eyes will be on Congress in late November and early December to seewhether it extends expiring tax incentives for renewable energy. Wind, geothermal, biomass,landfill gas and ocean energy projects had to be under construction by December 2013 to qual-ify for tax credits. Wind companies are pushing for the construction-start deadline to be ex-tended to December 2015. Solar companies want to convert a December 2016 deadline tocomplete solar projects to qualify for a 30% investment tax credit into one merely to start con-struction. Unless it changes, the solar deadline is expected to make financing difficult for largesolar projects that might not be completed in time; at least two large projects have already beencancelled. It could also lead to shortages of tax equity, working capital, debt and equipment in2016 as the entire industry races to install as much as possible before the deadline.

Silver liningsJohn Marciano and Keith Martin of Chadbourne & Parkeexplain how sponsors and financiers are shaping a new,more balanced project finance industry

“Yieldcos' low cost of capital has madethem the winning bidders in many ofthis year’s asset auctions

CONTENTS

IFLR REPORT | PROJECT FINANCE 2014 WWW.IFLR.COM2

ContentsCountry reports

Angola 12Catarina Levy Osório and Vanessa Pinto RodriguesAngola Legal Circle Advogados

Botswana 15Parks TafaCollins Newman & Co

Indonesia 19Jardin Bahar and Justin PatrickHermawan Juniarto

Mexico 23Raquel Bierzwinsky and David Jiménez RomeroChadbourne & Parke

Mozambique 27Paula Duarte Rocha and Sílvia Prista CunhaMozambique Legal Circle Advogados

Nigeria 31Tunde Oyewole and Dayo IdowuOlajide Oyewole

4

10

CITI

An unexpectedcomeback

Expert analysis

MIGA

Navigating the safest path

Macquarie Capital

Shifting the funding mix

CONTENTS


6

Country reports

Portugal 35Filipe Lowndes Marques and Ana MonjardinoMorais Leitão Galvão Teles Soares da Silva & Associados

South Korea 39Michael Chang and Seung-Gyu YangShin & Kim

Tanzania 43Nicholas Zervos and Victoria Lyimo MakaniVelma Law

Thailand 47Maythawee Sarathai and Ben ThompsonMayer Brown JSM

US 50John MarcianoChadbourne & Parke

Vietnam 53Nathan Dodd and David HarrisonMayer Brown JSM

EXPERT ANALYSIS CITI


P roject finance has made a comeback from its low point during thefinancial crisis, but the revived market is not what many expected.While project bonds have grown, they are not yet as common a

product as many had hoped and the pool of potential investors remains lim-ited. Meanwhile, banks continue to offer longer tenors - a trend spurred bythe flow of capital from Japanese banks. While investors view this as a pos-itive sign for securing financing, Citibank’s Nasser Malik, managing directorand head of global structured debt at Citi, worries it is stunting the devel-opment of new debt products that would be a more stable foundation forthe project finance market.

What is the biggest trend affecting project finance right now?Globally, there are a number of important trends developing. If you turnback the clock, going into the European sovereign debt crisis there was agreat deal of speculation on how banks would deal with project finance be-cause of both Basel III and dollar liquidity challenges. Three years later,banks seem to be less focused on Basel III, despite the need for Europeanbanks to continue deleveraging. At the same time, liquidity pressures seemto have dissipated.

There is more capital available to deploy than two or three years ago.Project sponsors are looking for funding from both banks and the bondmarket. There is more disciplined behaviour in both the US and Europeanbank markets, but the foundation for bank markets in general may becomea little weaker going forward. We will need to see a stronger foundation fordebt capital built up over the next five to 10 years.

The number of bank players in project financing has decreased relativeto pre-crisis numbers, though there has been some reversion back to longertenor lending. This trend stems from the increased participation of Japanesebanks, though one has to question how sustainable their quantum of lendingis.

What effect have the long tenors Japanese banks offer had on theglobal project finance market? Sponsors that want to harness Japanese lending are seeking to incorporateas many Japanese touch points as possible in a deal. They will have Japaneseshareholders and capital goods providers, and then bring in Japanese banksand the Japanese Bank for International Cooperation (JBIC). Because ofthis, they are able to obtain very long tenors without having to go to thebond market. Competition engendered among Japanese lending institutionsis also resulting in tighter spreads that US and European banks are nowforced to chase.

Japanese banks are being increasingly aggressive in the way they putmoney into the system. I don’t know if it is sustainable. For now, thataggression is delaying further development of an institutional investor mar-ket for project finance, which may be an issue if Japanese banks suddenlypull back.

An unexpected comebackNasser Malik, managing director and head of global structured debt at Citi, discusses thestate of global project finance and the challenges and changes on the horizon

“Japanese banks are being increasingly aggressive in theway they put money into thesystem

EXPERT ANALYSISCITI


I question whether we will see a market led by Japanese banks five yearsfrom now. If we do, it will leave us in a healthier place by fostering the fur-ther development of debt capital market solutions, which will be able to ad-dress lender needs while also handling the construction risk of which manyinvestors today are still wary.

Following the financial crisis, there was a lot of talk about the needfor project bonds to be more actively used. Where do we stand nowon their use and should we expect them to become more common?We have seen a nice if not important increase in project bond activity andvolume, though it’s hard to get a full sense of this as some has been fullysupported by government guarantees, lowering the risk. Even so, the growthin project bond activity has been a significant milestone in validating theimportance of project bonds to the project finance market. That said, thereare still a relatively small number of investors driving these transactions.More work needs to be done to develop this market.

The system has gone some way to achieving the sustainability of this mar-ket with the emergence of new dedicated third-party money managers thatinvest in infrastructure debt. This has mostly occurred in Europe and theUK, and it’s a very healthy development. When money is raised for this pur-pose, it comes with specialised skills and knowledge of the infrastructuresector and how a transaction should be structured. The growth has raisedsome concern that there is not sufficient deal volume in the pipeline to de-ploy these funds, but this is due more to a lag effect from the euro crisis.

There has been a lot of conjecture about how capital markets and in-vestors will be a rising force in the infrastructure realm. This is plausible (in-deed desirable), but at the moment work still needs to be done around howgovernment concessions are awarded, in tandem with engendering a processthat incorporates the unique nuances of infrastructure financings. There isstill a long way to go to getting the kind of certainty of execution that equityinvestor will need.

Following the financial crisis, there was a pull back from banks whohave since taken on the role of financing the greenfield stages ofprojects and allowing more typical long term investors such aspension funds to fund the brownfield stages. Is this the new normand does it pose any problems?This is the model some people have hoped for because investors very oftendon’t want construction risk, but this isn’t easy to solve. What if there is along construction period? What if yields in the bond market have signifi-cantly risen at the point of refinancing? It can be hard to refinance the debtif that is the case.

What equity investors are saying is that they often need to know thatthey have financing for life to proceed with a project, and this approachcan’t guarantee that. While some projects can withstand this re-financing

risk, for others, particularly infrastructure projects, the risk can be too muchstress on the equity (and, thereby, the lenders as well). There are a lot ofideas out there as to how to address this issue, but none of them compre-hensively solves the issue globally.

How would you classify the state of financing in developingcountries where project financing is arguably most needed? Andhow important is securing local financing in those markets? Some countries are getting what they need – Peru, Mexico and much ofAsia, for example. The problem is how you define developing. There are re-gions where banks are lending and where capital markets are lending. Insome lesser developed countries, there is not as much activity.

In some lesser developed regions, the multilaterals want to help, but maynot necessarily have the best tools for the market. The foundation on whichthe multilaterals were created has changed. Some investors today want tobe paid for sovereign risks, rather than be protected from them – but thesesame investors are not likely to want construction risk. The BRICs (Brazil,Russia, India, China and South Africa) development bank is interesting be-cause it will hopefully seek to build a foundation based on the world oftoday.

Additionally, in many emerging markets, local currency markets areneeded to create longer-term sources of infrastructure funding, but that re-quires broader macro-economic and structural reform. Chile is a really greatexample of this. There are other examples of governments that want to fostergreater capital formation for infrastructure finance, but which place con-straints that will ultimately frustrate the development of a sustainable andhealthy market.

Should banks be pushing for more social conciseness in projectfinance (such as green bonds, native rights, sustainability)? Or isthis beyond the role of banks?Ultimately, banks have been the leaders of the equator standards. More re-cently, there has also been a paradigm shift in the notion of green investing,to an investor base that is increasingly green-conscious. It’s only good busi-ness that we offer products that are green. Standardising the green bondprinciples is part of creating more acceptance, which is only going to en-gender more green bond issuances. These developments are very healthy.

About the contributorNasser Malik heads a number of structured finance teams within Citithat span global project and infrastructure finance, financing fortransportation assets, and structured tax-efficient borrowings andinvestments. Additionally, he is responsible for the US debt privateplacement business.

Malik has been with Citi and its predecessor companies for 27 years.Prior to the evolution of his role, he spent three years in London,responsible for cash-based fixed income capital market products.Between 1999 and 2003, Malik was a director on the fixed incomesyndicate desk, responsible for the underwriting of bonds fromemerging markets. Before that, he worked in liability management,global structured bonds and emerging market securitisation. He beganhis career in Toronto on the Canadian corporate finance team.

Malik holds graduate degrees from the Columbia University in NewYork and the University of Toronto.

Nasser A MalikManaging director, head of globalstructured debt capital marketsOriginationCiti

T: +1 212 816 8020

“I question whether we will seea market led by Japanesebanks five years from now

EXPERT ANALYSIS MIGA


N ew financial structures which balance risk and encourage the useof diverse funding methods are helping to drive project investmentin developing countries. Understanding local political and eco-

nomic conditions is therefore necessary to choose the most appropriatestructure.

The Multilateral Investment Guarantee Agency (MIGA), a member ofthe World Bank Group, helps investors offset risk by offering political riskinsurance. They are intended to encourage foreign direct investment (FDI)and have had a substantial impact, particularly, on infrastructure and energyprojects in many developing countries.

Managing the risk in project finance remains a struggle globally. Theneed to have local and international partners throughout the lifecycle of theproject is high. Developing relationships with local investors and govern-ments can help ensure a smooth-running project. This growing understand-ing is allowing structures more commonly seen in developed economies totransition to challenging ones. As they do, the local economies are also ben-efitting, creating more stable markets for further development.

MIGA senior counsel, Shamali De Silva, takes a look at how projectsponsors and financiers can make headway in more difficult markets. Shediscusses innovative instruments to support financial structures in develop-ing economies, the role of international patterns and multilateral organisa-tions, and how project developers can offset the risk of working in theseareas.

How do MIGA’s guarantees work? Are they a solution for the full lifeof the project? Do the financing structures for these projects haveto change or take on any special features to accommodate this?MIGA provides political risk insurance (PRI) and credit enhancement forprojects in a broad range of sectors in its developing member countriesaround the world. MIGA covers a variety of cross-border investments, in-cluding both debt and equity. Under our PRI suite, MIGA covers four tra-ditional risks: transfer restriction; expropriation; war and civil disturbance;and breach of contract. Under our non-honouring of financial obligationscover (NHFO), MIGA can also cover commercial bank financing and cap-ital markets transactions for public sector projects. NHFO protects a lenderagainst losses resulting from a failure to make a payment when due underan unconditional and irrevocable financial payment obligation or guarantee.One advantage that MIGA has over private sector PRI providers is our abil-ity to extend long tenors – in some cases up to 20 years. This means MIGA’scover can generally match the term of project loans.

What are the major risk factors for investors in projects based indeveloping countries? What are the best tools for addressing thoserisks?MIGA’s 2013 World Investment and Political Risk report examined trends inpolitical risk perceptions and longer-term demand for PRI in emerging

Navigating the safest pathShamali F De Silva, senior counsel at MIGA, discusses measures to mitigate the risksassociated with investing in projects in developing economies

“Investors continue to rank political risk as a key obstacleto investing in developingcountries

EXPERT ANALYSISMIGA


economies. The report’s research included an Economist Intelligence Unitsurvey of multinational investors that assessed their risk perceptions in theshort and medium term. It found that breach of contract and regulatoryrisk were the respondents’ main political risk concerns — based on actualexperience as well as perception. Additionally, we found that investors con-tinue to rank political risk as a key obstacle to investing in developing coun-tries. A survey launched recently by MIGA shows that macroeconomicinstability, which is linked to political instability, is a primary concern ofinvestors, over the medium term.

Investors use a variety of tools and approaches to mitigate political risk.Some of these include using phased investment, local partnerships, engage-ment with the host government and local communities, and PRI. Our re-port confirms a continued increase in the use of PRI as a risk-mitigationtool and reaffirms the industry’s health and resilience. Providers have metthe challenge of the past years with new products and innovative ways touse existing tools as well as expanding existing capacity.

How much interaction should project developers and financershave with governments? What is the most important step forgovernments looking to support investment in infrastructure? Investors understand that mitigation strategies must now involve broaderlocal partnerships, more careful analysis of political economy, and attentionto fairness of contracts, sustainability, and distribution of benefits. Further,it is important that the projects fit within the overall macroeconomic de-velopment structure and identified priorities of the country. When MIGAprovides coverage for an investment, we ensure that the project is alignedwith the host country’s development strategy and meets high environmentaland social standards. We must also seek approval from the host country.These measures help the investor’s position with the host country govern-ment should a dispute arise.

Governments are also looking for new financing solutions to fund theircritical public projects. In 2009, MIGA began offering NHFO to help themaccess commercial financing. This instrument can be used for sovereign andsub-sovereign investments, and more recently it was extended to state-ownedenterprises.

In 2013, MIGA provided NHFO coverage to HSBC for its loan for theexpansion of the Cambambe hydro-power dam in Angola. The guaranteeimproved the tenor and price of the borrowing, and complemented exportcredit agencies’ work to achieve financing for this project, which will increaseAngola’s power generation capacity by 50%.

What types of financial structures or use of collateral are commonin countries where stability is low?MIGA’s non-honouring product is not available in markets where countryand project ratings are below a certain threshold, and these countries remainheavily reliant on government guarantees for public investments. However,project finance structures and public-private partnerships are gaining pop-ularity in challenging markets. Often, these transactions have a developmentfinance institution tranche and a commercial tranche with PRI from an en-tity such as MIGA—particularly against the risk of breach of contract. Oneexample is in Côte d’Ivoire, which has recently emerged from a prolongedcivil conflict. MIGA is providing coverage for both the equity investmentand commercial debt against all four traditional PRI risks for on and off-

shore oil and gas facilities that are providing electricity to Côte d’Ivoire’spower plants. MIGA’s sister organisation, the International Finance Corpo-ration, is providing financing and the World Bank’s International Develop-ment Association (IDA) is providing a partial risk guarantee that backstopsongoing payment obligations of the government off-taker to the power sec-tor’s joint venture partners. This combination of IFC financing and MIGAand IDA guarantees has also been used in Kenya to deliver a series of inde-pendent power producers.

Are there transferable lessons from emerging economies abouthow to encourage project finance to help promote development andinfrastructure?The World Bank Group’s experience in Kenya is a good example of how theprivate sector instruments of multilateral organisations and development fi-nance institutions can help countries implement project finance deals. TheThika power project is a replicable model: MIGA provided breach of con-tract cover to Absa Capital of South Africa—the first time an internationalcommercial bank provided long-term financing to a power project in Kenyaon a limited recourse basis. Previous power projects were financed by inter-national development finance institutions.

What is the right balance between ensuring a country’s naturalresources are not exploited and protecting private investment, sothat it is incentivised to develop projects in that country?MIGA supports projects in sectors such as agribusiness, mining, and oil andgas, as we recognise the importance of these resources to economic devel-opment. We work closely with project sponsors to ensure that projects com-ply with standards that are considered to be the world’s best social andenvironmental safeguards. International lenders benchmark the EquatorPrinciples that reputable international commercial banks are required to ad-here to against these standards. MIGA’s environmental and social sustain-ability policies are a powerful tool for identifying risks, reducingdevelopment costs, and improving project sustainability—benefiting af-fected communities and preserving the environment. During the under-writing process, we identify the policies and guidelines that are applicableto a project. Projects are expected to comply with those policies and guide-lines, as well as applicable local, national, and international laws. In addition,MIGA carries out a rigorous development impact analysis on each projectthat it supports and investors are expected to achieve and document positivedevelopment outcomes through the life of the project. Our clients increas-ingly recognise that implementing these practices leads to stronger relation-ships with local communities and boosts the overall long-term viability oftheir investments.

What are some solutions for fundraising when developing a projectin high-risk areas (other than MIGA insurance)?In addition to helping countries attract project finance for strategic infra-structure deals, MIGA offers other instruments that can help mobilise cap-ital. For example, MIGA is able to provide coverage for private equity fundsunder a master contract of guarantee that reserves capacity and provides up-front pricing for a specific period. The fund managers may use this contractto raise funds from institutional investors interested in taking commercialrisks (and returns) associated with the investments but are concerned aboutpolitical risks. MIGA has master contracts with several private equity fundsthat invest in sub-Saharan Africa.

MIGA can also provide coverage for capital market transactions by in-suring bond holders. MIGA has supported several such capital market trans-actions to raise financing for much-needed infrastructure projects. In somecases, MIGA’s support enhanced the rating of the country or the entity mak-ing the offering, attracting additional investors.

For example, in Senegal, MIGA provided NHFO coverage for a dollar-euro cross-currency swap arrangement between Standard Bank (SB) and thegovernment. Senegal’s Ministry of Economy and Finance entered into theswap with SB as a hedge against currency risk exposure related to a 10-year,$500 million eurobond. The proceeds of the eurobond are being used to fi-

“MIGA’s support enhanced therating of the country or the entity making the offering, attracting additional investors

EXPERT ANALYSIS MIGA


nance new infrastructure projects and critical energy sector investments.This transaction marked the first time MIGA issued a guarantee for a hedg-ing arrangement without covering the related financing.

What role should international finance bodies such as yourselvesbe playing? Are there ways they are adapting to meet modernglobal economic challenges? Multilateral organisations and development finance institutions play a sig-nificant role in helping countries attract private sector financing, particularlyat a time when local and governmental resources are low or shrinking, byoffering new instruments and innovative applications of existing instru-ments. We note that traditional donor countries are increasingly emphasis-ing the private sector’s role in their development assistance policies.Fortunately, both investors and lenders see the potential and returns inemerging markets, which have recently posted relatively stable growth.Therefore, we foresee an increased pool of resources available to improvelives in developing countries around the world.

About the contributorShamali F De Silva, a Sri Lankan national, joined the MultilateralInvestment Guarantee Agency (MIGA) in 2000. She is a senior counselworking on transactions and claims/pre-claims. De Silva has successfullymediated and resolved several investment disputes relating to guaranteesissued by the agency.

Before joining MIGA, De Silva worked as an attorney in law firms inLondon, Washington and Colombo in the practice area of corporatelaw. She also worked as the legal advisor to the World Bank’sMetropolitan Environmental Improvement Program (MEIP) inColombo. In this capacity, she advised the Government of Sri Lanka inthe drafting of legislation and policy relating to environmental, watermanagement, and urban planning issues.

De Silva graduated from the Sri Lanka Law College, and holds an LLMfrom the Washington College of Law of the American University andanother LLM in urban planning (MCP) from the University ofMaryland. She is a solicitor.

Shamali F De SilvaSenior counsel, Multilateral InvestmentGuarantee Agency (MIGA)

T: 202.458.5866E: [email protected]

“We foresee an increased poolof resources available to improve lives in developingcountries around the world

EXPERT ANALYSIS MACQUARIE CAPITAL


D espite recovery in the project finance market, fragmentation andstagnation in certain areas remain. Risk allocation is still tricky forinvestors, lenders and sponsors. Public private partnerships (PPPs)

are still underutilised even as government funding for developments retreats.Creating new structures which encourage more long term investors and bal-ance the risks will be essential for banks looking to carve out a more flexiblerole for themselves in the new market. As the role of banks in project financecontinues to evolve, the market is looking for new ways to consistently raisefunding and manage construction risk. Increased regulation is adding to theburden and uncertainty of banks’ role in project financing. But without a largeinvestor pool and increasing demand for projects, banks have not left the spacenor fully moved away from their traditional role. New structuring techniquesmay hold the key for addressing the challenges, but few have taken off withthe kind of zeal once expected.

Does the US need to put more emphasis on PPPs? Have sufficientmarket alternatives developed?The US market is highly fragmented, with infrastructure ownership spreadbetween states and localities, and that has resulted in the relatively slow adop-tion of P3s. The federal government has been a consistent supporter of P3sand is engaging in a significant push for their further use. In addition, we areseeing an increasing number of governments at the state and local level posi-tioning themselves to take advantage of the efficiencies P3s offer. The US chal-lenge is really helping governments understand why P3s are beneficial andcost-effective in light of their access to inexpensive tax-exempt debt.We donote that there are federal programmes such as private activity bonds for high-way and special facility bonds for airports, that are available to the private sec-tor to help facilitate P3s.

What are biggest developments in infrastructures financing in thelast 5 years?The last five years have seen a dramatic shift in the level of liquidity availablefor infrastructure financings. In 2009, liquidity was scarce following the fi-nancial crisis and financing solutions were hard to find. This is in stark con-trast to the last 12 months, where we have seen abundant liquidity fromboth bank and institutional lenders across the board.

Of particular note is the increased level of acceptance of constructionrisk by institutional investors in North America and in Europe. This expan-sion was seen in P3 financings in both the Canadian bond markets and theUS private activityb bond markets, and more recently we have seen non-re-course construction financing in the broader US capital markets as demon-strated by the bond financing’s for Cheniere’s Sabine Pass.

What is the best way to handle construction risk?Stating the obvious, the best way to manage construction risk is through aproperly structured EPC (engineering, procurement and construction) con-tract and project structure. With the correct structures in place, we haveseen an increased acceptance of construction risk by institutional investorsand expect this trend to continue. Sponsors across sectors such as power, oiland gas, and petrochemicals have continued to tap the institutional loanand bond markets to finance greenfield projects. Banks will always have arole in structuring the projects and providing construction funding, but Iexpect we will see more projects access the capital markets either to fundthe start of construction or to refinance their construction bank facilitiesearly.

Shifting the funding mix

Nicholas Gole, managing director of Macquarie Capital’s debt capital markets group discusses the changes in project finance funding models and how the industry is meeting the challenges

EXPERT ANALYSISMACQUARIE CAPITAL


Are infrastructure debt funds the solution for long term projectfinancing? Until now, infrastructure debt funds have played a fairly limited role in driv-ing project financings transactions, given their limited size and lack of fa-miliarity amongst project sponsors. As more debt funds enter the market, Iexpect we will see a broader acceptance of their role as they can take largerslices of transactions and team up with other infrastructure debt funds orinstitutional investors. It will continue to be important for these funds tomaintain a flexible approach in order to increase their role in the market –for example, being able to support M&A transactions by participating insponsors’ bid financings.

Do you expect the amount of leverage used in these deals tocontinue to increase? How can leverage and risk be properlybalanced in these deals? In contrast to the ramp-up in leverage seen in project finance structures be-fore the financial crisis, the level of leverage and structural protections forlenders on core infrastructure assets appears to be consistent with prudentrisk management. In many cases, sponsors have sought to bring in experi-enced financial advisors to help structure these transactions and provideboth themselves and outside investors added comfort on the leverage to riskbalance.

Where we are seeing an increase in leverage around the non-traditionalinfrastructure assets, given the liquidity in the market this is unavoidableand it will be up to the sponsors and their advisors to manage the level ofleverage they are comfortable with on assets.

What role should bespoke lending structures play? Are these typesof instruments a good sign for flexibly or a concern because ofincreased risk factors?So long as bespoke lending structures solutions are created to match a pro-ject’s risk profile, they should be seen as a more efficient financing methodand a positive development for both sponsors and lenders. It should benoted that in order to create a good bespoke solution it requires both thesponsors and the lenders to have a thorough understanding of the projectand the added complexity can create additional risks.

What regions have seen the best development and what are themost important takeaways for other areas?The European infrastructure markets have seen a more dramatic shift in thefunding mix over the last few years given that they have traditionally beena bank-centric market. We expect some of the key institutional players andmethods that have emerged in the European infrastructure financing mar-kets (including infrastructure debt funds) to slowly become a larger part ofother markets, including the North American markets.

About the contributorNicholas Gole is a managing director in Macquarie Capital’s debtcapital markets (DCM) group. In his role as head of DCMinfrastructure, he is responsible for infrastructure and project financetransactions in North America. Gole’s participation in a number oftransactions has included advising and arranging a broad range oftransactions, including project and structured finance, leveragedfinance, taxable and tax-exempt bond financings, mergers andacquisitions, corporate restructures, initial public offers and capitalraisings (both listed and unlisted). Before relocating to Macquarie’s NewYork office in 2006, Gole undertook a range of transactions in bothAustralia and Europe for both Macquarie and its clients.

Nicholas GoleManaging director, Macquarie Capital

T:+1 713 275 6287E: [email protected]

SECTION 1 – Collateral/security

1.1 What types of collateral/security are available? In Angola the following types of collateral are generally available: mortgages;pledges of assets and rights; assignment of rights by way of security; andbank guarantees.

SECTION 2 – Perfection and priority

2.1 How is a security interest in each type of collateral perfectedand how is its priority established? The Angolan legal system is very conservative in the sense that the majorityof legal documents (agreements, securities, powers of attorney) must be au-thenticated by a public notary in order to be considered as evidence in acourt of law. Further, if we are referring to pledged assets subject to regis-tration or mortgages, the security would have to be registered in the relevantregistry. For example, a pledge of an aircraft would have to be registered atthe National Institute for Civil Aviation (INAVIC).

The priority of a security is assessed based on the date of the security’s reg-istration; earlier registered securities prevail over later ones.

2.2 How can a creditor assure itself as to the absence of liens withpriority to the creditor’s lien? In accordance with applicable law this could be assessed by referring to therelevant registry. However, due to local constraints and legal practices, manyof the existing liens subject to registration are not registered, which raisesdifficulties in obtaining confirmation of the existence of prior liens on as-sets.

It is important to note that in Angola the majority of real estate is ownedby the Government, following a series of seizures in the post-independenceperiod. The process of transferring property from the State to individuals,which allows them to sell or establish other liens on the real estate is timeconsuming. There are some mortgages registered, however the vast majorityof real estate transactions are secured only by private contractual arrange-ments; there are no means to verify their existence.

2.3 Are any fees, taxes or other charges payable to perfect asecurity interest and, if so, are there lawful techniques to minimiseor defer them? All security agreements are subject to the payment of a stamp duty rangingfrom 0.04% to 0.6% depending on their duration. This duty is mandatoryand not deferrable. Stamp duty will not be levied on a security if it is for-malised together with the financing agreement.

2.4 May a corporate entity, in the capacity of agent or trustee, holdcollateral on behalf of the project lenders as the secured party? In Angola, the concept of trustee has no legal basis, so one of the projectlenders may be appointed as security agent.

SECTION 3 – Foreign investment and ownership restrictions

3.1 What restrictions, fees and taxes exist on foreign investment inor ownership of a project? Foreign investors are subject to the same taxes as local investors: businessincome tax (35% or 20% reduced rate for agricultural, forestry and livestockactivities); investment income tax (5% to 15%); employment income tax(5% to 17% withholding tax), social security contributions (8% paid bythe employer).

As for restrictions, there are certain sectors that are reserved for national in-vestment or that require that the companies pursuing such activities are heldby a majority of Angolan shareholders. That is the case in certain servicesto be rendered to, inter alia, the oil and gas industry, mining, and fishing.

Foreign investment projects have to be approved by the Angolan NationalPrivate Investment Agency, which requires an investment of an overallamount equal to or greater than $1 million. Certain areas, such as oil ex-traction, diamond exploration and financial institutions are excluded fromthis general private investment regime and are subject to special legislation.

3.2 Are there any bilateral investment treaties with key nation statesor other international treaties that may afford relief from suchrestrictions? Would such activities require registration with anygovernment authority? Angola has not executed any agreements to avoid double taxation with anycountry. There was a privileged agreement regarding taxes with Portugal butit is now suspended.

3.3 Can a government authority block or unwind a transactioninvolving foreign investors after it has closed for strategic/nationalsecurity or other reasons? Yes, that is possible in certain exceptional circumstances.

SECTION 4 – Documentation formalities and governmentapprovals

4.1 Is a submission to a foreign jurisdiction and a waiver ofimmunity effective and enforceable? Yes, but in order to be enforceable in Angola an award issued by a foreignjurisdiction must be subject to the Angolan Supreme Court for confirma-tion.

4.2 What are the relevant government agencies or departments withauthority over projects in the typical project sectors? What is thenature and extent of their authority? The most relevant government agencies regarding projects involving foreignparticipation are the following: the Angolan National Private InvestmentAgency (ANIP); the Angolan Central Bank (BNA); the relevant ministries;and the Evaluation Ministry Commission for Public-Private Partnerships(PPP).

As noted previously, all foreign investment projects, such as the incorpora-tion of a company with foreign shareholders or registration of a branch bya foreign parent company, will have to be approved by ANIP.

The BNA will monitor and issue the relevant authorisations regarding alltransactions involving foreign exchange.

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Angola

Catarina Levy Osório and Vanessa Pinto Rodrigues, Angola Legal Circle Advogados

www.angolalegalcircle.com

ANGOLA


The Angolan law on (PPPs establishes that all PPP projects must be analysedby the Evaluation Ministry Commission for PPP, which is composed of rep-resentatives from the Ministry of Economy, Ministry of Finance and Min-istry for Regional Planning.

This Commission will decide on the conditions of the PPP as well as thewinning bid.

4.3 What government approvals are required in relation toenvironmental concerns for typical project finance transactions?What fees and other charges apply? In relation to environmental concerns, there is no general rule applicable toproject finance transactions, so it depends on the project. Yet, in a PPP theenvironmental licence (if required) must be obtained from the State priorto the launching of the public tender.

SECTION 5 – Bankruptcy proceedings

5.1 How does a bankruptcy proceeding in respect of the projectcompany affect the ability of a project lender to enforce its rights asa secured party over the collateral/security? A bankruptcy proceeding will immediately freeze the project company’s as-sets. Subsequently, the court will make a list of all of a company’s creditorsand establish a ranking of such creditors.

Creditors with real guarantees (mortgages for example) will take priorityover other creditors.

5.2 What processes, other than court proceedings, are available toseize the assets of the project company in an enforcement? Forinstance, is contractual enforcement (such as receivership)recognised? All proceedings to seize the assets of a project company would have to beperformed through court order.

5.3 Outside the context of a bankruptcy proceeding, what stepsshould a project lender take to enforce its rights as a secured partyover the collateral/security?It is recommended to first implement all the formalisation requirements es-tablished in Angolan law, in particular registration. Additionally, to facilitatethe enforceability of the guarantees, it is common practice that an irrevoca-ble power of attorney from the shareholders and the project company infavour of the project lender to sell the assets and rights granted as securityis granted. However, sometimes the sale of the assets may be executedthrough a judicial proceeding.

SECTION 6 – Foreign exchange, remittances andrepatriation

6.1 What, if any, are the restrictions, controls, fees and taxes onremittances of investment returns or payments of principal, interestor premiums on loans or bonds to parties in other jurisdictions? Angola has foreign exchange restrictions in the sense that all transactionsinvolving non-resident entities and foreign currency (of a certain amount)require the authorisation of the Angolan Central Bank (BNA). In fact, allcapital transactions (debt instruments, loans, granting of guarantees andother forms of collateral) require a licence (Licença de Importação de Capitaisor LIC to import foreign exchange and Licença de Exportação de Capitais orLEC to export foreign exchange).

6.2 Must project companies repatriate foreign earnings? If so, mustthey be converted to local currency and what further restrictionsexist over their use? The Angolan local currency (kwanza) is not an active currency in the inter-national monetary market. Therefore, the repatriation of earnings is usuallymade in a foreign currency, usually in American dollars.

Under the Angolan Private Investment Law, companies with foreign share-holders are only allowed to repatriate earnings after three years of their in-corporation. However, in the context of a PPP, special conditions may benegotiated for the project company.

6.3 What, if any, tax or other incentives are provided preferentiallyto foreign investors or creditors? What, if any, taxes apply to foreigninvestments, loans, mortgages or other security documents, eitherfor the purposes of effectiveness or registration? Incentives, in the form of tax exemptions, are applicable to foreign investorswith projects in specific sectors such as, among others, technology, educa-tion, and agriculture.

Taxes applicable to securities for effectiveness and registration purposes havebeen explained above (section 2.3).

SECTION 7 – Public private partnerships

7.1 Is there a public private partnership act or similar statuteauthorising PPPs and are both greenfield and brownfield PPPprojects permitted? On January 14 2011 the Angolan Parliament adopted the Law on PPPs;both greenfield and brownfield PPP projects are permitted.

7.2 May a concessionaire grant security interest in the project to itslenders and, if so, is consent of the government or contractingauthority required? The conditions to grant security interest in a project by a concessionaire toits lenders should be regulated under the terms of the concession agreement,whose draft is made available upon the launching of the public tender.

7.3 Are government guarantees or other payment obligations of thegovernment or contracting authority subject to appropriations orother periodic authorisations? Under Angolan law, the Government may suspend payments abroad in caseof an imbalance in Angola’s balance of payments. In a PPP, any paymentsto be made by the Government or any contracting authority must be regu-lated under the terms of the concession agreement.

7.4 May the government or contracting authority unilaterally amendor terminate a concession? Yes, under the terms of a concession agreement, whose draft is made avail-able upon the launching of the public tender.

SECTION 8 – National update

8.1 In no more than 250 words, please describe any relevant projectfinance developments within your jurisdiction. This can includenoteworthy projects, new structures or techniques.To the best of our knowledge, to date, no project finance developments havebeen executed in Angola.

ANGOLA


About the authorCatarina Levy Osório is a partner at Angola Legal Circle Advogados, theAngolan member of the MLGTS Legal Circle, an international networkcreated by Portuguese law firm Morais Leitão, Galvão Teles, Soares daSilva & Associados (MLGTS).

Levy Osório, a member of the Angolan and Portuguese BarAssociations, has relevant experience in Angolan law, having advisedclients on private investment, tax, and labour law in that jurisdiction.Previously, she worked at another law firm as a consultant to the taxdepartment and as a senior tax consultant in a major internationalconsulting firm. In both firms she provided assistance to clients fromdifferent sectors on VAT and other indirect tax matters, acquiringrelevant experience in the development of tax diagnostics and in theimplementation of corporate structures and their tax impacts.

Levy Osório is also a consultant to MLGTS in all matters pertaining toAngola.

She has a law degree from the law faculty of the Portuguese CatholicUniversity, 1998.

Catarina Levy OsórioPartner, Angola Legal Circle Advogados

Luanda, AngolaT: +244 222 441 935 / 443 341F: +244 222 449 620E: [email protected]: www.angolalegalcircle.com

About the authorVanessa Pinto Rodrigues is a lawyer with considerable internationalexperience, especially in the Angolan jurisdiction in the areas ofcorporate and commercial and banking and finance law.

Pinto Rodrigues has been involved in operations concerning foreigninvestment. She provides legal consultancy to oil companies and serviceproviders in the oil and gas sector (particularly foreign exchangelegislation), and to several international financial entities on regulatoryissues related to the commercialisation and marketing of complexfinancial products (derivatives, swaps, and over-the-counter derivatives).

Pinto Rodrigues’ experience in banking includes direct participation inthe permitting process of an international bank in Angola, andpreparation of the documentary package and negotiations with theNational Bank of Angola (BNA) at various stages of the procedure.

Rodrigues has a law degree from the law faculty of the University ofLisbon, 2003 and she completed postgraduate studies in commerciallaw at the law faculty of the Portuguese Catholic University, 2006.

Vanessa Pinto Rodrigues Lawyer, Angola Legal Circle Advogados

Luanda, AngolaT: +244 222 441 935 / 443 341F: +244 222 449 620E: [email protected]: www.angolalegalcircle.com

BOTSWANA


SECTION 1 – Collateral/ security

1.1 What types of collateral/security are available?Mortgage bonds. These are recognised through the Deeds Registry Act(chapter 33). Mortgage bonds are granted and registered over: immovableproperty (generally all landed property); other real rights in land such asmineral rights, leases of mineral rights, servitudes and registered long-termleases or sub-leases of land; and units under sectional title;

Notarial bonds. Similarly formalised in the Deeds Registry Act, these applyto corporeal movable property. The commercial efficacy of notarial bondsis doubtful and they have virtually fallen into disuse in Botswana as theyconstitute a less complete and efficient security package. Financialinstitutions in Botswana tend to prefer the deed of hypothecation as asuperior form of security package for all kind of movable assets, whether ornot they are corporeal or intangible.

Deed of hypothecation. This was created by the Hypothecation Act (chapter46). It is a special class of statutory pledge instrument under which a creditoris granted a security interest for all present and future loans, debts oradvances of the borrower by hypothecating the movable assets of the debtor,of any kind or description. It is akin to the English law concept of a floatingcharge. It allows a creditor to secure a loan or advance with any class ofrevolving movable asset (corporeal or incorporeal), such as all stocks of coal,raw materials, work-in progress, manufactured goods, produce, and stock-in-trade. Unlike a common-law pledge, the movable asset pledged is deemedto have been delivered to the creditor by operation of law upon registrationof the deed of hypothecation.

Pledges. These are a common-law form of security constituted by deliveryof the movable asset being pledged by the borrower to the creditor as securityfor the obligation pledged. The legal requirement that the pledged assetmust be delivered and retained by the pledgor (debtor) means that itseconomic potential cannot be exploited during the existence of the pledge.

Cession and assignment. This is a form of security which is granted forreceivables (book debts, rentals, dividends, distributions, insurance proceedsand benefits to all rights and claims). It involves the substitution of a newcreditor (the cessionary) for the original creditor (the cedent), with thedebtor remaining the same. A cession is in essence the intention to transferthe legal entitlement to the payment of a debt irrevocably from the cedentto the cessionary.

Finance lease. This is a lease agreement in which the lessor agrees to transferthe ownership rights to the lessee after the completion of the lease period.A financial lease is a method used by a business for acquisition of equipmentwith payment structured over time. Finance leasing is used to finance high-cost single assets such as ships and aircraft, and to finance packages ofequipment with a high aggregate value, such as motor vehicles and shippingcontainers. During the lease period, the finance company is considered thelegal owner of the asset.

Letters of credit. These are documents issued by a financial institution or asimilarly accredited professional party. The letter assures payment to a sellerof goods or services provided certain documents have been presented to thebank. The letters prove the seller has performed the duties specified by anunderlying contract (for example a sale of goods contract) and the goods orservices have been supplied as agreed. In return, the beneficiary receives

payment from the financial institution that issued the letter. Therefore, itserves as a guarantee to the seller that payment will be received even if thebuyer ultimately fails to pay. The letter can also be used to ensure that allagreed standards are met by the supplier, provided that these requirementsare reflected in the documents described in the letter of credit. Letters ofcredit are used primarily in international trade for transactions between asupplier in one country and a purchaser in another;

Guarantees. These can be provided by an individual, a company or anyother type of corporate entity. In a corporate environment, it is commonfor a company to guarantee the repayment of a loan borrowed by asubsidiary company. A guarantee is one of the simplest security documents,basically stating the conditions under which the guarantor (the surety) willbe required to take over the borrower’s repayment obligations on its default.


2.1 How is a security interest in each type of collateral perfectedand how is its priority established?(a) Mortgage bondsThis form of security is perfected by registration at the Deeds Registry Office(Deeds Office) in accordance with the provisions of the Deeds Registry Act.Once registered, it grants a real right in the security interest to the holder.

Mortgage bonds rank in preference and in order of their date of registrationat the Deeds Office. The mortgage bond first registered is affordedpreferential ranking in the event of insolvency of the mortgagor or executionagainst the property by the first mortgagee.

(b) Notarial bondsThese are divided into two classes: (i) general notarial bond; and (ii) specialnotarial bond.

A special notarial bond specifies and describes the movables beinghypothecated, and confers a statutory preference above the claims ofconcurrent creditors for specified movable assets. It is perfected byregistration at the Deeds Office.

A general notarial bond, strictly speaking, does not confer such preference:it merely confers a preferential right over other concurrent creditors for thefree residue in an insolvent estate during insolvency. A general notarial isperfected by a creditor taking possession of the movable property so that hecan acquire a right of pledge over it.

(c) PledgeThis form of security is created and perfected by delivery of the movableasset by the pledgor to the pledgee (lender or creditor), with the commonintention that it constitutes security for an obligation owed to the latter. Anexample would be the delivery of as share certificates and share transferforms in blank by the debtor to the creditor. Actual physical delivery isgenerally required, and constructive forms of delivery of the pledged articledo not suffice to constitute a real right of security.

(d) Deed of hypothecationA Deed of hypothecation is perfected by the enforcement mechanismprovided for by section 9 of the Hypothecation Act. Its enforcement occursonly when there is a breach or the occurrence of an event of default asdefined by the security arrangements agreed between the debtor and the

Botswana

Parks Tafa, Collins Newman & Co

www.collinsnewman.bw

BOTSWANA


creditor in the deed of hypothecation and other security agreementsunderpinned by it.

On registration, a first ranking security is provided. However, it can onlybe granted to an authorised creditor prescribed under the HypothecationAct.

(e) CessionA cession is the most common form of security issued in relation toincorporeals, such as shares and financial instruments, which are perfectedby the furnishing of notice by the creditor to the debtor and delivery of thedocuments.

A cession is perfected upon the execution of a valid cession agreementbetween the creditor and debtor, and the delivery of documents of title,such as share certificates and share transfer forms in blank.

(f) Letters of creditA security interest held by a secured party with control of the letter of creditright has priority to the extent of its control over a conflicting securityinterest held by a secured party that does not have control.

A security interest in a letter of credit right may be perfected only by control.

(g) GuaranteesThis form of security is perfected by entering into an agreement with theguarantor setting out the conditions under which they will be required totake over the borrower’s repayment obligations upon default.

(h) Finance leasesThis form of security is perfected by its registration.

2.2 How can a creditor assure itself as to the absence of liens withpriority to the creditor’s lien?The registration of mortgage bonds, deed of hypothecations and notarialbonds (among others) serves as constructive notice that there exists a lienupon the property in question. These types of security are available forinspection by the public at the Deeds Office, so the creditor only needs toconduct a deeds search to determine if there are any encumbrances or lienswhich take priority over its lien.

• In terms of Section 125 of the Companies Act, every company is obligedto file with the Registrar of Companies a statement of particulars inrespect of the creation by the company of any charge and the making ofany issue of debentures charged on or affecting any property of thecompany. This Act defines a charge as: (i) a mortgage or a mortgagebond; (ii) a deed of hypothecation; (iii) a notarial bond; (iv) a deposit ofa share or debenture certificate made by way of charge; (v) a pledge orshares or debentures; (vi) a pledge or cession over motor vehicles or plantand equipment; (vii) cession of book debts; and (viii) a charge on a shipor aircraft or an agreement to give a charge.

• Are any fees, taxes or other charges payable to perfect a security interestand, if so, are there lawful techniques to minimise or defer them?

Neither taxes nor charges are payable at the Deeds Office to perfect asecurity interest. However, fees are levied by the respective legal practitioners(a conveyancer or a notary public) for the preparation and registration ofsecurity documents which require registration in the Deeds Office.

A mortgage bond is prepared by a conveyancer who charges fees to theindividual passing the bond in favour of the mortgagee (creditor). There aretaxes on such conveyancing fees, set by tariff depending on how much thebond is worth.

Both a deed of hypothecation and a notarial bond must be prepared by anotary public who also levies prescribed notarial fees set by tariff.

The remaining types of security do not require registration and so are notsubject to any fees.

There are no lawful techniques to minimise or defer the fees.

2.3 May a corporate entity, in the capacity of agent or trustee, holdcollateral on behalf of the project lenders as the secured party?It is common around the world in large scale project financing for thesecurity given to a syndicate of banks or lenders to be held by, and theproject revenue paid into accounts held in the name of, a security trustee ora security agent.

In Botswana, lenders who choose to use a security trustee or agent structuredo so for the following advantages.

• The trust removes insolvency risk because the assets taken as security areimmune from the trustee’s personal creditors and are protected fromthird party or general creditors of the borrower, who are not in thelenders’ syndicate;

• It is often impossible to grant security to each individual creditor andsecurity trusts facilitate the trading loans by the lenders without thedanger of releasing the security;

• There is common monitoring of covenants and insurance;• The trustee holds the security in their name as the legal holder of the

security and so it is unnecessary to register the security in each creditor’sname and incur the related cost;

• The enforcement powers against the security interests are common andmore efficient. The security trustee can enforce their own right, becausethe security title is in their name; and

• Creditors can easily transfer their claims by novation.

However, section 52 of the Deeds Registry Act does not allow an agent tohold security on behalf of a principal who is the lender.

Reliance is often placed on the Companies Act, which permits the creationof trustees for debenture-holders, to hold and register security interests ofany nature as collateral for the common benefit of the debenture holder.This allows the trustee of debenture holders to take security in a mannervery similar to the usual security trustee structure for syndicate banks foundin other jurisdictions, by means of a statutory deed of trust as set out in thefifth schedule of the Companies Act. In terms of the fifth schedule, onlythe following corporate entities qualify to act as a trustee for debenture-holders: (i) banking companies; (ii) insurance companies; (iii) investmenttrust companies, finance or other corporations as approved by the Ministerof Finance and Development Planning.


3.1 What restrictions, fees and taxes exist on foreign investment inor ownership of a project?No such restrictions, fees or taxes exist. Foreign and domestic investors aretreated the same under the laws of Botswana.

3.2 Are there any bilateral investment treaties with key nation statesor other international treaties that may afford relief from suchrestrictions? Would such activities require registration with anygovernment authority?Under Section 54 of the Income Tax Act the Minister of Finance andDevelopment Planning (the Minister of Finance), on behalf of thegovernment of Botswana, is able to enter into tax agreements with anyperson who is or may become liable to pay tax.

Under the above stated provision, a number of double taxation avoidancetreaties have been concluded so as to reduce the tax burden between theparty states. The Botswana income tax regime is source-based, with notmuch foreign-earned income taxed by the treasury, except where theamounts are deemed to be sourced in Botswana. However, where the income

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taxable in Botswana was previously taxed in another jurisdiction with adouble taxation avoidance agreement with Botswana, the taxpayer is givencredit for the tax paid in that other jurisdiction.

The key nation states which are afforded this taxation relief are: Barbados;China; France; India; Lesotho; Mozambique; Namibia; the RussianFederation; Seychelles; South Africa; Swaziland; Sweden; the UK; and,Zimbabwe.

3.3 Can a government authority block or unwind a transactioninvolving foreign investors after it has closed for strategic/ nationalsecurity or other reasons?No. The Republic of Botswana, as a state that vigorously adheres to the ruleof law and upholds both the sanctity and freedom of contract, does notenable its governmental agencies or authorities to interfere in lawfully-concluded commercial transactions.

However, there are a few limited and exceptional circumstances in which atransaction may be unwound or blocked, such as transactions induced byfraud (which nullifies the transaction from its inception), or any othercontractually vitiating factor such as illegality, a common mistake of theparties and misrepresentation.


4.1 Is a submission to a foreign jurisdiction and a waiver ofimmunity effective and enforceable?Yes, as Botswana adheres to the principle that parties be held to theircontracts (pacta sunt servanda). A submission to a foreign jurisdiction iseffective, provided that the same is done freely and voluntarily by the State.

A waiver of immunity is effective and enforceable provided that thesignatory had the requisite governmental or state authority (actual) toexecute the waiver of immunity in question.

4.2 What are the relevant government agencies or departments withauthority over projects in the typical project sectors? What is thenature and extent of their authority?The relevant government departments with authority over projects includes:the Ministry of Minerals, Energy and Water Resources; the Ministry ofTrade and Industry; the Ministry of Transport and Communications; theMinistry of Local Government Lands and Housing; and the Ministry ofInfrastructure, Science and Technology.

The nature and extent of the authority exercised by these ministerialdepartments is dependent upon a number of variables, such as: the projectto be undertaken and the applicable project sector; the national import ofthe project; and, the amount of public funds invested into the project.

4.3 What government approvals are required in relation toenvironmental concerns for typical project finance transactions?What fees and other charges apply?Under the Atmospheric Pollution (Prevention) Act (chapter 65) a personcarrying on an industrial process capable of causing or involving theemission into the atmosphere of an objectionable matter must have aregistration certificate authorising them to carry out the process.Applications for registration certificates must be made to the air pollutioncontrol officer.

In terms of the Environmental Impact Assessment Act (chapter 65), aprospective developer must apply to the Department of EnvironmentalAffairs (DEA) for authorisation if the activity involves infrastructuredevelopment, developments in the energy industry, or any other activity setout in either the Environmental Assessment Act or its regulations.


5.1 How does a bankruptcy proceeding in respect of the projectcompany affect the ability of a project lender to enforce its rights asa secured party over the security?The project lender can enforce their rights against the project companyduring bankruptcy proceedings. Secured creditors, such as the holders ofmortgage bonds or deeds of hypothecation, have preferential claims whichare paid out before other creditors, and will be paid in respect of therealisation of the sale of the asset that is the subject of the security. Wheresecured creditors have security over the same asset, the creditor grantedsecurity earlier in time has a higher-ranking claim in respect of that asset.

5.2 What processes, other than court proceedings, are available toseize the assets of the project company in enforcement? Forinstance, is contractual enforcement (such as receivership)recognised?No processes exist to seize the assets of the debtor without a court of law’sintervention, as Botswana law does not sanction so-called self help (theconcept of receivership is not recognised). A court order is required in orderto seize the assets of the debtor.

However, other contractual mechanisms such as step–in contractual clauses,may provide some degree of recourse to lenders and borrowers. Step-in rightsare rights given to lenders in project finance arrangements, which enablethe project lender to take the place of the project company’s position in thecontract, thereby seizing control of the project where the project companyis not performing.

5.3 Outside the context of a bankruptcy proceeding, what stepsshould a project lender take to enforce its rights as a secured partyover the collateral/ security? With regards to a deed of hypothecation, the Hypothecation Act providesan abridged, swift and expeditious route for the judicial enforcement of adeed of hypothecation and against the security mortgaged by it. This occursonly when there is a breach or the occurrence of an event of default asdefined by the security arrangements agreed between the debtor and thecreditor in the deed of hypothecation and underlying loan agreement.

The process is laid down in section 9 of the Act which gives rights ofrecourse to an authorised creditor upon the breach of any provision specifiedin a hypothec or hire-purchase contract entered into under the Act.

SECTION 6 – Foreign exchange, emittances and repatriation

6.1 What, if any, are the restrictions, control, fees and taxes onremittances of investment returns or payments of principal, interestor premiums on loans or bonds to parties in other jurisdictions?There are no foreign exchange controls in Botswana – hence the freerepatriation of profits, dividends and capital.

The practice of tax grossing-up is prohibited. Grossing-up is designed toprotect the margin of the bank’s gross profit. Grossing-up involves the debtoror borrower paying extra so that after all tax deductions, the bank receivesthe full amount on the due date as if there had been no tax deductions.

6.2 Must project companies repatriate foreign earnings? If so, mustthey be converted to local currency and what further restrictionsexist over their use?Project companies are not obliged to repatriate their foreign earnings, andwith the absence of exchange controls, the same may repatriate their foreignearnings in foreign currency.

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6.3 What, if any, tax or other incentives are provided preferentiallyto foreign investors or creditors? What, if any, taxes apply to foreigninvestments, loans, mortgages or other security documents, eitherfor the purposes of effectiveness or registration?The following are tax and other incentives which are provided to investors,and not strictly preferentially provided to foreign investors.

Manufacturing companies and International Financial Services Centre(IFSC) accredited companies pay tax at a rate of 15% on their taxableincome, and companies accredited by the Botswana Business InnovationHub pay tax at a rate of 15% on their profits.

A development approval order (DAO) provides special tax relief and maybe acquired subject to the prior authorisation of the Minister of Finance.This provides so-called tax holidays in which a zero corporate tax rate islevied and may be made available to investors for a period of five to 10 years.


7.1 Is there a public private act or similar statute authorising PPPsand are both greenfield and brownfield PPP projects permitted?There is no legislative instrument authorising PPPs, but both greenfield andbrownfield projects are permitted depending upon the acquisition of therequisite ministerial or governmental authorisation.

The Electricity Supply Amendment Act 2007 was introduced to create anenvironment for public private partnerships (PPPs) to enter the market tobuild and operate power generation and transmission activities.

7.2 May a concessionaire grant security interest in the project to itslenders and, if so, is consent of the government or contractingauthority required?Yes, a concessionaire may grant security interest in the project to its lenderssubject to procuring the prior consent of the government.

7.3 Are government guaranties or other payment obligations of thegovernment or contracting authority subject to appropriations orother periodic authorisations?Section 22 of the Public Finance Management Act (SI 12 of 2011) providesthat any government guaranties or other payment obligations of theGovernment are subject to the prior authorisation of the National Assembly.Only then (unless it is not reasonably practicable to await suchauthorisation) may the Minister of Finance may then guarantee therepayment of the principal money and payment of interest and otherincidental charges on behalf of the Government..

7.4 May the government or contracting authority unilaterally amendor terminate a concession?No (see 3.3). The Republic of Botswana, as a state that vigorously adheresto the rule of law, and upholds both the sanctity and freedom of contract,does not enable its governmental agencies and authorities to interfere inlawfully-concluded commercial transactions.


Botswana has seen an increase in the development of commercial properties,power plants, infrastructure and the mining industry. Major constructionprojects in Botswana include: the Morupule B Power Plant; the AcademicHospital at the University of Botswana; Kazungula Bridge project; roadsand infrastructure; the new central business district; and, the MmamabulaPower Plant.

About the authorParks Tafa is the managing partner of Collins Newman & Co, and hasbeen with the firm and in private practice for over 23 years. Tafa is oneof the leading lawyers in Botswana, with considerable experience as abusiness-transactional lawyer. He has a Bachelor of Laws from theUniversity of Botswana, and was attorney for the High Court ofBotswana (1991).

Tafa is consistently ranked by Chambers Global, PLC Which Lawyer andIFLR 1000 as a leader in his field. He co-authored an article forPractical Law Multi-Jurisdictional Guide 2013/2014 (Construction andProjects Overview in Botswana).

Parks TafaManaging partner, Collins Newman & Co

Gaborone, BotswanaT: + 267 395 2702F: + 267 391 4230E: [email protected]: www.collinsnewman.bw

INDONESIA



1.1 What types of collateral/security are available? Collateral and security available includes: • mortgage (hak tanggungan), which encumbers land, buildings and other

immovable properties;• pledge (gadai), which encumebrs movable property that is physically

delivered to the pledgee and intangible assets (for example, shares of acompany or monies on deposit in a bank account);

• fiduciary security (jaminan fidusia), which encumbers movable propertyand certain immovable properties that are not eligible to be encumberedby a mortgage (which, in each case, may remain in the possession of thegrantor), and intangible assets (for example, receivables, insuranceproceeds and intellectual property rights);

• security over movable goods described in a warehouse receipt (adocument issued by a warehouse manager evidencing the ownership ofeligible goods stored in a warehouse);

• hypothec (hipotik), which encumbers registered ships with a gross volumeof 20 cubic metres or more; and

• international interests in certain airframe, aircraft engines andhelicopters, which are encumbered by a security agreement, titlereservation agreement, or leasing agreement (governed by foreign orIndonesian law).

In addition, quasi-security may be provided in the form of powers ofattorney or conditional novations of contracts, among other contractualarrangements.


2.1 How is a security interest in each type of collateral perfectedand how is its priority established? For a mortgage, the security interest will be created upon registration of themortgage deed with the applicable national land agency office. Creation ofa second ranking mortgage is possible.

For fiduciary security, the security interest will be created upon registrationof the fiduciary security deed with the relevant fiduciary registration office.In addition, for fiduciary security over intangible assets, to make thefiduciary security binding against the account debtor (the payor of thereceivable), the account debtor must be notified of, and acknowledge, thecreation of the fiduciary security. A filing with the fiduciary registrationoffice will be invalid if the relevant property is already encumbered byanother fiduciary security interest.

For a pledge, the pledge will be created after the signing of an instrumentagreeing to the terms of the pledge (a deed or an agreement) and: (i) in thecase of tangible movable property, delivery of the property from the pledgorto the pledgee (or its agent); (ii) in the case of a bank account, notificationto, and acknowledgement by, the bank where the bank account is located;and (iii) in the case of shares of a company, annotation of the pledge in theshare register of the company.

For each of the security interests, the secured creditor holds a priority claimover the proceeds from the sale of the encumbered assets, subject to costsassociated with foreclosure and taxes.

2.2 How can a creditor assure itself as to the absence of liens withpriority to the creditor’s lien? For land rights, a creditor may procure a title and lien search, by a licensedland deed officer, at the applicable national land agency office. Conductingthe search requires the original title certificate and a power of attorney fromthe land right holder.

For movable properties, a creditor may procure a search, by a licensed notary,at the fiduciary registration office in the location where the asset owner isdomiciled, although such searches are not frequently carried out in practice.The search may require several days of manual review of physical records,and results may not be reliable. (An electronic filing system was recentlyintroduced, and this may facilitate more accurate searches).

The absence of a pledge over shares can be confirmed by review of the shareregister of the company that has issued the shares. It is not possible toconfirm the absence of a pledge over other types of assets.

2.3 Are any fees, taxes or other charges payable to perfect asecurity interest and, if so, are there lawful techniques to minimiseor defer them? Fees, taxes and other charges include notarial fees, land deed officer’s fees,nominal stamp duty, and registration fees. Notarial fees are generallynegotiable. For a mortgage, the land deed officer usually charges apercentage of the property value (although in some cases the fee may benegotiated).

Registration of fiduciary security interests and mortgages require thepayment of registration fees, based on the value of the security.

2.4 May a corporate entity, in the capacity of agent or trustee, holdcollateral on behalf of the project lenders as the secured party? Fiduciary security interests may be granted in favour of a lender’srepresentative or proxy. The position with respect to mortgages and pledgesis not expressly stipulated by law, but the use of an agent or proxy acting ona lender’s behalf as security agent is generally accepted practice. Trusts aregenerally not recognised under Indonesian law. In practice, internationalfinancings commonly utilise an onshore security agent (usually anIndonesian bank), with the terms of the appointment governed by foreign(non-Indonesian) law.


3.1 What restrictions, fees and taxes exist on foreign investment inor ownership of a project? Foreign investment generally requires an approval from the CapitalInvestment Coordinating Board (BKPM) and the establishment of anIndonesian limited liability company. Investment in certain sectors (such asupstream oil and gas, banking and construction services) may also be madethrough the creation of a licensed permanent establishment.

The Negative List of Investment (most recently updated in 2014) identifiesbusiness sectors which are closed to foreign investment or open to foreigninvestment subject to conditions. Conditions may include participation ofa domestic shareholder at a minimum ownership level, partnershiprequirements or special licensing requirements. Sectoral regulations may alsostipulate restrictions on foreign investment.

Indonesia

Jardin Bahar and Justin Patrick, Hermawan Juniarto

www.hermawanjuniarto.co

INDONESIA


Foreign investments may benefit from various fiscal incentives.

3.2 Are there any bilateral investment treaties with key nation statesor other international treaties that may afford relief from suchrestrictions? Would such activities require registration with anygovernment authority?Indonesia is party to numerous bilateral and multilateral treaties to promoteinvestment and trade. These treaties do not provide a basis for relief fromrestrictions under domestic law (although there are some cases wheredomestic law provisions have been amended to conform with treatyprovisions). In 2014, the Indonesian Government announced its intentionto terminate existing bilateral investment treaties. Although provisions vary,Indonesia’s bilateral investment treaties generally provide that treatyprotection is only available for investments that have been approved by theGovernment of Indonesia in accordance with applicable law.

3.3 Can a government authority block or unwind a transactioninvolving foreign investors after it has closed for strategic/nationalsecurity or other reasons? BKPM and other competent authorities may block a transaction that doesnot conform to applicable investment restrictions. The Commission for theSupervision of Business Competition (KPPU) may compel the unwindingof a transaction that has an anti-competitive effect. Indonesian courts arealso able to invalidate transactions ab initio (as if they never occurred) onthe basis that the terms of the transaction are contrary to the public order(although this is an exceptional remedy).


4.1 Is a submission to a foreign jurisdiction and a waiver ofimmunity effective and enforceable? An Indonesian person or entity may submit to a foreign jurisdiction, butIndonesian courts do not enforce judgments from foreign courts. Foreigncourt judgments may be considered as evidence in a new court proceedingin Indonesia.

Indonesian law is unclear on the authority to waive sovereign immunity,but it’s generally accepted that sovereign immunity does not apply to actsin a commercial transaction under a private (jure gestionis) capacity. UnderIndonesian law, government assets are imune from any form of seizure orencumbrance.

4.2 What are the relevant government agencies or departments withauthority over projects in the typical project sectors? What is thenature and extent of their authority? Relevant government agencies include: • Sector regulators, such as the Ministry of Transportation, the Ministry

of Energy and Mineral Resources, the Toll Road Authority (BPJT), theSpecial Task Force for Upstream Oil and Gas Business Activities (SKKMigas), and the Authority for Downstream Oil and Gas BusinessActivities (BPH Migas). These sector regulators authorise and monitorbusiness activities and, in some cases, award projects and approve tariffs;

• The Ministry of Finance, which regulates direct fiscal support (viabilitygap funding), government guarantees, tax incentives, and the utilisationof state-owned assets;

• The Capital Investment Coordinating Board (BKPM), which approvesand monitors the implementation of foreign investments.

Various other regulatory bodies at the national and regional level will beinvolved in particular aspects of a project (such as land usage, forest areausage, environmental impact, water usage and discharge, and road usage).

Planning agencies, such as the National Development Planning Agency ofIndonesia (BAPPENAS), also play a key role in developing potentialprojects.

4.3 What government approvals are required in relation toenvironmental concerns for typical project finance transactions?What fees and other charges apply? Indonesia’s Environmental Law requires companies with business activitiesthat have an environmental impact to complete an environmental impactassessment, known as an AMDAL. The State Minister of EnvironmentalAffairs has specified categories of business activities that require preparationof an AMDAL. Business activities that do not require an AMDAL requireeither documentation of environmental management efforts andenvironmental monitoring efforts (known as UKL and UPL) or delivery ofa Letter of Undertaking of Environmental Management and Monitoring(SPPL).

The Environmental Law provides that, as a prerequisite for the issuance ofa business or activity permit, the applicant must complete an AMDAL,UKL or UPL, and obtain an environmental licence. Some otherenvironmental permits may also be required, for example, permits for thehandling, storage or transportation of hazardous waste (as necessary).

Additionally, a business may be required to obtain a nuisance permit (hinderordonnantie or izin gangguan), under which periodic retribution must bepaid to the regional government.


5.1 How does a bankruptcy proceeding in respect of the projectcompany affect the ability of a project lender to enforce its rights asa secured party over the collateral/security? All creditors’ claims will be subject to a stay of 90 days following abankruptcy declaration (the day on which the commercial court declaresthat the company is bankrupt). A creditor is not allowed to exercise its rightsagainst the company’s assets during the stay. The stay does not apply tocreditors’ claims secured by cash collateral and creditors’ set-off rights.

5.2 What processes, other than court proceedings, are available toseize the assets of the project company in an enforcement? Forinstance, is contractual enforcement (such as receivership)recognised? Indonesia does not recognise the appointment of a receiver (as the role isunderstood in commonwealth jurisdictions) outside of bankruptcyproceedings. Specifically for a mortgage, however, a mortgage deed mayauthorise the mortgagee to manage the encumbered assets based on courtapproval. Enforcement outside of court proceedings is further describedunder section 5.3.

5.3 Outside the context of a bankruptcy proceeding, what stepsshould a project lender take to enforce its rights as a secured partyover the collateral/security? Legally, a project lender (secured party) has the right to immediately sell theencumbered assets through a public auction by a licensed auction house,without a court order. In practice, however, an auction house may bereluctant to execute the auction without a court order. A project lender isnormally expected to file an application for writ of enforcement with therelevant district court. The process for obtaining a court order can take threeto six months, assuming that there is no challenge from the debtor or anyother interested parties.

The enforcement may also be done by way of a private sale with the consentof the debtor, provided that there are no objections from any third parties.Consent of the debtor must be granted after default has occurred. Withrespect to mortgages and fiduciary security, the intention to hold a privatesale must be notified to the relevant parties and published in printed mediaone month prior to the date the private sale is to be carried out.

INDONESIA



6.1 What, if any, are the restrictions, controls, fees and taxes onremittances of investment returns or payments of principal, interestor premiums on loans or bonds to parties in other jurisdictions? Payment of income or revenue by an Indonesian tax resident to a non-Indonesian tax resident (including payment of interest or dividends) issubject to withholding tax at a rate of 20%. A lower rate may be applicableif there is a double tax avoidance agreement between Indonesia and thecountry of domicile of the payee. The payee would need to present a proforma certificate of domicile to apply for such lower rate.

For purposes of overseeing foreign currency transfers, a purchaser of foreigncurrency equal to $100,000 is required to provide the bank with which it istransacting a copy of the underlying transaction documents (providing abasis for the foreign currency payment) and other administrative documents.

6.2 Must project companies repatriate foreign earnings? If so, mustthey be converted to local currency and what further restrictionsexist over their use? Indonesian companies are generally required to receive any export proceedsor disbursements of offshore loans through an onshore account in a foreignexchange bank. Failure to comply with this requirement results in monetarysanctions by Bank Indonesia (the central bank).

There is no specific requirement for foreign earnings to be converted intolocal currency. The Currency Law, however, imposes mandatory use ofIndonesian rupiah for all transactions conducted within Indonesia. Thiscovers payment and settlement of all domestic commercial transactions andobligations, but excludes: transactions related to the state budget; grantsgiven by or to a foreign state; international commercial transactions; bankdeposits denominated in foreign currencies; and international financetransactions.

6.3 What, if any, tax or other incentives are provided preferentiallyto foreign investors or creditors? What, if any, taxes apply to foreigninvestments, loans, mortgages or other security documents, eitherfor the purposes of effectiveness or registration? The Investment Law allows for certain incentives, known as investmentfacilities, to foreign investors. These facilities include: income tax relief;exemption from, or reduction of, import duties over certain goods,machinery or raw materials; exemption from, or suspension of, value addedtax on import; accelerated depreciation or amortisation; and, dispensationof land and building tax in certain areas. Other fiscal incentive programmesare available, depending on the sector.

See section 6.1 on withholding tax on remittance. See section 2.3 for feesrelating to securities.


7.1 Is there a public private partnership act or similar statuteauthorising PPPs and are both greenfield and brownfield PPPprojects permitted? PPP projects in Indonesia are generally regulated under PresidentialRegulation 67 of 2005 on Cooperation between the Government and aBusiness Entity in Infrastructure Provision, as amended. This regulationgenerally allows for greenfield and brownfield projects, although regulationsfor some sectors (such as ports, airports and railways) provide thatbrownfield projects are to be implemented through state-owned enterprises.

7.2 May a concessionaire grant security interest in the project to itslenders and, if so, is consent of the government or contractingauthority required? A concessionaire would generally be allowed to grant security interests inthe project to its lenders (so long as the project assets are owned by theconcessionaire), subject to consent from the Government or relevantcontracting authority. Security interests are not allowed to be created overstate-owned assets or region-owned assets.

7.3 Are government guaranties or other payment obligations of thegovernment or contracting authority subject to appropriations orother periodic authorisations? State ministries are only allowed to make fiscal commitments within thebudget approved in the annual state budget. State ministries are allowed tomake multi-year commitments for the procurement of goods or serviceswith approval from the Minister of Finance.

The Minister of Finance has authority to approve direct fiscal support (inthe form of viability gap funding) and government guarantees for certainPPP projects, which approval will be granted in advance of projectimplementation. No other periodic authorisations are required.

7.4 May the government or contracting authority unilaterally amendor terminate a concession? Under the PPP regime, a concession would be granted through acooperation agreement which stipulates the rights and obligations of eachparty, including the risk allocation of the project. The Government orcontracting authority is not allowed to amend or terminate a concessionunilaterally unless expressly permitted to do so in the cooperationagreement.


8.1 In no more than 250 words, please describe any relevant projectfinance developments within your jurisdiction. This can includenoteworthy projects, new structures or techniques. Over the past five years, the Government has focused on developing variousincentives and facilities for PPP projects. Some notable developmentsinclude: • promulgation of Law 2 of 2012 on Land Procurement in the Public

Interest, which provides a procedure for compulsory acquisition of landrights to be used for public infrastructure;

• development of a government guarantee framework and establishmentof the Indonesia Infrastructure Guarantee Fund; and

• development of governmental direct fiscal support through viability gapfunding.

In May 2014, the Sarulla geothermal power plant project reached financialclose with a total estimated project value of $1.6 billion. The project willconsist of a 330MW power plant, and the first phase is anticipated to reachcommercial operation in 2016.

Reportedly, the Donggi Senoro liquefied natural gas (LNG) project isapproaching financial close and is expected to commence production inmid-2015.

The Central Java coal-fired power plant project is Indonesia’s most advancedPPP project, currently at the stage of land acquisition, and is the first projectto receive a guarantee from the Indonesia Infrastructure Guarantee Fund.

There are various other PPP projects in the pipeline, including: the BandarLampung water supply project; the Soekarno Hatta Airport rail link project;Sumsel 9 and 10 coal-fired mine mouth projects; the Bandung waste-to-energy project; and the Central Kalimantan coal railway project. All are atvarious stages of preparation or procurement.

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About the authorJardin Bahar is an Indonesian qualified attorney. His practice areas covervarious corporate and transactional matters in Indonesia, with a focuson project construction and finance. His in-depth knowledge ofIndonesian infrastructure regulatory frameworks (particularly relating topublic private partnerships) combined with his familiarity withinternational transaction practice, means he is a leading attorney ininfrastructure in Indonesia. Bahar has advised on and been involved inseveral major infrastructure projects in Indonesia, such as the JakartaMass Rapid Transit project and the Soekarno Hatta InternationalAirport railway project.

In banking and finance practice, Bahar has advised on various corporateloan transactions, assets finance and project finance transactions. Hisrepresentative clients include Standard Chartered Bank Group, ANZBank Group, PT Sarana Multi Infrastruktur (Persero), PT IndonesiaInfrastructure Finance, OCBC Group, and International FinanceCorporation.

Jardin BaharPartner, Hermawan Juniarto

Jakarta, IndonesiaT +62 21 5795 7676E: [email protected] W: www.hermawanjuniarto.co

About the authorJustin Patrick is a foreign legal advisor. He has a background in advisingsponsors, contractors, lenders and other institutions in the naturalresources, power, infrastructure and other sectors on project, asset-basedand corporate financing, project development (including public privatepartnerships), corporate transactions and commercial agreements.Before joining Hermawan Juniarto, Patrick was an attorney in HoganLovells’ Singapore office, where he was a member of the firm’sinternational infrastructure and project finance group. He has been aregular speaker on various regulatory issues in Indonesia and speaksBahasa Indonesia.

Justin PatrickForeign Legal Advisor, Hermawan Juniarto

Jakarta, IndonesiaT +62 21 2902 6441E: [email protected] W: www.hermawanjuniarto.co

MEXICO



1.1 What types of collateral/security are available? Collateral security on real property, personal property and intellectual prop-erty are available, including over land, movable assets, contractual rights,capital stock and cash flow.

The most common security interest on real property is a mortgage (hipoteca).For personal property a pledge (prenda) and a floating lien pledge (prendasin transmisión de la posesión), and security trust (fideicomiso en garantía) arecommonly used.

While most forms of collateral may be assigned to a security trust (includingreal property, contractual rights, certain permits, licences and other assets),some are not legally assignable, such as concessions granted by the Govern-ment or certain permits issued by federal authorities, including certain per-mits to operate energy assets.

It is customary for secured parties to receive collateral security in the formof a pledge on the project company’s shares and in tangible and intangibleassets related to the project.


2.1 How is a security interest in each type of collateral perfectedand how is its priority established? A security interest in real property is perfected by executing the documentthrough which the lien is granted in a notarial deed and recording it withthe property public registry (registro público de la propiedad or RPP) of thejurisdiction where the real property is located.

A security interest in personal property is perfected by recording any liensor encumbrances with the registry of movable security interests (registro únicode garantías mobiliarias or RUG).

Perfecting a security interest over certain types of movable property (suchas aircraft) can require several additional steps.

In most scenarios, priority is determined based on the timing of filing andperfection of the lien, although statutory priorities are applicable in case ofbankruptcy (see 6.1).

Perfection is retroactive to the time when the lien was filed in the applicableregistry.

2.2 How can a creditor assure itself as to the absence of liens withpriority to the creditor’s lien? For real property, parties may conduct a title search on the relevant realproperty, which will highlight any liens or encumbrances on the property.In addition, title policies can insure the owner, lender, mortgagee or holderof any security interest.

For personal property, parties may conduct a search in the relevant registry,but registration of liens or encumbrances on personal property in the RUGis not mandatory for all types of property. Floating lien pledges should beregistered.

2.3 Are any fees, taxes or other charges payable to perfect asecurity interest and, if so, are there lawful techniques to minimiseor defer them? Taxes and fees for the perfection of a security interest depend on the type ofasset and its location. A customary fee is paid upon filing or recording ofsecurity documents with the relevant registry.

A public deed by a notary public is required to perfect security interest inreal property. Notary fees will vary according to the place of the transaction.

Registration fees for real property in the property public registries vary bystate, while registration of personal property in the RUG is free of charge.

2.4 May a corporate entity, in the capacity of agent or trustee, holdcollateral on behalf of the project lenders as the secured party? A corporate entity, as agent or trustee for secured parties, may hold a securityinterest in collateral. It is quite common in project finance transactions touse a security trust structure as security interest, as the security trust is abankruptcy remote structure where the trust estate is separate and independ-ent from the borrower’s estate. Under this structure, the trustee will act onthe instructions of the secured parties and will execute all remedies and ac-tions in respect of collateral based on a private, contractually agreed enforce-ment process.


3.1 What restrictions, fees and taxes exist on foreign investment inor ownership of a project? Foreign investment is permitted in all sectors except those specifically re-served to the Mexican government (such as nuclear power) or Mexican na-tionals or companies (for example, certain ground transportation services).In addition, certain regulated activities (such as air transportation and radiobroadcasting) limit foreign investment to anything between 10% and 49%of the equity of the regulated company, while some others require the ap-proval of the Foreign Investment Commission to hold an ownership interestin excess of 49%. However, there are cases in which the limits providedunder the Foreign Investment Law can be exceeded with the prior approvalof, or a notice to, the National Foreign Investment Registry (Registro Na-cional de Inversiones Extranjeras or RNIE).

Foreign investment in Mexican companies must be registered in the RNIE.Fees for registration are minimal. For statistical purposes, the registry re-quires companies with foreign investment to file certain economic and fi-nancial information on a yearly or quarterly basis.

The Mexican Constitution prohibits foreigners from having direct owner-ship of real property located within a restricted zone of 100 kilometers alongthe Mexican borders and 50 kilometers along the Mexican coastlines. How-ever, Mexican law allows foreigners to acquire, indirectly, the rights to hold,develop, occupy, use, sell or lease real property in the restricted zone. Thiscan be done either through a Mexican corporation or a trust, so long as theby-laws for such entity include a provision whereby a foreign investor agreesto be deemed a Mexican national with regard to the investment and not toseek the protection of its Government in the event of a dispute, underpenalty of forfeiting its interest to the Mexican State.

Mexico

Raquel Bierzwinsky and David Jiménez Romero, Chadbourne & Parke

www.chadbourne.com

MEXICO


3.2 Are there any bilateral investment treaties with key nation statesor other international treaties that may afford relief from suchrestrictions? Would such activities require registration with anygovernment authority?Mexico has a robust network of bilateral and multilateral internationaltreaties, including the North American Free Trade Agreement with the USand Canada, and free trade agreements with the EU, Chile, Colombia,Uruguay, Japan, Israel, Switzerland and Norway, among others. Mexico’sfree trade agreements provide for most-favoured nation and non-discrimi-natory treatment, dispute settlement mechanisms, free transfer of capitaland protection from expropriation without compensation, among otherprinciples.

In addition, Mexico has entered into bilateral agreements for the protectionand promotion of investments (APRIS), including with the US, Australia,England, The Netherlands, South Korea, Switzerland, Spain, Italy, France,Uruguay, Germany, China and India.

No specific registration with any government authority, other than thoserequired by applicable law, is required by any such treaty.

3.3 Can a government authority block or unwind a transactioninvolving foreign investors after it has closed for strategic/nationalsecurity or other reasons? No government authority may block or unwind any such transaction, exceptin the case of legal expropriation, seizure and confiscation.

The Mexican Government has the right to seize, expropriate and confiscateany property or investments, regardless of national or foreign ownership, incases of public interest (including for strategic or national security reasons).This right is subject to a legal procedure and, other than in cases involvingcriminal activity, compensation is afforded to the affected party.


4.1 Is a submission to a foreign jurisdiction and a waiver ofimmunity effective and enforceable? Yes. The parties to a transaction may freely submit to the jurisdiction of thecourts of another country, subject to certain limitations and exceptions,among them disputes involving a government concession or permit, PPPsand real estate rights. They may also agree to submit to alternate disputeresolution procedures. In addition, with the exception of sovereign entities,waiver of immunity is effective and enforceable in Mexico. However, to theextent that a sovereign entity is involved in commercial activities with privateentities, such entity will not be afforded immunity from trial.

4.2 What are the relevant government agencies or departments withauthority over projects in the typical project sectors? What is thenature and extent of their authority? Depending on the nature and characteristics of a project, different govern-ment agencies may be involved.

In the energy sector, the Ministry of Energy (Secretaría de Energía orSENER) has oversight authority and coordinates, supervises and often reg-ulates the different sectors. SENER is supported by several agencies withdifferent regulatory authority, including the Energy Regulatory Commission(Comisión Reguladora de Energía or CRE) and the National HydrocarbonsCommission (Comisión Nacional de Hidrocarburos or CNH).

With the recently-enacted energy reforms, state actors Petróleos Mexicanos(PEMEX) in the hydrocarbons sector and the Comisión Federal de Electrici-dad (CFE) in the power sector, no longer have monopolies over their activ-ities. They have been transformed into state productive enterprises that,with certain exceptions, will freely compete with private participants in theenergy markets.

With the energy reforms, two new important state entities were created: theNational Centre for Energy Control (Centro de Nacional de Control de En-ergía or CENACE), which will have control of the national electricity gridand oversight of the wholesale electricity market and, the National Centrefor Natural Gas Control (Centro Nacional de Control de Gas Natural or CE-NAGAS), which in turn will have control and oversight over the gas pipelinenetwork in Mexico.

For infrastructure projects, such as toll-roads, ports, airports and other trans-portation related projects, the Ministry of Communications and Transporta-tion (Secretaría de Comunicaciones y Transportes or SCT) has oversightauthority and awards concessions and permits. For water transmission proj-ects, the National Water Commission (Comisión Nacional del Agua) is re-sponsible for awarding contracts and concessions.

Federal government agencies are responsible for the majority of public ten-ders for energy and infrastructure projects in Mexico, issuing the biddingguidelines and regulations to be complied with by all bidders, with the ex-ception of certain projects still controlled by the CFE and Pemex.

4.3 What government approvals are required in relation toenvironmental concerns for typical project finance transactions?What fees and other charges apply? Projects must file for approval of an Environment Impact Assessment (Man-ifestación de Impacto Ambiental) with the Ministry of Environment and Nat-ural Resources (Secretaría de Medio Ambiente y Recursos Naturales orSEMARNAT), to ensure the project complies with all applicable environ-mental laws and regulations. Other studies and permits may be applicabledepending on the type of project, such as solid toxic waste permits, air pol-lution approvals or construction permits.

Fees for the preparation of the relevant studies may vary based on the char-acteristics of each project and the conditions in which it will be built andoperated.


5.1 How does a bankruptcy proceeding in respect of the projectcompany affect the ability of a project lender to enforce its rights asa secured party over the collateral/security? The federal bankruptcy law (Ley de Concursos Mercantiles) was amended in2014 to eliminate certain loopholes. The reform included the followingchanges: (i) intercompany and shareholder debt is now considered subordi-nated debt; (ii) clearer rules for bondholders (and trustees) when dealingwith courts; (iii) the inclusion of a voluntary pre-insolvency filing; and (iv)the right of creditors to directly petition the liquidation of the debtor. Thecreation of federal specialised bankruptcy courts and the implementationof e-filings is expected to occur in the near future.

In bankruptcy, payment of labour liabilities and outstanding fiscal obliga-tions will have priority over the rights of secured creditors. Creditors withthe same level of priority may collect from the outstanding proceeds on apro rata basis.

In the case of secured bonds, enforcement of collateral may proceed only ifapproved by a majority vote of the bondholders to the extent set out in thetransaction documents or under applicable law.

MEXICO


5.2 What processes, other than court proceedings, are available toseize the assets of the project company in an enforcement? Forinstance, is contractual enforcement (such as receivership)recognised? Mexican law provides for several legal actions in favour of creditors (beforea formal insolvency proceeding), including foreclosure, attachment of assets,temporary restraining orders, preliminary discovery and pre-filing motions.Specific remedies will depend on the security interest implemented over theproject company’s assets (or any guarantor)

Some commercial claims may be resolved through summary proceedingsand expedited enforcements. For example, promissory notes (pagarés) andcredit agreements documented in a notarial deed afford the creditor accessto expedited foreclosure proceedings (juicio ejecutivo mercantil).

Under a security trust, the parties may contractually agree to private en-forcement procedures that will be implemented and enforced by the trusteewithout court intervention.

Government authorities, such as the Mexican Internal Revenue Service (Ser-vicio de Administración Tributaria) and the Mexican Institute for Social Se-curity (Instituto Mexicano del Seguro Social) are able to seize assets of a projectcompany through an administrative procedure to collect any amounts dueto them.

5.3 Outside the context of a bankruptcy proceeding, what stepsshould a project lender take to enforce its rights as a secured partyover the collateral/security? Generally, as a first step, lenders should require collection of payment inwriting. Depending on the type of collateral, such notice should be servedthrough a notary public.

It is customary for Mexican courts to resolve claims arising from the en-forcement of collateral or security interests in Mexico, although some out-of-court proceedings are available depending on the project documents(including liquidation of assets by third parties or secured parties). Theseprocedures are subject to particular and strict regulations and in certain casesmay be challenged in court.

In addition, a promissory note grants a creditor an executive action (acciónejecutiva), through which the creditor is afforded a more expedited enforce-ment process and the right to seize the debtor’s assets upon service of processbeing made, among other advantages.


6.1 What, if any, are the restrictions, controls, fees and taxes onremittances of investment returns or payments of principal, interestor premiums on loans or bonds to parties in other jurisdictions? There are no restrictions or limitations on repatriation of capital or profitsremittances aside from reporting obligations. Transfer of amounts exceeding$10,000 must be reported to the tax authorities.

Foreign investors are subject to a federal withholding tax at a rate of 10%on dividends, unless a lower rate based on an international treaty is appli-cable. With respect to interests, withholding tax rates vary from 4.9% (res-idents in treaty countries and publicly traded securities) to 40% (residentsof tax havens).

6.2 Must project companies repatriate foreign earnings? If so, mustthey be converted to local currency and what further restrictionsexist over their use? Project companies are not legally obligated to repatriate foreign earnings. Ifany, repatriation payments can be made in any currency. Peso-dollar ex-change rate is available on 24 and 48 settlement bases.

The Mexican Government does not impose any restrictions, limitations ortaxes on foreign currency exchange. Mexican nationals and foreigners alikecan hold bank accounts in foreign currencies outside of Mexico, and Mex-ican banks commonly have dollar-denominated accounts.

6.3 What, if any, tax or other incentives are provided preferentiallyto foreign investors or creditors? What, if any, taxes apply to foreigninvestments, loans, mortgages or other security documents, eitherfor the purposes of effectiveness or registration? The Mexican Government does not offer preferential tax treatment to for-eign investors, but rather affords equal treatment with Mexican nationalsand entities. Corporate foreign tax paid may be credited against Mexicantax on the same profits, provided it does not exceed the Mexican tax payableon foreign income.

Certain states and municipalities offer local tax incentives, irrespective ofthe nationality of the investor.


7.1 Is there a public private partnership act or similar statuteauthorising PPPs and are both greenfield and brownfield PPPprojects permitted? In 2012, a new Federal Mexican PPP Law entered into effect, providing ex-panded protection for investors. Both greenfield and brownfield projectsmay be developed under a PPP scheme. In addition, states have issued localPPP laws applicable to projects within their jurisdiction.

7.2 May a concessionaire grant security interest in the project to itslenders and, if so, is consent of the government or contractingauthority required? In terms of the PPP Law, each contract or concession must include provi-sions regulating how security interests may be granted on a case-by-casebasis. The economics of each PPP contract or concession, including any fi-nancing related provisions, are thoroughly reviewed and approved by therequesting government entity and by an interministerial commission headedby the Ministry of Finance (Secretaría de Hacienda y Crédito Público).

7.3 Are government guaranties or other payment obligations of thegovernment or contracting authority subject to appropriations orother periodic authorisations? PPP projects are analysed and authorised by the interministerial commissionbefore the payment resulting obligations are included in the federal expen-ditures budget. The multi-annual commitments related to the relevant PPPprojects that are included in this budget are reviewed and approved by theMexican house of representatives (Cámara de Diputados) on an annual basis.

7.4 May the government or contracting authority unilaterally amendor terminate a concession? The PPP Law provides specific events under which an adjustment or im-provement may be required in the form of an amendment. Early termina-tion may be declared by the contracting authority as a result of a breach ofthe project company’s obligations or an expropriation (see 3.3).

MEXICO



8.1 In no more than 250 words, please describe any relevant projectfinance developments within your jurisdiction. This can includenoteworthy projects, new structures or techniques. As a result of a constitutional reform passed in December 2013 and the en-actment of secondary legislation in August 2014, Mexico is further openingits energy sector to broader private sector participation. In the power sector,new legislation allows the private sector to participate competitively in thegeneration, sale, supply and marketing of electricity, while maintaining theelectricity grid under the operational control of a state-owned agency, aswell as electricity supply to residential and small commercial users. With re-spect to the oil and gas industry, the new legal framework creates a new mar-ket through: (i) assignments to state-owned agencies; (ii) contracts with theprivate sector for exploration and production of hydrocarbons; and (iii) per-mits to private participants for refinement, transportation, storage, distri-bution and marketing of hydrocarbons and hydrocarbon by-products, whilemaintaining ownership of all subsurface hydrocarbons.

In addition, the Mexican Government announced investments for up to$316 billion in infrastructure projects by 2018, including $48 billion fortransportation projects and an increase in infrastructure spending of 35%compared to the previous administration.

Also, amendments to commercial and procedural laws in the last few yearshave improved and expedited the legal procedures to enforce collateral andsecurity interests before local courts.

About the authorRaquel Bierzwinsky advises US and international clients in the areas ofproject finance, international finance and M&A, with a particularemphasis on Mexico and Latin America. She represents projectdevelopers, sponsors, commercial lenders, and multilateral and bilateralagencies in energy and infrastructure project financings, as well as inacquisitions and dispositions of projects. Bierzwinsky also advisesgovernment and international financing agencies in international grantand investment projects in developing countries

Raquel BierzwinskyCounsel, Chadbourne & Parke

New York and Mexico CityT: +1 212 408 5219 (New York)T: +52 55 3000 0608 (Mexico City)E: [email protected]: www.chadbourne.com

About the authorDavid Jiménez has been involved in major infrastructure projects inMexico, advising both private and public entities, and representingmultinational companies in the structuring development and financingof major projects. These cover many sectors including energy, oil & gas,transportation, water, social infrastructure and public privatepartnerships (P3/PPP).

He has been involved in major infrastructure privatisation processesincluding the sale of equity and assets of state-owned companies – suchas railroads, satellites, airports and natural gas – and in the awarding ofpublic services concessions. Jiménez assists multinational companies andconsortia in a large number of international public tenders called by thefederal and local government, including for the granting of concessions,public works and P3/PPP, as well as in the design and drafting of otherkinds of infrastructure contracts.

Jiménez has been actively involved in Mexico’s recent structural reforms,remarkably in the new PPP law and energy reforms.

David Jiménez RomeroPartner, Chadbourne & Parke

Mexico CityT: +52 55 3000 0601F: +52 55 3000 0600E: [email protected]: www.chadbourne.com

MOZAMBIQUE



1.1 What types of collateral/security are available? The Mozambique Civil Code rules on the types of collateral and securityavailable to creditors.

Mortgages and pledges are preferred securities. Being the subject of rightsin rem generally entitles creditors the right to be repaid from the proceedsof the sale of certain assets with preference over other creditors of the debtor(except for privileged creditors and in circumstances where a first rankingsimilar security is already in place). As a general rule, the creditor right inrem determines the type of security created. Immovable property or real es-tate and moveable assets subject to registration such as vehicles, vessels andaircrafts are mortgaged, whilst movable assets that cannot be mortgaged andrights (such as shareholdings) are pledged.

Other available instruments include surety, debt confession, right of reten-tion, novation, cession of receivables and assignment of rights (contractualposition, debts, credits and insurance).


2.1 How is a security interest in each type of collateral perfectedand how is its priority established? The majority of securities available under Mozambican legislation are cre-ated and perfected through a written agreement between the debtor andcreditor with their respective signatures certified by a notary public.

For mortgages, however, the debtor and creditor are required to sign a deedin the presence of a notary public. The deed must be subsequently registeredwith the applicable registry, depending on the asset being mortgaged (im-movable property or real estate, vehicle, vessel or aircraft).

For pledges, specifically where shareholding rights are concerned, the rulesfor creation and perfection of the security depend on the manner of mate-rialisation of the shareholding.

Pledging shareholding rights in a joint stock company or sociedade anónima(wherein the shareholding is represented by nominative shares and the cre-ation and perfection of the security) requires the endorsement of the sharecertificates by the debtor (pledgor), the registration of the pledge in the com-pany’s share register book and the delivery of the share certificates to thecreditor (pledgee). Should the shares be warrant-to-bearer, the delivery ofthe shares to the creditor (pledgee) is sufficient for the creation and perfec-tion of the pledge.

Pledging rights in a private limited liability company or sociedade por quotas– in which the shareholding is represented by quotas (corresponding to per-centages of the company’s share capital and not materialised in share cer-tificates) – requires and is subject to execution of a pledge agreementbetween the debtor and the creditor, the notification to the company of thecreation of the pledge (if not the prior consent of the company or by theshareholders for creation of the pledge) and the registration of the pledgewith the legal entities registry.

2.2 How can a creditor assure itself as to the absence of liens withpriority to the creditor’s lien? Mortgages and pledges and over quotas as recordable securities allow credi-tors to confirm the existence or absence of liens with priority to the creditor’senvisaged lien, and based on updated and recent certificates obtained fromthe applicable registry with respect to the asset being mortgaged or from thelegal entities registry when pledging quotas. A verification of the share cer-tificates or the verification of the company’s share register book are sufficientto confirm the existence or absence of prior liens in the case of nominativeshares.

It is worth stressing that in the case of different securities granted over thesame asset, the prior in tempor, potior in iure principle applies, and the first(holder) creditor will be paid first, except in the case of the right of retention.Where the security is subject to registration (please refer to the previousparagraph), the prior in tempor, potior in iure principle is assessed by referenceto the date of registration.

2.3 Are any fees, taxes or other charges payable to perfect asecurity interest and, if so, are there lawful techniques to minimiseor defer them? Costs and taxes to create and perfect any type of securities include notarypublic and applicable registry charges, plus stamp duty. Stamp duty is as-sessed on all documents, contracts, books, papers and deeds designated in aschedule that is attached and forms an integral part of the Stamp DutyCode. Mortgages and pledges are subject to 0.3% stamp duty, due andpayable by the borrower, assessed with reference to the amount secured bysuch securities, unless such transactions are deemed ancillary to anothertransaction (a loan) already subject to stamp duty in Mozambique (0.5%over the loan amount when the maturity is equal to or higher than five years,0.4% when the maturity is between one and five years, and 0.03% whenthe maturity is less than one year).

2.4 May a corporate entity, in the capacity of agent or trustee, holdcollateral on behalf of the project lenders as the secured party? Corporate entities may hold collateral or security on behalf of project lendersand in the capacity of an agent of security trustee. Such corporate entitiesare, however, not allowed to provide security for third-party debts, unlessthere is a justified self-interest on the part of the corporate entity, or thethird party debtor is a company of the same group or controls or is con-trolled by the entity providing the security. Therefore, the self-interest jus-tification must be contained in a report or resolution passed and approvedby the board of directors.


3.1 What restrictions, fees and taxes exist on foreign investment inor ownership of a project? Until recently, except for designated sectors (such as media, private securitycompanies) there was no real obligation to have indigenous equity partici-pation in companies conducting business in Mozambique.

The approval of the mega-projects legislation (a cross sectoral or horizontallegislation ruling on any sectors and activities that fall under its scope andprovisions) along with the recent approval of the new Petroleum and MiningLaws, imposes new restrictions on foreign equity participation for foreigninvestments in Mozambique. It establishes provisions accommodating notonly a mandatory and progressive increase of state participation, but also

Mozambique

Paula Duarte Rocha and Sílvia Prista Cunha, Mozambique Legal Circle Advogados

www.mozambiquelegalcircle.com

MOZAMBIQUE


mandatory mechanisms and conditions for the involvement of local com-panies and individual entrepreneurs in project activities in such sectors.

The new Petroleum Law even accommodates a transparency mechanism,whereby foreign entities participating in petroleum operations must be in-corporated in jurisdictions transparent to the Government. This refers tojurisdictions where the Government of Mozambique may, independently,verify the ownership, management and control and fiscal situation of sucha foreign entity interested in participating in petroleum operations.

3.2 Are there any bilateral investment treaties with key nation statesor other international treaties that may afford relief from suchrestrictions? Would such activities require registration with anygovernment authority? Mozambique is a party to several bilateral investment treaties with key na-tions, to promote and strengthen investment relations between Mozambiqueand other countries, such as South Africa, Germany, Algeria, Belgium,China, Cuba, Denmark, Egypt, US, US (OPIC), Finland, France, Indone-sia, Italy, Mauritius, Netherlands, Portugal, Sweden, United Kingdom, Viet-nam, India, Switzerland, Spain and Zimbabwe. All these bilateral investmenttreaties aim at fostering foreign direct investment into Mozambique, pro-viding investors with guarantees and protection measures (security and pro-tection of property rights, access to foreign loans and loan repayment,remittance of dividends, arbitration by the International Chamber of Com-merce or the International Centre for Settlement of Investment Disputesliberalised banking rates and, simultaneously, an increase in internationalcooperation.

Mozambique is also a party to and has ratified double tax treaties with Por-tugal, Italy, Mauritius, United Arab Emirates, Macau, South Africa, Viet-nam, India and Botswana, which generally cover taxes on (corporate andindividual) income and complementary tax.

The approval and entering into force of a competition law in Mozambiquemust also be taken into account when it comes to assessing actual or poten-tial restrictions on foreign investments. Although the implementation ofthis law is expected to be gradual, a number of public interests to be enforcedgo beyond the protection of a competition process, such as the promotionof national products and services, the competitiveness of small and mediumcompanies, and the consolidation of the national economy. Incidentally,these are objectives that can justify restrictive agreements.

3.3 Can a government authority block or unwind a transactioninvolving foreign investors after it has closed for strategic/nationalsecurity or other reasons? The blocking or unwinding of transactions involving foreign investors doesnot easily or often occur. However, there are laws and regulations expresslyallowing the state or governmental authorities to expropriate companies andnationalise assets, or compulsorily acquire assets in the private sector forstrategic, national security or other reasons (pertaining to situations in whichpublic interest must prevail over private interest). Such laws and regulationsalso establish the right to compensation.


4.1 Is a submission to a foreign jurisdiction and a waiver ofimmunity effective and enforceable? Submission to a foreign jurisdiction and a waiver of immunity are effectiveand enforceable contract provisions in Mozambique to the extent permittedby law. Under the Mozambican Civil Procedural Code, Mozambican courtscannot be deprived of their jurisdiction (irrespective of contractual provi-sions providing otherwise) if, in accordance with the Mozambican manda-tory procedural rules, they are deemed as having jurisdiction to decide onany matter arising from an agreement.

4.2 What are the relevant government agencies or departments withauthority over projects in the typical project sectors? What is thenature and extent of their authority? N/A

4.3 What government approvals are required in relation toenvironmental concerns for typical project finance transactions?What fees and other charges apply? Where foreign investments are concerned, the Ministry of Planning andDevelopment and the Bank of Mozambique are the most relevant govern-ment authorities with a cross sector role over investment projects. Theirmain roles include the authorisation, monitoring and supervision of invest-ments and projects and relevant inflow and outflow of capital and foreigncurrency.


5.1 How does a bankruptcy proceeding in respect of the projectcompany affect the ability of a project lender to enforce its rights asa secured party over the collateral/security? Mozambique approved and implemented in late 2013 a new regime forbankruptcy and recovery procedures, which provides that debtors withfavourable economic prospects be allowed to continue operating. Theregime also envisages the liquidation of companies with little economicprospect by maximising the value of the assets and by preferably selling theentire business.

The maximisation of the value of the debtor’s assets, active participationfrom the creditors and the protection from destruction of value and loss ofhuman capital are the key ideas in the Mozambique bankruptcy and recov-ery regime.

A debtor’s declaration of insolvency triggers the automatic maturity of allthe debts of the debtor and involves an automatic stay on assets; that is, se-cured creditors cannot gain possession of a secured asset or sell such assetseparately in order to be paid. The declaration also prohibits the debtor fromcarrying out any business activities or administering and disposing of its as-sets, and implies the unenforceability of certain transactions related to thedebtor carried out immediately prior to the declaration of insolvency.

Creditors are paid with the proceeds of the sale in the following order: (i)employment credits; (ii) secured credits; (iii) tax credits; (iv) ordinary credits;(v) contractual and tax penalties; and (vi) subordinated credits.

5.2 What processes, other than court proceedings, are available toseize the assets of the project company in an enforcement? Forinstance, is contractual enforcement (such as receivership)recognisedBoth judicial recovery proceedings – encompassing a request to the courtby the debtor for protection of his assets against creditors, together with thesubmission of a recovery plan approved by the creditors (share capital in-creases, changes in the control of the company, sale of assets) – and extra-judicial recovery proceedings – a special mediation procedure whereby thedebtor’s assets are not protected from creditors’ claims. However, once ap-proved (through a recovery agreement enabling the restructuring of thedebtor’s claims), it is deposited in a judicial court and constitutes an en-forcement order.

5.3 Outside the context of a bankruptcy proceeding, what steps should aproject lender take to enforce its rights as a secured party over thecollateral/security?

Outside the context of the bankruptcy and recovery proceedings, Mozambicanlaw generally grants the creditor the right to be paid for the sale of secured as-sets with preference over other creditors in the event of default. Where a mort-gage is in place, the enforcement of the security must be effected by means ofproper judicial proceedings. In the case of pledges, the sale may be performed

MOZAMBIQUE


either judicially or, when previously agreed upon by the parties, privately. Usu-ally, an irrevocable power of attorney is granted to the creditor under whichthe creditor is entitled at his discretion to sell the secured asset on behalf ofthe debtor and be paid from the proceeds of such sale.


6.1 What, if any, are the restrictions, controls, fees and taxes onremittances of investment returns or payments of principal, interestor premiums on loans or bonds to parties in other jurisdictions? The undertaking of any arrangement, transaction or operation between res-ident and non-resident entities in Mozambique, which result or may resultin payments or receipts from abroad is subject to exchange control legisla-tion. It thus requires the Bank of Mozambique (Central Bank) to give priorauthorisation. Such legislation specifically governs the undertaking of ex-change transactions by non-resident entities and in respect of goods or mon-etary assets located within the Mozambican territory and rights over suchgoods or assets, or when pertaining to activities exercised within the Mozam-bican territory.

The granting of credit to a resident in foreign currency is classified as a for-eign exchange transaction, and therefore subject to and requiring authori-sation from the exchange control authority (the Central Bank). Applicationfor authorisation for contracting the loan offshore will be effected by com-pleting a standard form provided by the Central Bank, substantiated by orattached with the following documentation: (i) parties identification – cer-tificate of incorporation or registration, power of attorney granting authorityto any individuals to execute the facility agreement (and supporting or an-cillary documentation) and to represent the relevant entities before any au-thority in Mozambique, and shareholders or board of directors’ resolutionsagreeing to the terms of the transaction; (ii) copy of the loan, credit, or fa-cility agreement – in draft (non-executed); (iii) rationale, setting out theeconomic or social reasons which justify the indebtedness; and, (iv) bor-rower’s latest financial statements, or confirmation of availability of resourcesfor settlement of the debt.

For purposes of consolidating the foreign exchange registration and com-mencement of disbursements, a certified copy of the loan, credit or facilityagreement should be submitted to the Central Bank within 30 days, count-ing from the date of execution of the agreement. To this effect, the agree-ment must be sworn and translated into Portuguese.

Registration of the loan disbursements should be made by the borrower bycompleting a standard form provided by the Central Bank, substantiatedwith the bank bordereau issued by the lender’s bank, evidencing the entryof funds. Payments relating to the repayment of capital (principal) are madethrough an intermediary or commercial bank and are subject to subsequentregistration with the Central Bank by way of completion of another standardform, also provided by the Central Bank and substantiated by attaching ademand or debit note.

The payment of interest and any other charges flowing from the loan is re-garded as a current transaction, and therefore not subject to authorisationby the Central Bank. It should be effected through presentation, by the in-terested party, to the intermediary bank, of the following: (i) parties’ iden-tification; (ii) proof of foreign exchange authorisation for contracting theloan, credit or facility; (iii) proof of registration of the disbursements; (iv)repayment plan or debit note; and (v) proof that tax due in respect of thetransaction has been paid or guaranteed (withholding tax).

As Mozambique has a number of double tax treaties in force, the withhold-ing tax rate may be considerably reduced. For example, under the doubletax treaty between Mozambique and South Africa, interest paid to and ben-eficially owned by a bank in South Africa, is subject to zero percent with-holding tax.

Foreign exchange registration of the transfer of income from foreign directinvestment in the form of profits or distributed dividends should be effectedagainst the presentation by the interested party to the intermediary bank,with the following: (i) identification of the parties involved; (ii) proof ofregistration of the investment with the Bank of Mozambique; (iii) declara-tion, issued by an independent auditor, confirming that the profits flowfrom the financial year or years in question, and from operations relating tothe activities of the company, explaining whether the profits were deter-mined prior to or after any transfers required by law; (iv) proof of consentof the competent corporate body, or, in the case of the transfer of dividends,a resolution of the General Assembly meeting which decided upon the dis-tribution of profits; and (v) proof that tax owing, in respect of the transac-tion, has been paid or guaranteed.

6.2 Must project companies repatriate foreign earnings? If so, mustthey be converted to local currency and what further restrictionsexist over their use? Mozambique resident entities are obliged to declare to the Central Bank allamounts and rights acquired, generated or held abroad, and to remit toMozambique all income from the export of goods, services and investmentsmade abroad. Part of the income in foreign currency may be retained abroadunder specific circumstances and are subject to effective submission to theCentral Bank of a monthly bank statement by the bank with which the en-tity in question holds the account and income offshore.

The income must be remitted by way of bank transfer and should be re-flected in national currency in the account of the beneficiary at the rate ofexchange used by the bank intermediating the export operation on the dateof the effective remittance.

6.3 What, if any, tax or other incentives are provided preferentiallyto foreign investors or creditors? What, if any, taxes apply to foreigninvestments, loans, mortgages or other security documents, eitherfor the purposes of effectiveness or registration? Besides the favourable exchange control regime highlighted herein, foreigninvestors may be eligible to tax incentives in Mozambique – deductionsfrom taxable income, deductions from the amount of tax assessed, acceler-ated depreciation, tax credits, exemption from tax and the reduction of therate of tax and other fiscal payments, deferment of the payment of taxes andother special fiscal measures as – as provided for under the Investment Law,the Regulation of the Investment Law and the Code of Fiscal Benefits, a setof rules designed mainly to attract foreign investment into the country.


7.1 Is there a public private partnership act or similar statuteauthorising PPPs and are both greenfield and brownfield PPPprojects permitted?Mozambique has approved and implemented a mega-projects legislation, across-sectoral or horizontal legislation, ruling on any sectors and activitiesthat fall under its scope and provisions. This legislation establishes the guid-ing rules for the process of contracting, implementing and monitoring un-dertakings of PPPs, large-scale projects and business concessions.

Both greenfield and brownfield projects are permitted within this legalframework, with contract lengths depending on the type of infrastructureto be developed.

7.2 May a concessionaire grant security interest in the project to itslenders and, if so, is consent of the government or contractingauthority required? Public domain assets (such as the land granted for exploration of the projectactivity) may not be granted as security by the concessionaire to the lenders.Also, the total or partial transfer of the rights or assets covered by the con-cession, sub-concession, sale, encumbrance or any form of disposition ofthe concession are subject to prior approval by the relevant competent au-thority.

MOZAMBIQUE


7.3 Are government guarantees or other payment obligations of thegovernment or contracting authority subject to appropriations orother periodic authorisations? As a general rule, Government guarantees and other payment obligationsare subject to issuance of the prior supervision visto by the AdministrativeCourt.

7.4 May the government or contracting authority unilaterally amendor terminate a concession? The Government or contracting authority may not unilaterally amend orterminate a concession contract, which must specifically describe the con-ditions for termination and the mechanisms for compensation in case oftermination. Nevertheless, the law sets out some general conditions underwhich the contract can be terminated (non-compliance, abandonment,transfer of the contract without consent, and non-payment of taxes).


8.1 In no more than 250 words, please describe any relevant projectfinance developments within your jurisdiction. This can includenoteworthy projects, new structures or techniques.The new Mozambique legal framework applicable to mining and petroleumoperations, including liquefied natural gas (LNG), is expected to acceleratethe implementation of the long-awaited $50 billion onshore LNG project.

Raising capital for such a project through project finance and available se-curities models will certainly pose restrictions, and the Government mayhave to consider exceptional rights and assurances to lenders in this project,including additional sharing of risks and more robust undertakings, guar-antees and assurances. Otherwise, the project may simply not be bankable,or imply commitments that cannot be met by the private partners and bythe required special purpose vehicle, as entailed in most project finance mod-els.

New bidding rounds for exploration of hydrocarbons in the offshoreRovuma, offshore Zambezi and Angoche and onshore around the Pande-Temane concession and Palmeira areas are expected to be launched shortly.However, the new Petroleum Law is still to be regulated, thus creating un-certainty and opening room for grey areas where potential bidders are con-cerned.

About the authorSílvia Prista Cunha is a lawyer in the Mozambique Legal CircleAdvogados, the Mozambican member of the MLGTS Legal Circle, aninternational network created by the Portuguese law firm Morais LeitãoGalvão Teles Soares da Silva & Associados (MLGTS). She began hercareer as a trainee lawyer at Pimenta Dionísio & Associados beforecompleting her law degree. Subsequently, she worked as a lawyer at SilvaGarcia Advogados e Consultores and Ferreira Rocha & Associados,Sociedade de Advogados.

Prista Cunha’s work focuses on legal advice to national and foreignclients in various fields of law with particular emphasis on areas ofemployment, commercial, corporate, investment and insurance. She hasa law degree from the Polytechnic University (2008).

Sílvia Prista CunhaLawyer, Mozambique Legal Circle Advogados

Maputo, MozambiqueT. +258 21 344000F. +258 21 344099E: [email protected]: www.mozambiquelegalcircle.com

About the authorPaula Duarte Rocha is a partner in the Mozambique Legal CircleAdvogados, the Mozambican member of the MLGTS Legal Circle, aninternational network created by the Portuguese law firm Morais LeitãoGalvão Teles Soares da Silva & Associados (MLGTS).

Duarte Rocha has also been a consultant to MLGTS in all matterspertaining to Mozambique since January 2014. From 2000 to 2002, sheprovided multidisciplinary legal consultancy to the tax and legal servicesdepartment of PricewaterhouseCoopers, cooperating with national andforeign investors. She was also an associate lawyer and senior legaladvisor at MGA Advogados & Consultores (2002-2008). Duarte Rochawas also a managing partner and lawyer at Ferreira Rocha & Associados,Sociedade de Advogados (2008-2012), taking part in all areas ofpractice and advising national and foreign private companies on publicsector laws, public tenders and contracts, as well as advising foreignentities on compliance with all Mozambican tax, labour andcommercial obligations.

Duarte Rocha has a law degree (Polytechnic University, 2001) andattended the arbitration course at the Center of Arbitration,Conciliation and Mediation (2002).

Paula Duarte RochaPartner, Mozambique Legal Circle Advogados

Maputo, MozambiqueT. +258 21 344000F. +258 21 344099E: [email protected]: www.mozambiquelegalcircle.com

NIGERIA


SECTION 1: Collateral/security

1.1 What are the types of collateral/security available?Nigerian law recognises both consensual and non-consensual security. Inthe case of consensual security, the main types are: mortgages (legal and eq-uitable), charges (fixed and floating charge), security assignments, and,pledges.

In the case of non-consensual security (security arising by operation of law),these are mainly in the form of liens.

SECTION 2: Perfection and priority

2.1 How is a security interest in each type of collateral perfectedand how is its priority established?A mortgage document must be stamped to be admissible as evidence in aNigerian court. According to legislation and case law, mortgages require theconsent of the governor of the relevant state in which the land is situated inorder to be effective.

Further, a mortgage agreement is a registrable instrument and must be reg-istered accordingly at the relevant lands registry. Registration of the instru-ment has a direct impact on priority over other competing instruments andinterests in the land.

In addition to registration at the lands registry, if the mortgage is created bya company, it must also be registered at the Nigerian companies house, theCorporate Affairs Commission, within 90 days of its creation. Otherwise,the mortgage security will be void against the liquidator or any creditor ofthe company. The registration of charges also has a direct effect on priorityof such security interest (prior registered mortgage against subsequent se-curity interests).

In the case of charges created by a company, stamping and registration ofthe charge with the Corporate Affairs Commission (CAC) are required. Ifit is a fixed charge over land, the prevalent view supported by case law isthat the consent of the governor will also be required and registration of thecharge at the relevant lands registry of the state.

A security assignment is in essence a mortgage (ie an assignment of title toan asset with an equity of redemption included). Typically, it is used for thecreation of security over choses in action or incorporeal assets. The perfec-tion process involves stamping and registration of the security assignmentwith the CAC (in the case of a charge created by a company). In addition,notice of the assignment may also be required to be given to the obligor ofthe underlying contract or asset. If the underlying contract or asset includesa restriction on assignment, consent of the counterparty or obligor wouldalso be required.

A pledge is a possessory security interest and is effected by delivery of pos-session. There is no formal perfection process required. However, where thepledge includes a memorandum delivered together with the assets, the mem-orandum may need to be stamped.

2.2 How can a creditor assure itself as to the absence of liens withpriority to the creditor’s lien?A creditor may secure itself as to the absence of liens or any encumbrancesby conducting a company search at the CAC. If the security is in the formof real estate or land, title searches should also be conducted at the land reg-istry of relevant state where the property is situated. In addition, searches atthe court registries may also be conducted to ascertain if there is any pendinglitigation on the assets in respect of which security is to be granted and inrespect of the company in general (including insolvency and winding up).

2.3 Are any fees, taxes or other charges payable to perfect asecurity interest and, if so, are there lawful techniques to minimiseor defer them?The various fees and taxes payable in order to perfect and enforce a securityinterest include the following.

• Governor’s consent and land registration feesThe fee for obtaining the consent of the governor is specific to the state inwhich the mortgage is to be created. It can range from 1.5% to six percentof the mortgage sum. Once the governor’s consent has been granted, themortgage must be registered at the relevant state’s lands registry – and, again,this attracts a fee that varies from state to state.

• Stamp duty feesThe applicable rate is 0.375% of the sum secured, although the precise ratecan only be confirmed following an assessment of the security documentsby the stamp duties commissioner.

• Registration fees of the charge with CACIn the case of a private company, the registration fee payable to the CACfor the registration of a charge is one percent of the sum secured. However,in the case of a public company, the applicable rate is two percent.

Most of the applicable legislation does not provide for deferment of fees andlevies, but in practice, where the fees are significant, government authoritieshave sometimes provided for a deferred payment over a period of time orreduction of such fees. Sometimes, this will require the provision of bankguarantees to ensure subsequent payment.

To minimise cost, it is common market practice for parties – lender(s) andborrower – to perfect the security interest to cover an agreed amount (per-centage of total obligation). The lenders have the right and ability to perfector up-stamp to cover the full obligation at their discretion (ie upon potentialdefault occurring).

2.4 May a corporate entity, in the capacity of agent or trustee, holdcollateral on behalf of the project lenders as the secured party?Nigerian law recognises the concept of trusts and agency. Also, corporateentities which are empowered to hold property in their name by their con-stitution documents or enabling laws (in the case of corporations createdby statute) may act as trustees, agents or secured parties holding security forand on behalf of beneficiaries under the applicable documents.

Nigeria

Tunde Oyewole and Dayo Idowu, Olajide Oyewole

http://olajideoyewole.com

NIGERIA


SECTION 3: Foreign investment and ownership restrictions

3.1 What restrictions, fees and taxes exist on foreign investment inor ownership of a project?The Nigerian Investment Promotion Commission Act CAP N117 LFN2004 (NIPC Act) permits 100% foreign ownership of Nigerian companiesand alien participation in virtually all sectors of the economy.

Both Nigerian and non-Nigerian investors are precluded from investing insectors viewed as important to national security, such as the production ofarms and ammunitions, and production of and dealing with narcotic drugs.

There are no discriminatory levies or taxes on foreigners intending to investin Nigeria; however, they are required by law to incorporate companies do-mestically at the CAC. The company is then treated as a Nigerian company.Potential foreign investors may also consider registration of their local orforeign companies as free trade zone entities if it is intended that the oper-ations of the companies will be carried out in a free trade zone in Nigeria.Such entities will be eligible for certain incentives such as exemption fromall federal and local taxes and levies in Nigeria (the customs territory).

In addition, a company with foreign investors must after due incorporationat the CAC, be registered with the NIPC for the grant of a business permitand approvals for all other incentives. A business permit is essentially thepermanent authorisation for the local operations of businesses with foreigninvestments or the subsidiary of a foreign company. Business permits maybe granted only to companies with a minimum authorised capital of N10million ($61,000).

The Certificate of Capital Importation (CCI) is an official document re-quired to be obtained from Nigerian authorised dealers (licenced banks)which evidences importation of capital investment (debt or equity) by a for-eign investor into Nigeria. The CCI guarantees unrestricted ability to repa-triate the principal, dividends, interests or other accretions using foreignexchange obtained from the official Central Bank of Nigeria foreign ex-change market.

For the oil and gas sector, the Petroleum Act CAP P10 LFN 2004 restrictsownership of licences and leases to Nigerian entities. In addition, the NigerianOil and Gas Industry Content Development Act (2010) gives significant ben-efits to Nigerian incorporated companies and indigenous companies partici-pating in the oil and gas sector. It states that preference be given to Nigerianindependent operators in the award of contracts and licences. The Act goeson to specify the minimum Nigerian content in oil and gas projects.

3.2 Are there any bilateral investment treaties with key nation statesor other international treaties that may afford relief from suchrestrictions? Would such activities require registration with anygovernment authority?Section 3.1 above makes this inapplicable in this context.

3.3 Can a government authority block or unwind a transactioninvolving foreign investors after it has closed for strategic/nationalsecurity or other reasons?In addition to constitutional safeguards, the NIPC Act reiterates the guar-antee preventing businesses from being nationalised or expropriated by theNigerian government and protects investors from being coerced into relin-quishing their business interest.

However, the government may acquire a company or business, if it isdeemed to be in the national interest or in pursuance of public policy de-mands. In such a scenario, the government is required to pay prompt, fairand adequate compensation. Further, Nigerian law, provides guarantees tar-geted at particular projects and companies.

SECTION 4: Documentation formalities and governmentapprovals

4.1 Is a submission to a foreign jurisdiction and a waiver ofimmunity effective and enforceable?The Nigerian courts have shown an inclination to accept and enforce agree-ments of Nigerian entities submitting themselves to the jurisdiction of foreigncourts. However, the courts are prepared, in limited circumstances, to assumejurisdiction despite the express choice of some other jurisdiction by the parties.Factors which the courts will consider in determining whether to assume ju-risdiction include: (a) the location of the evidence, the convenience in termsof accessibility and expenses between the domestic and foreign courts; (b) thecountries with which the parties are connected; (c) whether the party seekingto stay the proceedings in Nigeria is only seeking procedural advantages; and,(d) whether the plaintiffs would be prejudiced by having to sue in the foreigncourt because they would be (i) deprived of security for that claim; (ii) unableto enforce any judgment obtained; (iii) faced with a time-bar not applicable tothe domestic court; or, (iv) for political, racial, religious or other reasons, un-likely to get a fair trial.

A waiver of immunity is generally enforceable in Nigeria.

4.2 What are the relevant government agencies or departments withauthority over projects in the typical project sectors? What is thenature and extent of their authority?

Government ministry/department/agency Project sector

Ministry of Petroleum Resources Oil and gas sector

Department of Petroleum (DPR) Oil and gas sector

Nigerian Content Development Oil and gas sectorand Monitoring Board (NCDMB)

Ministry of Communications Technology, Telecommunications sectorNigerian Communication Commission (NCC)

Ministry of Power, Nigerian Electricity Electricity sectorRegulatory Commission (NERC)

Ministry of Aviation, Nigerian Aviation sectorCivil Aviation Authority (NCAA), Federal Airports Authority of Nigeria (FAAN), Nigerian Airspace Management Agency (NAMA)

Ministry of Transport, Nigerian Maritime sectorPorts Authority (NPA), Nigerian Maritime Administration and Safety Agency (NIMASA)

Infrastructure Concession and Public private partnership (PPP) Regulatory Commission (federal government)

National Council of Privatization, Privatisation of national assetsBureau of Public Enterprises (BPE)

Ministry of Agriculture Agro-allied sector

Ministry of Environment, NESREA Environmental impact assessment

Ministry of Lands and Lands Registry Real estate

Central Bank of Nigeria Banking and foreign exchange

NIGERIA


4.3 What government approvals are required in relation toenvironmental concerns for typical project finance transactions?What fees and other charges apply?The Environmental Impact Assessment Act CAP E12 LFN 2004 (EIA) pro-vides the general principles, procedures and methods to be followed whenconsiderating the impact of major projects on the environment. The EIAAct is administered by the Federal Ministry of Environment, and providesthat public and private sectors should not undertake or authorise projectsor activities without prior consideration of their environmental effects.

Where the extent, nature or location of a proposed project or activity is suchthat it is likely to significantly affect the environment, its environmental im-pact assessment should be undertaken in accordance with the provisions ofthe Act

The criteria and procedure in the Act should be used to determine whetheran environmental impact assessment is needed. All agencies and institutionsare required to apply in writing to the authority before embarking on theirproposed projects.

The National Environmental Standards and Regulations EnforcementAgency (NESREA) established under the NESREA Act (2007) acts as theenforcement agency for environmental standards and regulations, rules,laws, policies and guidelines.

SECTION 5: Bankruptcy proceedings

5.1 How does a bankruptcy proceeding in respect of the projectcompany affect the ability of a project lender to enforce its rights asa secured party over the collateral/security?A secured lender is entitled to enforce its security in the insolvency of a projectcompany subject to applicable law. In the insolvency of a project company, se-cured creditors rank above unsecured creditors of the project company if thesecurity interests of the secured lenders are appropriately registered within 90days of their creation. Priority of security interests amongst secured lenders willbe determined by the nature of security interest, priority of creation and priorityof registration. For example, a fixed charge on any property will have priorityover a floating charge affecting that property, unless the terms on which thefloating charge was granted prohibited the company from granting any latercharge with priority over the floating charge and the person in whose favoursuch later charge was granted had actual notice of that prohibition. Priority offixed charges will be determined by registration. A holder of a legal interest willhave priority over the holder of an equitable interest. Aside from this, certainpreferential creditors are preferred by law ahead of secured lenders, ie (taxes,wages and salaries, and compensation underthe Workmen’s Compensation Act).

Any conveyance, mortgage, delivery ofgoods, payment, execution or other act relat-ing to property which would be deemed inbankruptcy a fraudulent preference, wouldbe deemed, in the event of a company beingwound up, a fraudulent preference of itscreditors, and be invalid accordingly.

Any conveyance or assignment by a com-pany of all its property to trustees for thebenefit of all its creditors will be void.

Also, a floating charge on the undertaking or property of a company createdwithin three months of the commencement of the winding up of the com-pany would be invalid.

5.2 What processes, other than court proceedings, are available toseize the assets of the project company in an enforcement? Forinstance, is contractual enforcement (such as receivership)recognised?Where the security agreement provides, a receiver may be appointed by thesecured party, who will have powers under applicable law including a powerof sale of assets.

5.3 Outside the context of a bankruptcy proceeding, what stepsshould a project lender take to enforce its rights as a secured partyover the collateral/security?A project lender may enforce its security under the applicable security doc-uments without the need to present a petition for winding up the companyor borrower. For mortgages and assignments, the equity of redemption maybe foreclosed, powers of sale under charges and other security instrumentsmay be enforced. In addition, a receiver or receiver/manager may be ap-pointed by the lender over the borrower or over particular assets.

SECTION 6: Foreign exchange, remittances and repatriation

6.1 What, if any, are the restrictions, controls, fees and taxes onremittances of investment returns or payments of principal, interestor premiums on loans or bonds to parties in other jurisdictions?Subject to a CCI having been obtained when an initial investment or loanwas imported into Nigeria, outward remittance of funds, such as repatriationof dividends and profits, loan repayments and interest may generally bemade freely and is guaranteed under the NIPC Act.

6.2 Must project companies repatriate foreign earnings? If so, mustthey be converted to local currency and what further restrictionsexist over their use?There is no legal requirement for a project company to repatriate foreignearnings.

6.3 What, if any, tax or other incentives are provided preferentiallyto foreign investors or creditors? What, if any, taxes apply to foreigninvestments, loans, mortgages or other security documents, eitherfor the purposes of effectiveness or registration? Tax and other incentives providing preferential treatment to foreign in-vestors or creditors are generally given by the various applicable laws. Forexample, the Companies Income Tax Act CAP C21 LFN 2004 providesthat interest payable on a foreign loan granted on or after April 1 1978 areexempted from tax as prescribed in the table below:

SECTION 7: Public private partnerships

7.1 Is there a public private partnership act or similar statuteauthorising PPPs and are both greenfield and brownfield PPPprojects permitted?Under the Infrastructure Concession Regulatory Commission Act 2005(ICRCA), the Federal Government of Nigeria set up the Infrastructure Con-cession Regulatory Commission (ICRC) to drive PPP projects for and onbehalf of the Federal Government of Nigeria.

Repayment period includingmoratorium

Above seven years

Five to seven years

Two to four years

Below two years

Grace period

Not less than two years

Not less than 18 months

Not less than 12 months

None

Tax exemption

100%

70%

40%

None

NIGERIA


The functions of the ICRC are to: take custody of every concession agree-ment made under the ICRCA and monitor compliance with the terms andconditions of such agreement; ensure efficient execution of any concessionagreement or contract entered into by the government; ensure compliancewith the ICRCA; and perform other duties as may be directed by the Pres-ident.

Certain states (for example Lagos) have also set up PPP agencies or offices,which focus primarily on the development and implementation of PPP proj-ects within the state.

7.2 May a concessionaire grant security interest in the project to itslenders and, if so, is consent of the government or contractingauthority required?The concessioner will require the consent of the government or contractingauthority for the purpose of granting security interest to its lenders savewhere the concession agreement excludes such consent requirement in re-spect of financing for the project. Typically, most concession agreements in-clude such provisions.

7.3 Are government guaranties or other payment obligations of thegovernment or contracting authority subject to appropriations orother periodic authorisations?Government guarantees or other payment obligations of the government orcontracting authority will be subject to appropriations or other periodic au-thorisations subject to the provisions of the applicable laws. The applicablelegislations provide that these forms of funding will include governmentgrants and budgetary allocation. The Debt Management Office managesand administers all debt obligations of the Federal Government of Nigeria.

7.4 May the government or contracting authority unilaterally amendor terminate a concession?Subject to the terms of the concession agreement, the government or con-tracting authority may terminate the agreement for breach of contract.However, the applicable legislation protects and upholds contract sanctityand protects PPP contracts from arbitrary cancellation and termination.

SECTION 8: National update

8.1 In no more than 250 words, please describe any relevant projectfinance developments within your jurisdiction. This can includenoteworthy projects, new structures or techniques.The Samsung Egina project is a contract awarded by Total Upstream Nigeriato Samsung Heavy Industries for the construction and installation of a $3billion floating production storage and offoading (FPSO) Vessel. As part ofthe local content development objectives of the Nigerian government, cer-tain aspects of the FPSO are to be locally fabricated and final integration ofthe FPSO is to be carried out in Nigeria at a facility to be constructed bySamsung Heavy Industries Nigeria and which is to be located at the LagosDeep Offshore Logistics (LADOL) base. The total cost of the local fabrica-tion and integration facility is estimated to be about $300 million. The fa-cility is to ensure that large vessels, including FPSOs are partially constructedand assembled onshore in Nigeria. The project is expected to be a Nigeriancontent milestone as it will also ensure the domestication of a large portionof oil and gas industry activities in the country.

About the authorTunde Oyewole is the senior partner of the Olajide Oyewole, and headsthe firm’s advisory services group. He has over 30 years’ businessexperience as an engineer, lawyer and tax adviser. He was part of thefoundation management team that established Econet Wireless Nigeria(later known as Vmobile Nigeria), where he spent over five years as chieflegal officer and chief compliance officer.

Oyewole’s key areas of expertise are project finance, telecommunicationsand commercial litigation. He has a wealth of experience in projectfinance and M&A transactions and has recently advised Oando on its$1.7 billion acquisition of the Nigerian assets of ConocoPhillips.

The firm’s most important clients consider Tunde to be their mosttrusted adviser, and rely on his considerable experience and businessinsights over and above the dry legal principles.

Tunde Oyewole Senior partner, Olajide Oyewole

Lagos, NigeriaT: +234 1 279 3677M: +234 808 888 1111E: [email protected]: http://olajideoyewole.com

About the authorDayo Idowu is a partner at Olajide Oyewole and leads the finance andM&A practice.

Idowu has handled various landmark financing transactions in Nigeria,including the largest cement manufacturing plant in Africa and variousfinancings in the oil and gas industry. Recently, he advised Oando on its$1.79 billion acquisition of the Nigerian assets of ConocoPhillips andSamsung Heavy Industries in relation to its $3 billion FPSO EPCproject in Nigeria.

Idowu previously worked in the front office business of an investmentbank. He has a degree in law from the University of Ibadan and a jointMasters degree in global finance from the New York University, SternSchool of Business and the Hong Kong University of Science andTechnology Business School. He is admitted as a solicitor in Englandand Wales and as a solicitor and advocate in Nigeria.

Dayo Idowu Partner, Olajide Oyewole

Lagos, NigeriaT: +234 1 279 3670M: +234 703 405 5428E: [email protected]: http://olajideoyewole.com

PORTUGAL


SECTION 1: Collateral/security

1.1 What types of collateral/security are available? The Portuguese legal system includes the concept of security rights in rem(direito real de garantia) granting to the secured party: the right to pursuethe secured asset, even if it is transferred to a third party; and the right to bepaid out of the proceeds of the sale of the secured asset with priority overany other unsecured creditors.

Under Portuguese law, parties may establish different types of security rightson different types of assets. However, it is not possible to grant or create se-curity rights different to those expressly foreseen and regulated in the law,as all rights in rem are subject to numerous clausus. It is customary in a proj-ect financing in Portugal that, on the date of financial closing, secured par-ties receive security interests in substantially all personal and real propertyof the project company and in the receivables of the project itself, the mostcommon being: pledge of shares or quotas; pledge of rights, credits, movablegoods, and bank accounts; assignment of rights by way of security; and,mortgages – normally for real estate.

Portuguese law also admits financial collateral on shares, debentures andbanks accounts in line with the provisions of the Directive on Financial Col-lateral Arrangements.

SECTION 2: Perfection and priority

2.1 How is a security interest in each type of collateral perfectedand how is priority established? Contractual mortgages on real estate require the execution of a notarial deed(or equivalent document) and are subject to registration with the Land Reg-istry Office. Priority granted by duly registered mortgages ranks accordingto the registration date and, if registered on the same date, equally. Themortgagee or creditor does not have the right to automatically take posses-sion of the property in the event of default of the secured obligation: it mustseek judicial sale and be paid out of the proceeds of such sale.

Pledges over capital stock are subject to the execution of a private writtendocument containing the terms and conditions under which the pledge isgranted, in favour of whom the pledge is granted and the rights which areto be secured. For quotas (which are participations in so called private lim-ited companies – sociedades por quotas), the pledge must subsequently beregistered with the Commercial Registry Office for it to be effective towardsthird parties (erga omnes).

For book entry shares, the pledge must be registered in the account in whichthe shares are registered. For nominative certified shares, declaration of thepledge must be recorded in the certificate itself, signed by the owner of theshare to be pledged and subsequently registered in the share registry book.Finally, for bearer certified shares, dispossession or delivery of the share cer-tificates to the pledgee is necessary.

In case of security over credits rights (either by way of a pledge or assignmentin security), the creditor must take possession of any document evidencingthe debt. The debtor owning the corresponding debt must be notified bythe pledgor of the granting of the relevant security right in order for thepledge or assignment to be effective for the debtor.

Pledges over bank accounts is formalised by way of a private written docu-ment, subject to registration with the relevant credit institution.

The perfection of security over movable assets may be formalised by meansof a private written agreement. Perfection of a pledge over movable assetsrequires that the creditor takes possession of the pledged assets until full dis-charge of the debt. In case such a pledge is granted in favour of banking in-stitutions, the debtor may keep possession of the relevant pledged assets,acting as a holder on behalf of a third party. This requires that the signatureson the security documents be authenticated by a lawyer or public notary.

2.2 How can a creditor assure itself as to the absence of liens withpriority to the creditor’s lien? Lien searches are usually performed shortly before or on financial closingand allow secured parties to direct the debtor to extinguish intervening se-curity interest on personal property as necessary.

For the pledge of capital stock, confirmation may be obtained by consulting:the share certificates and the share registry book, in the case of shares ofjoint stock companies; or, the commercial registry certificate, in the case ofquotas of private limited companies.

For mortgages, the intervention of the public notary (or equivalent official)ensures title search, allowing good title confirmation and identification ofany encumbrances.

In addition, secured parties often rely on representations from the relevantentities that there is no security interest in the collateral other than as per-mitted.

2.3 Are any fees, taxes or other charges payable to perfect securityinterest and, if so, are there lawful techniques to minimise anddefer them? Stamp tax (0.6%) is due over the value secured whenever a security interestis granted, if the maturity date is longer than five years (lower rates are ap-plicable for lesser periods). However, the Portuguese Stamp Duty Code es-tablishes an exemption for any document or obligation which is consideredaccessory to a document or obligation already charged for stamp duty. It isbest to create security on the same date as the financing agreement it meansto secure (as the financing itself is subject to stamp duty).

Fees (normally nominal) are generally payable upon the filing or registrationof security documentation.

2.4 May a corporate entity, in the capacity of agent or trustee, holdcollateral on behalf of the project lenders as the secured party? As a matter of law, Portugal does not foresee any type of fiduciary ownershipand trusts are not recognised (save in the limited context of the MadeiraFree Trade Zone). In order to have a fully valid and enforceable securityright in rem, the beneficiary of the security needs to hold a valid underlyingclaim. Accordingly, even if the finance documents establish that the securityagent holds both the secured obligations and the security for the benefit ofthe members of a lending syndicate, unless all members of the syndicate aredescribed in the document as legal creditors or beneficiaries, the securityagent will appear as the sole beneficiary and will be the only entity with fullauthority to file enforcement procedures.

Portugal

Filipe Lowndes Marques and Ana Monjardino, Morais Leitão Galvão Teles Soares da Silva & Associados

www.mlgts.pt

PORTUGAL


SECTION 3: Foreign investment and ownership restrictions

3.1 What restrictions, fees and taxes exist on foreign investment inor ownership of a project?There are no restrictions, fees and taxes on foreign investment in or owner-ship of a project.

Economic activities within the regulated sectors, such as energy, telecom-munications, water and waste management, postal services, railways, com-mercial aviation and financial services, may require (for Portuguese andforeign investors) authorisation from the relevant regulator.

Compliance with the anti-money laundering and anti-terrorism financinglegislation needs to be assured at all times.

3.2 Are there any bilateral investment treaties with key nationsstates or other international treaties that may afford relief from suchrestrictions? Would such activities require registration with anygovernment authority?Please see question 3.1.

3.3 Can a government authority block or unwind a transactioninvolving foreign investors after it has closed for strategic/nationalsecurity or other reasons? A public contracting party may unilaterally terminate an agreement basedon duly justified public interest reasons and compensation will be due tothe other party (for all investors). A duly authorised private transaction witha foreign investor may not be unwound.

SECTION 4: Documentation formalities and governmentapprovals

4.1 Is a submission to foreign jurisdiction and a waiver of immunityeffective and enforceable?Submission to a foreign jurisdiction is effective and enforceable in Portugalso long as there is a serious interest in that choice or a connection with theunderlying transaction. However, Portuguese courts may claim to hold ex-clusive jurisdiction, such as over actions related to: local land; the validityof the incorporation and dissolution of companies domiciled in Portugal;the validity of entries in public registers; or, to the registration or validity ofpatents.

Waiver of immunity is effective and enforceable in Portugal. However, stateimmunity has a narrow scope and is limited to acts involving the exercise ofsovereign authority.

4.2 What are the relevant government agencies or departments withauthority over projects in the typical project sectors? What is thenature and extent of their authority? In general terms, the relevant ministries are responsible for the launching,licensing and major regulation of projects, either directly or through theirgovernmental departments. The approval of the Ministry of Finance mayalso be required whenever the project involves public investment.

The Tribunal de Contas (Court of Auditors) also plays an important role. Itis responsible for the supervision, approval and control of public funds, andparticularly PPP contracts in Portugal.

Finally, reference should be made to the Unidade Técnica de Acompan-hamento de Projectos (UTAP), an administrative entity under the supervisionof the Ministry of Finance in charge of the follow-up of PPP projects.

4.3 What government approvals are required in relation toenvironmental concerns for typical project finance transactions?What fees and other charges apply? Typical project financing requires environmental permits. For certain proj-ects, an environmental impact assessment (EIA) is required.

The administrative procedure for EIAs may now run simultaneously withthe licensing and authorisation procedure of the construction and installa-tion of the project, although the final decision may not be given before theissuance of the EIA.

Environmental permit fees are often de minimis application processing fees.However, costs of compliance with, and mitigation measures required by,environmental permits can be significant. In order to minimise this risk,the Portuguese PPP Act imposes that any applicable environmental impactdeclarations must be obtained by the public partner prior to the launchingof a PPP tender.

SECTION 5: Bankruptcy proceedings

5.1 How does a bankruptcy proceeding in respect of the projectcompany affect the ability of a project lender to enforce its rights asa secured party over the collateral/security?On the opening of bankruptcy proceedings, all security other than financialcollateral over the insolvent’s assets must be enforced within the bankruptcyproceedings. Payment of the creditor’s claims should be made in accordancewith the provisions of the Portuguese Insolvency and Company RecoveryCode. Any insolvent entity’s creditor must lodge its claims within the bank-ruptcy proceedings, indicating the amount of its claim and any securityfrom which it may benefit in the assets of the insolvent entity.

An insolvency order ruled by the court suspends any outstanding enforce-ment proceedings relating to seizure or attachment of any of the insolvent’sassets and prevents any new executor or enforcement proceeding against it.

5.2 What processes, other than court proceedings, are available toseize the assets of the project company in an enforcement? Forinstance, is contractual enforcement (such as receivership)recognised?Creditors may enforce security over assets outside the court provided suchsecurity has been granted under the Directive in Financial CollateralArrangements.

If the creditor holds a claim arising from expenses or damages caused bycertain assets (and provided that such assets are in its possession) the creditormay retain possession without filing a court proceeding.

5.3 Outside the context of a bankruptcy proceeding, what stepsshould a project lender take to enforce its rights as a secured partyover the collateral/security?Enforcement of security is usually regulated in the respective security agree-ment, and may freely determine (other than in specific cases, such as mort-gages) if assets may be sold by a court procedure or by private sale, and inthe latter case, the conditions (if any) that must apply to such private sale.

PORTUGAL


SECTION 6: Foreign exchange, remittances and repatriation

6.1 What, if any, are the restrictions, controls, fees and taxes onremittances of investment returns or payments of principal, interestor premiums on loans or bonds to parties in other jurisdictions?As a general rule, Portuguese Law does not impose currency controls andthere are no restrictions on the remittance of profits or investment abroad.Reporting obligations to the Bank of Portugal may apply to certain trans-actions.

Income derived from foreign currency exchanges may be subject to Corpo-rate Income Tax. Commission fees payable to a financial institution for for-eign currency exchange may trigger stamp duty.

6.2 Must project companies repatriate foreign earnings? If so, mustthey be converted to local currency and what further restrictionsexist over their use?Project companies have no obligation to repatriate foreign earnings.

6.3 What, if any, tax or other incentives are provided preferentiallyto foreign investors or creditors? What, if any, taxes apply to foreigninvestments, loans, mortgages or other security documents, eitherfor the purposes of effectiveness or registration?The Portuguese Government has put in place (for 2014 onwards) a corpo-rate income tax reform with the purpose of promoting international invest-ment and simplifying red tape.

Some of the investment-friendly tax measures enacted are:

• Exemption of foreign-sourced income from permanent establishmentsof resident companies (for at least three years and for all permanent es-tablishments in the same jurisdiction);

• Simplification of the certification process to benefit from reduced ratesof withholding tax regarding entities resident in a country with whichPortugal has entered into a Double Tax Convention;

• Participation exemption for foreign dividends (EU and non-EU) receivedfrom a qualifying shareholding (at least five percent) held uninterrupt-edly for at least two years;

• Withholding tax exemption for dividends paid to non-resident share-holders (EU and non-EU), with shareholdings of at least five percentheld uninterruptedly for at least two years.

In addition, the recently implemented golden visa has opened up the pos-sibility of applying for a residence permit for pursuing investment activitiesto those who have entered the country regularly (such as holders of validSchengen visas, or beneficiaries of visa exemptions), by transferring capital,creating jobs or acquiring real estate, with advantageous periods of stay inPortugal.

SECTION 7: Public private partnerships

7.1 Is there a public private partnership act or similar statuteauthorising PPPs and are both greenfield and brownfield PPPprojects permitted? The Portuguese PPP Act has recently been revised, defining new rules ap-plicable to the state’s intervention regarding the definition, conception,preparation, launching, awarding, modification, supervision and monitoringof PPPs. The goal of this revised legal regime, which was approved in thecontext of the Economic and Financial Aid to Portugal Programme, is toreinforce the prior evaluation by the Ministry of Finance, of risks to thestate when participating in the PPP, as well as the monitoring of their exe-cution. Concessions of multi-municipal water supply for human consump-tion systems, and sanitation of residual waters and management of urbansolid waste are expressly excluded from the scope of the PPP Act and areregulated by specific legislation.

Both greenfield and brownfield PPP projects are permitted under Por-tuguese law.

7.2 May a concessionaire grant security interest in the project tothe lender and, if so, is consent of the government or contractingauthority required? The concessionaire may not normally grant security over its shares and overrights and goods arising from or integrated in the concession without thegovernment or contracting authority’s approval. It will also be impossibleto grant any security over assets considered to be in the public domain (suchas roads). In project financings, it is common for the concession agreementto include provisions authorising the granting of security in favour of thelenders.

7.3 Are government guaranties or other payment obligations of thegovernment or contracting authority subject to appropriation orother periodic authorisations? In the control measures for budgetary execution foreseen in the Financialand Economic Assistance Programme, a set of legal rules (Law of Commit-ments) has been established for the assumption of commitments and delayedpayment of public entities.

Financial commitments may only be assumed to the extent of availablefunds, subject to several control mechanisms such as: (i) verification of legalcompliance and financial regularity of expenditure, in accordance with thelaw; (ii) registration in the computer system of budget execution support;and, (iii) issuance of a valid and sequential commitment number reflectedin the purchase order, order form or equivalent document.

7.4 May the government or contracting authority unilaterally amendor terminate a concession?The public contracting authority may not force its counterparty to sign anamendment to a concession agreement that does not deserve the latter’s con-sent, nor may it impose the execution of a different agreement to the oneoriginally agreed between the parties. The public contracting party may,however, unilaterally impose, via administrative order and based on publicinterest reasons, measures that modify the development conditions of theactivities within the concession agreement. Here, the concessionaire will beentitled to claim the financial rebalancing of the concession.

In the event of serious default by the concessionaire under its obligationsunder this agreement, the grantor may: i) through sequestration, temporarilyendorse the execution of any works and the development of the activitiesforming part of the concession, or the operation of its services; or ii) termi-nate the concession agreement (in case no remedy has been provided duringa remedy period), being the concessionaire liable for compensating thegrantor. In case of termination, financing entities normally have a prior step-in right.

Based on public interest, the grantor may redeem the concession at any time.Notice must be given to the concessionaire of the intention to redeem theconcession. In the event of redemption, the concessionaire will be entitledto receive from the grantor, by way of compensation and for each year fromthe date of redemption until the end of the concession period. In this sce-nario, finance documents should normally be assumed by the grantor.

PORTUGAL


SECTION 8: National update

In order to fulfil the goals required by the Memorandum of Understandingsigned with the Troika, the Portuguese Government has engaged a reviewof existing PPP agreements.

The Portuguese Republic is renegotiating road sector agreements with a viewto obtaining a 30% reduction in the costs imposed on public funds in 2014.The expected reduction of costs means a decrease, in equal amount, in avail-ability payments supported by the state concerning road concessions, whichare subject to the availability model. The concessions included are Costa dePrata, Grande Porto, Norte Litoral, Algarve, Beira Interior, Interior Norte,Beira Litoral and Beira Alta (previously subject to the shadow toll regime,SCUT), Norte and Grande Lisboa.

Availability payment reductions result from the combined effect of severalmeasures, such as: i) the reduction of shareholders’ internal rate of return(IRR) in the base case; ii) the review of rendering of services’ agreementsconcerning the toll tax payment between Estradas de Portugal (EP) and theconcessionaires (reducing EP’s payments); and iii) the structural change ofthe regulatory model, in order to reduce the services related to routine main-tenance and repair, protection against noise in accordance with Europeanlegislation, extension of roads and minimal conditions for movement onroads under construction.

Portugal’s strong investment in public infrastructure during the boom yearsunder PPP structures may be part of the reason why it found itself in a dif-ficult economic position in 2008. Several projects that were launched werehard to justify economically and have had serious revenue issues, which hasmeant added dependence on the state. The government appears to recognisethe importance of investment in public infrastructure so long as such infra-structure is viable; it has recently published a discussion paper on essentialinfrastructure projects for the next five years, with an emphasis on railwaysand ports, which may also help attract international banks back to the Por-tuguese lending market.

About the authorFilipe Lowndes Marques is a member of the banking and finance teamat Morais Leitão Galvão Teles Soares da Silva & Associados. He hasextensive experience in the area of project finance, having worked since1995 on several types of projects, including bridges, motorways, powerplants, wind farms, football stadia, LNG terminals and natural gasconcessions.

Marques has also been active in capital markets, having advised onseveral securitisation transactions (including the first securitisationtransaction under the new law and the first synthetic securitisation),covered bonds issuances and he has worked on several initial privateofferings for state-owned companies.

Marques is qualified to practice law in Portugal (1997) and in England& Wales (2000). He has a law degree (Portuguese Catholic University,1994) and a Magister Juris in European and comparative law (OxfordUniversity, 1995).

Filipe Lowndes MarquesPartner, Morais Leitão Galvão TelesSoares da Silva & Associados

Lisbon, PortugalT: +351 21 382 66 01F: +351 21 382 66 29E: [email protected]: www.mlgts.pt

About the authorAna Monjardino is a member of the banking and finance team atMorais Leitão Galvão Teles Soares da Silva & Associados.

Since 1996, Monjardino has worked on international public tenders,including privatisations, and on several types of operations in the area ofproject finance. She has represented promoters, financing banks(national and international) and administrative authorities, especially inregard to motorway (SCUT and toll), transport, water and wasteinfrastructures, and health care partnerships.

Monjardino also provides follow-up legal advice to concessionairecompanies and state-owned companies in local and regionaladministration. She is responsible for support to French-speakingclients.

She has a Diplôme du Baccalaureat (1991), a law degree (University ofLisbon, 1996) and an LLM in American law, intellectual property andantitrust (Boston University, 1999). She began her career as a traineeGide Loyrette Nouel in Paris (1996).

Ana MonjardinoSenior lawyer, Morais Leitão Galvão TelesSoares da Silva & Associados

Lisbon, PortugalT: +351 21 382 66 19F: +351 21 382 66 29E: [email protected]: www.mlgts.pt

SOUTH KOREA



1.1 What types of collateral/security are available? Under Korean law, security and collateral can only be established andeffected in a manner provided by the law. Real property, plant andmachinery, movable property, shares, deposit claims, contractual rights,receivables, and insurance claims can be used as collateral.

Types of security interest that can be created are: (a) mortgage; (b) pledge;and (c) yangdo dambo (a security assignment), depending on the type of theasset. Yangdo dambo is a security right created by transferring the legal titleof the collateral to the creditor. It is a non-statutory right which has beendeveloped through customary practice and is now recognised by Koreancourts as a valid form of security

There is also a newly-legislated security regime under the Act on SecurityOver Movables and Receivables (Movables Security Act) which came intoforce in June 2012. The Movables Security Act provides for an alternativemeans of creating security interests in movable properties and receivables(other than intellectual property).


2.1 How is a security interest in each type of collateral perfectedand how is its priority established? To create and perfect a mortgage, the mortgagor and the mortgagee mustexecute a mortgage agreement and register the mortgage with the relevantregistry.

To create and perfect a pledge, the pledgor and the pledgee must enter intoa pledge agreement. For a pledge over machinery, movable properties, orshares, the pledgee must also have actual (or deemed) possession of thecollateral. In the case of shares, the name of the pledgee can be recorded inthe shareholders’ registry to reinforce the level of security interest in additionto taking possession of such shares. For a pledge over the rights against athird party (including insurance claims, deposit claims, contractual rights,or receivables) a notice of pledge is given to, or the consent to pledge isobtained from, the obligor and such notice or consent must be affixed witha fixed-date stamp. There is no registration requirement for the creation orthe perfection of a pledge.

To create and perfect a yangdo dambo, the transferor and the transferee mustenter into a yangdo dambo agreement and the legal title to the relevantcollateral must be transferred from the transferor to the transferee.

Security interests under Movables Security Act can be created and perfectedover movables and receivables (present and future) by registering a securityinterest with the relevant registry.

The priority of competing security interests is determined by the order ofperfection. For mortgages, the date of registration will be the date ofperfection and for a pledge over the rights against a third party, the date onwhich a notice or consent with fixed date stamp is given or obtained is thedate of perfection. The Movables Security Act does not affect securityinterests created by other methods such as a pledge or yangdo dambo. Priorityof security interests created under the Movables Security Act and the existingsecurity methods will be determined in the chronological order of theirperfection.

2.2 How can a creditor assure itself as to the absence of liens withpriority to the creditor’s lien? A creditor can search the relevant registry for any mortgage or security underthe Movables Security Act or ask a third party whether there is a notice forany pledge over the rights against a third party.

2.3 Are any fees, taxes or other charges payable to perfect asecurity interest and, if so, are there lawful techniques to minimiseor defer them? Fees and taxes associated with the registration depend on the type of assetbeing provided as security. For instance, a major cost for establishing amortgage over a real property is the registration tax, which is 0.2% of themaximum secured amount.

2.4 May a corporate entity, in the capacity of agent or trustee, holdcollateral on behalf of the project lenders as the secured party? No. However, the generally accepted view in Korea is that a parallel debtstructure may be used for such arrangement. Under this structure, the debtowing to the security agent or trustee must be established as an independentobligation of the debtor to such person, separate from its obligations to thecreditor.


3.1 What restrictions, fees and taxes exist on foreign investment inor ownership of a project? The principal laws on foreign exchange transactions in Korea are the ForeignExchange Transaction Act (FETA) and the enforcement decree and rules.According to these laws and rules, most large-scale investment related to aforeign national or foreign currencies (including loans, guarantees, bonds,issuance or offering of securities, acquisition of domestic real estate or rightsover it) is subject to reporting requirements to the Ministry of Strategy andFinance (or, in certain cases, to a designated foreign exchange bank or theBank of Korea). The Minister of Strategy and Finance may suspend orrestrict foreign exchange transactions commenced without the relevantreports being made.

If a foreign national intends to invest by acquiring stocks of a Koreancorporation or by providing five-year or longer term loans to the samecorporation, such foreign national must report to the Minister of Ministryof Trade, Industry and Energy before the investment to be entitled to thebenefits provided under the Foreign Investment Promotion Act (FIPA).

However, in certain industries, foreign investment is prohibited or restricted.For example, foreign investment in nuclear plants and postal services isprohibited, and investment in power plants (other than nuclear plants),power transmission and supply, passenger service or freight transport, airtransportation, and communication services for example, is only permittedif certain conditions are met or the investment falls below a certaininvestment ratio.

Under the Foreigner’s Land Acquisition Act, a foreign national acquiringland is required to report to the relevant governmental agency.

South Korea

Michael Chang and Seung-Gyu Yang, Shin & Kim

www.shinkim.com

SOUTH KOREA


3.2 Are there any bilateral investment treaties with key nation statesor other international treaties that may afford relief from suchrestrictions? Would such activities require registration with anygovernment authority? No.

3.3 Can a government authority block or unwind a transactioninvolving foreign investors after it has closed for strategic/nationalsecurity or other reasons? Under FETA, if the Korean Government decides, due to certain emergencycircumstances (such as natural calamities, war or grave and sudden changesin economic situations in or outside Korea), that a serious difficulty in theinternational balance of payments and international finance, or seriousobstacles in implementing currency policies, exchange rate policies or othermacroeconomic policies due to capital movement in and out of Korea hasoccurred or is likely to occur, the Ministry of Strategy and Finance mayimpose certain restrictions on foreign exchange transactions. This wouldnot invalidate the transaction documents.


4.1 Is a submission to a foreign jurisdiction and a waiver ofimmunity effective and enforceable? The clauses under the relevant agreements providing for the submission bya Korean party to a foreign jurisdiction is valid and binding on that Koreanparty under Korean law. This applies when: (a) the relevant court hasjurisdiction over the matter under laws of a foreign jurisdiction; (b) thematter is reasonably related to such court’s jurisdiction; (c) the jurisdictionof such court is not so manifestly unfair or unreasonable as to be against thepublic policy of Korea; and (d) a Korean court has no exclusive jurisdictionover the matter under Korean law

4.2 What are the relevant government agencies or departments withauthority over projects in the typical project sectors? What is thenature and extent of their authority? The Ministry of Land, Infrastructure and Transport and the Minister ofTrade, Industry and Energy have the relevant authority to issue businesslicences and relevant permits. Depending on the project, the localgovernment has the authority to issue a construction permit.

4.3 What government approvals are required in relation toenvironmental concerns for typical project finance transactions?What fees and other charges apply? The Environmental Impact Assessment Act requires: (a) governmentagencies to assess the environmental impact at the government developmentplanning stage to reflect any environmental issues in their project plans; and(b) any sponsor to conduct an environment impact assessment. The relevantgovernment agency must consult with the Minister of Environmentregarding the environment impact assessment before granting a licence oran approval with respect to the project. The Minister of Environment mayalso request improvements or adjustments to be made to the environmentassessment or the project plan.


5.1 How does a bankruptcy proceeding in respect of the projectcompany affect the ability of a project lender to enforce its rights asa secured party over the collateral/security? The Debtor Rehabilitation and Bankruptcy Act regulates bankruptcy andrehabilitation proceedings. The purpose of a bankruptcy proceeding is toenable the debtor facing financial difficulties to suspend the creditor’soperation and liquidate and distribute its assets. The purposes of arehabilitation proceeding is to rehabilitate a company by reconciling theinterests of its creditors, shareholders and other interested parties.

In bankruptcy proceedings, if either the creditor or the debtor submits apetition for bankruptcy, the court declares the debtor bankrupt based onthe debtor’s inability to pay debts or the excess of the debtor’s indebtednessover its total assets, and the trustee will be appointed by the court toadminister and liquidate the bankruptcy estate. Under bankruptcyproceedings, the bankruptcy estate will be distributed to creditors in thefollowing priority order of claim: (1) secured creditors (who have a right ofseparation as discussed blow); (2) creditors with estate claims (includingclaims for costs of judicial proceedings, tax claims, wage and severanceclaims, management expenses incurred in connection with management,liquidation and distribution of the bankruptcy estate, and other claimsarising from the administration of the bankruptcy estate); (3) creditors withother statutorily preferred claims; and (4) other unsecured creditors.

Unlike rehabilitation proceedings, a secured creditor who has a lien, pledge,mortgage, chattel mortgage, bonds, intellectual property mortgage in thebankruptcy estate or leasehold rights is given the right of separation withrespect to the relevant estate. A secured creditor is not bound by bankruptcyprocedures and may enforce its security interest outside the bankruptcyproceedings and have priority in any proceeds resulting from theenforcement of its security interest. However, if the proceeds from theenforcement of security are insufficient to satisfy the claims of the securedcreditor, the remaining amount of the claims will be treated as an unsecuredclaim, which is subject to bankruptcy proceedings.

Unlike bankruptcy proceedings, secured claims in rehabilitation proceedingsare not recognised and cannot be enforced outside the rehabilitationproceedings. For rehabilitation proceedings, creditors have a right to voteon whether to approve or disapprove the rehabilitation plan, anddistribution to creditors is made in accordance with the approvedrehabilitation plan.

If the debtor engages in any acts that may harm the interests of itsbankruptcy creditor or rehabilitation creditor before the commencement ofa bankruptcy or rehabilitation proceeding, the trustee or the receiver canexercise the right to nullify such acts and recover the asset of the debtor’sestate. Accordingly, the project company’s provision of collateral which isdeemed to harm the interests of other creditors may be subject tonullification.

In bankruptcy and rehabilitation proceedings, foreign individuals andcorporations are treated the same as Korean nationals and corporations.

5.2 What processes, other than court proceedings, are available toseize the assets of the project company in an enforcement? Forinstance, is contractual enforcement (such as receivership)recognised? None.

5.3 Outside the context of a bankruptcy proceeding, what stepsshould a project lender take to enforce its rights as a secured partyover the collateral/security? Please see 5.1


6.1 What, if any, are the restrictions, controls, fees and taxes onremittances of investment returns or payments of principal, interestor premiums on loans or bonds to parties in other jurisdictions? FETA regulates the exchange rate system, foreign exchange operation andpayments and receipt of foreign exchange and accordingly remittances ofprincipal, interests or premiums. If the relevant investment involving suchremittance was conducted under FETA or FIPA, there are no limitationson such remittance of principal, interest or premiums.

SOUTH KOREA


If the Korean government deems that: (a) it is inevitable due to certainemergency circumstances, such as natural calamities, war or grave andsudden changes in economic situations in or outside Korea; or (a) a seriousdifficulty in international balance of payments and international finance,or serious obstacles in implementing currency policies, exchange rate policiesor other macroeconomic policies due to capital movement in and out ofKorea have occurred or are likely to occur, the Ministry of Strategy andFinance may impose certain restrictions on foreign exchange transactions,such as employing a permit system for foreign exchange transactions, orrequiring deposits of a certain portion acquired from the capital transaction.

However, foreign investment made under FIPA is not subject to anyrestrictions under FETA, and repatriation of amounts invested areguaranteed regardless of the Minister’s decision to impose the aboverestrictions.

6.2 Must project companies repatriate foreign earnings? If so, mustthey be converted to local currency and what further restrictionsexist over their use? No.

6.3 What, if any, tax or other incentives are provided preferentiallyto foreign investors or creditors? What, if any, taxes apply to foreigninvestments, loans, mortgages or other security documents, eitherfor the purposes of effectiveness or registration? There is a tax incentive to foreign investors subject to satisfying certainrequirements under relevant tax related laws.


7.1 Is there a public private partnership act or similar statuteauthorizing PPPs and are both greenfield and brownfield PPPprojects permitted? PPP infrastructure projects may be implemented under the Korea Publicand Private Partnership Act on infrastructure (KPPP Act). The KPPP Actlists 49 target businesses including roads, railways, ports,telecommunications, energy, environment, airports, and cultural facilities.It provides for several procurement schemes, including: build-transfer-operate (BTO); build-transfer-lease (BTL); build-operate-transfer (BOT);and build-own-operate (BOO).

For PPP infrastructure projects that are not implemented under the KPPAAct and not subject to laws applicable to government-led projects, theproject owner, depending on the characteristics of the project facilities, mayeither transfer ownership of the facilities to the government and secure theright to use the facilities for a certain period of time (usually for sportsfacilities, including baseball or soccer fields), or directly own and operatesuch facilities (usually for power plants and solar power plants).

The KPPP Act does not contain any provision related to brownfield PPPprojects.

7.2 May a concessionaire grant security interest in the project to itslenders and, if so, is consent of the government or contractingauthority required? Under the KPPP Act, any mortgage over the operation and managementrights of the project company under the concession agreement is permitted.For PPP infrastructure projects that are not implemented under the KPPAAct and not subject to other applicable laws, consent of the government orcontracting authority is required to grant security.

7.3 Are government guaranties or other payment obligations of thegovernment or contracting authority subject to appropriations orother periodic authorisations? No.

7.4 May the government or contracting authority unilaterally amendor terminate a concession? Under the KPPP Act, competent authorities can revoke a project relatedlicence if it is necessary to address any infrastructure related changes tooperate the project more efficiently to serve public interest. In such case,any loss suffered by the project company will be compensated.

The competent authorities can amend a project related licence afterconsultation with the project company if there are no other practicalmethods to achieve public interest in the operation of the project. In suchcase, any loss suffered by the project company is to be compensated. Further,the government can expropriate the project’s facility for legitimate reasonsand compensate the project company under the applicable law.


8.1 In no more than 250 words, please describe any relevant projectfinance developments within your jurisdiction. This can includenoteworthy projects, new structures or techniques.Due to a combination of factors such as a decline in real estate prices and aslowdown in the volume of transactions in South Korea, the localconstruction and project market is relatively slow. Some large-scale civilprojects such as redevelopment projects, new town construction projectsand other privately led projects have been postponed and some high-risebuilding projects have also been cancelled or terminated.

The main reason for such slowdown is the shortage of domestic investmentfunds and foreign investors’ withdrawal of funds from their co-investmentprojects in South Korea. In order to stabilise the construction and projectsmarket, the South Korean Government has proceeded with its early budgetexecution plan and placed a number of government-funded constructionorders. The major projects focus primarily on thermoelectric power plants,new renewable energy development facilities, hotels, shopping malls,railways and roads.

SOUTH KOREA


About the authorMichael Chang is a senior foreign attorney at Shin & Kim whose mainareas of practice are banking and finance, infrastructure and M&A. Hehas acted for banks, infrastructure funds, strategic investors andgovernmental agencies in a wide range of sectors, includinginfrastructure, media, power, mining, property development, hotels andtransport. He began to practise in Melbourne with Arthur Robinson &Hedderwicks in 1996 (now known as Allens) and following an extendedsecondment to Shin & Kim became their senior foreign attorney in2010. His in-depth experience in different sectors and different aspectsof Korean law allows him to provide commercial and integrated advice,whether it be to a strategic investor in the manufacturing or mediasector or a financial investor in the infrastructure sector.

Michael ChangSenior foreign attorney, Shin & Kim

Seoul, South KoreaT: +82 2 316 4653E: [email protected]: www.shinkim.com

About the authorSeung-Gyu Yang is a partner at Shin & Kim. His practice focuses onbanking and finance matters, with an emphasis on project finance,infrastructure funds, asset management business and finance regulatory.Yang has handled a great number of loan transactions and projectfinancings. He advises financial institutions on regulatory issues andregularly acts for financiers on acquisition finance matters.

Seung-Gyu YangPartner, Shin & Kim

Seoul, South KoreaT: +82 2 316 4048E: [email protected]: www.shinkim.com

TANZANIA


Section 1 – Collateral/security

1.1 What types of collateral/security are available?Collateral available in Tanzania includes mortgages over land, fixed chargesover assets (including the benefit of contracts, receivables and cash at bank),share charges and pledges, assignment by way of security, liens and floatingcharges (together security interests) and guarantees.

Section 2 – Perfection and priority

2.1 How is a security interest in each type of collateral perfectedand how is its priority established?Generally, a security interest is perfected by registration at the Business Li-censing Regulatory Authority (Brela) within 42 days of the date of its cre-ation. Otherwise, it will be void on the insolvency of the company againstthe liquidator or administrator, or any creditor of the company.

Mortgages must also be registered at the relevant lands registry, and somedocuments should also be registered at the registry of documents. The pri-ority of mortgages is generally determined by the date of registration at therelevant lands registry, and the priority of security interests is generally de-termined by the date of the document, in each case provided it is registeredin time and there is no other agreement.

2.2 How can a creditor assure itself as to the absence of liens withpriority to the creditor’s lien?Before concluding a transaction, a creditor should carry out a search at Brela,the lands registry, and the registry of documents.

Also, it is advisable to carry out a search at any relevant regulatory authoritywhich has issued sector-specific licences to, or regulates the activities of, thecompany. A search, for example, at the Ministry of Energy and Minerals orat the Tanzania Petroleum Development Corporation (TPDC) will confirmwhether there are any assignments or third party interests in mining licencesissued to or production sharing agreements entered into with the projectcompany.

Authorities such as the Tanzania Communications Regulatory Authority(TCRA) also have discretion to create charges over a licensee’s assets if thereis a default in payment of fees or royalty.

2.3 Are any fees, taxes or other charges payable to perfect asecurity interest and, if so, are there lawful techniques to minimiseor defer them?Nominal registration fees are payable for the registration of a security interestat Brela, the lands registry or the registry of documents. Security interestsare also liable to nominal stamp duty.

2.4 May a corporate entity, in the capacity of agent or trustee, holdcollateral on behalf of the project lenders as the secured party?Yes, a corporate entity can act as a security agent or trustee on behalf of theproject lenders, and this has been done in Tanzania, although the enforce-ability and operation of such an arrangement has not to our knowledge beentested in the courts in Tanzania.

Section 3 – Foreign investment and ownership restrictions

3.1 What restrictions, fees and taxes exist on foreign investment inor ownership of a project and related companies? Generally, there is no restriction of foreign ownership or management ofcompanies established in Tanzania.

However, there are restrictions on foreign investment in certain sectors suchas mining (some types only), telecommunications and shipping, which re-quire some local ownership.

Also, foreign ownership of title to land is not permitted unless the foreign-owned company has a certificate of incentives from the Tanzania InvestmentCentre, having approved the project for investment purposes.

Restrictions to 60% foreign investor equity participation in Tanzanian com-panies listed on the Dar es Salaam stock exchange were lifted in September2014. However, foreign investor participation in government securities isstill subject to conditions.

3.2 Do these restrictions also apply to foreign investors or creditorsin the event of foreclosure on the project and related companies?Yes, such restrictions would apply in the event of foreclosure on the project,where for instance there is a transfer of ownership of title to land, or a changeof relevant shareholders in a sector that has ownership restrictions.

3.3 Can a government authority block or unwind a transactioninvolving foreign investors after it has closed for strategic/nationalsecurity or other reasons?Generally, unless compensation is paid, a government authority cannotblock or unwind a transaction involving foreign investors after it has closedfor strategic or national security or other reasons.

Under the Tanzania Investment Act (which enables determination of avail-able investment opportunities in Tanzania and the modalities of accessingthem) there is express protection against expropriation without ‘fair adequateand prompt compensation’ with a right of access to a court or arbitrationto determine the compensation.

Under the standard for Mining Development Agreement there is expressprovision for no nationalisation or compulsory acquisition without com-pensation ‘in an amount and manner that is prompt, adequate and effec-tive’.

Generally under the PPP legislation, there is a requirement to fairly com-pensate the investor in the event that it suffers loss due to unforeseen eventsbeyond its control or if the contracting authority is in default under the PPPagreement. But note there is an equivalent requirement for the investor tocompensate the contracting authority for loss suffered if the project is ter-minated due to the failure of the investor to meet its obligations.

All title to land is usually held subject to the President’s right to revoke thetitle for ‘good cause and in the public interest’. Further, land can be com-pulsorily acquired by the President if it is for ‘public purpose’, which in-cludes in connection with development of a port or harbour of inconnection with mining for minerals or oil and the President can by orderin the Gazette deem any work to be for the ‘public purpose’.

Tanzania

Nicholas Zervos and Victoria Lyimo Makani, VELMA Law

www.velmalaw.com

TANZANIA


Section 4 – Documentation formalities and governmentapprovals

4.1 Is a submission to a foreign jurisdiction and a waiver ofimmunity effective and enforceable?The submission by parties to a foreign jurisdiction will be effective and en-forceable if submission is non-exclusive. Recognition of a foreign jurisdictionmay, however, be refused where a dispute relates to a matter that is exclu-sively governed by Tanzanian law. Foreign judgments will be enforced ifthere is a reciprocal agreement between Tanzania and the foreign jurisdic-tion. The High Court may, however, set aside the registration and enforce-ment of a foreign judgment, for a number of reasons including if theenforcement of the judgment would be contrary to public policy.

As regards sovereign immunity, where the Government of Tanzania is a partyto a contract, it is deemed to have waived its immunity, and will be subjectto all liabilities that arise in the contract, as if it were a private person. Anyclaim arising under the contract can be enforced against the Government.However, enforcement is restricted to payment by the treasury departmentof amounts due, and no other form of execution or attachment may be usedto enforce payment.

4.2 What are the relevant government agencies or departments withauthority over projects in the typical project sectors? What is thenature and extent of their authority?There are a number of government agencies with general authority overprojects in the typical project sectors, including:

• General: Tanzania Investment Centre; PPP (public private partnership)Unit at the Ministry of Finance; PPP Unit at the Tanzania InvestmentCentre; Public Procurement Regulatory Authority (PPRA); Ministry ofLands; National Environmental Management Council (NEMC);Tanza-nia Revenue Authority;

• Agriculture: Ministry of Agriculture; director-general and board of di-rectors of the relevant crop board;

• Energy: Ministry of Energy and Minerals (MEM); Energy and WaterUtilities Regulatory Authority (EWURA);

• Mining: MEM; Commissioner for Minerals;• Oil and Gas: MEM; TPDC; Commissioner for Petroleum Affairs;

EWURA;• Telecoms: Telecoms and Communications Regulatory Authority

(TCRA);• Transport: Reli Assets Holding Company (railways); Tanzania Ports Au-

thority (TPA); Surface and Marine Transport Authority (Sumatra); Min-istry of Infrastructure Development; Tanzania Civil Aviation Authority;Tanzania Airports Authority; and,

• Water: Ministry of Water; and, relevant basin water boards.Generally, the nature and extent of the authority of these government agen-cies is to issue licences, negotiate agreements with the private sector, regulatetariffs and charges, hold public inquiries before issuing licences or approvingregulated tariffs, and deal with any competition issues affecting the sector.

4.3 What government approvals are required in relation toenvironmental concerns for typical project finance transactions?What fees and other charges apply?An environmental impact assessment certificate is required from NEMCfor all projects that are likely to have a negative impact on the environment.

NEMC fees are TSh70,000 ($45) for registration of the project; a projectscreening fee, which is determined based on the location of the project, andthe need to undertake any site visits; and an annual fee of TSh300,000 formaintaining the registration.

Section 5 – Bankruptcy proceedings

5.1 How does a bankruptcy proceeding in respect of the projectcompany affect the ability of a project lender to enforce its rights asa secured party over the collateral/security?A winding up proceeding will affect a lender’s right to enforce any securityinterest. Any attachment or execution against a company’s assets after thecommencement of winding up proceedings by the court will be void. Anydisposal of the company’s property, including things in action, any transferof shares or any alteration in the status of the shareholders of the companywithout the court’s consent will also be void.

5.2 What processes, other than court proceedings, are available toseize the assets of the project company in an enforcement? Forinstance, is contractual enforcement (such as receivership)recognised?A receiver may be appointed without court proceedings, subject to the termsof appointment set out in the relevant security interest. An administrativereceiver appointed under the security interest also has the power seize anddispose of any property subject to such interest.

5.3 Outside the context of a bankruptcy proceeding, what stepsshould a project lender take to enforce its rights as a secured partyover the collateral/security?A project lender may take enforcement steps, such as dealing with any assetscharged to the lender on giving reasonable notice of the sale to the borrower,or completing the blank share transfer forms and proceeding with the trans-fer where shares have been charged.

The lender can similarly enter into possession of any land it has a securityinterest over after service of a notice of default on the borrower and eitherlease the land or sell it 30 days after the date of the notice.

Section 6 – Foreign exchange, remittances and repatriation

6.1 What, if any, are the restrictions, controls, fees, taxes or othercharges on foreign currency exchange?Foreign currency exchange restrictions apply where any payment is made inTanzanian shillings to or for the credit of a person resident outside Tanzania.

Applicable taxes include corporation tax and withholding tax on interestand dividend payments, but, for instance, withholding tax does not alsoapply to any interest payable to a non-resident bank by a strategic investor.

6.2 Must project companies repatriate foreign earnings? If so, mustthey be converted to local currency and what further restrictionsexist over their use?There is no legal requirement for a project company to repatriate foreignearnings, which can be reinvested back into the company or used for anyother purpose in accordance with the company’s memorandum and articlesof association.

6.3 What, if any, tax incentives or other incentives are providedpreferentially to foreign investors or creditors? What, if any, taxesapply to foreign investments, loans, mortgages or other securitydocuments, either for the purposes of effectiveness or registration?A number of tax and other incentives are provided to foreign investors whoregister their investments with the Tanzania Investment Centre (TIC). Theseinclude: import duty and VAT exemption on deemed capital goods; guar-antee against expropriation, unless it is done with due process and there ispayment or fair, adequate and prompt compensation; and, an initial auto-matic immigration quota of up to five persons during the start up period.

Taxes on foreign loans include withholding tax on interest (unless the in-terest is paid by a strategic investor); taxes on security documents includenominal stamp duty and registration fees of the documents at the relevantregistry.

TANZANIA


Section 7 – Public private partnerships

7.1 Is there a public private partnership act or similar statuteauthorising PPPs and are both greenfield and brownfield projectspermitted?PPPs are authorised under the Public Private Partnership Act 2010 (PPPAct) and the Regulations 2011.

Sectors that have identified for implementation in partnership with the pri-vate sector include agriculture, industry and manufacturing, explorationand mining, energy, ICT, health and education, trading and marketing andnatural resource and tourism.

The Public Procurement Act 2011 and Regulations 2013 also apply to PPPsin respect of the procurement of both solicited and unsolicited proposalsbetween the public sector and private under the PPP Act.

The PPP laws do not differentiate between greenfield and brownfield proj-ects, but the provision of assets by the Government can include existing as-sets of the relevant contracting authority or new assets to be acquired forthe purpose of entering into a PPP agreement.

7.2 May a concessionaire grant a security interest in the project toits lenders and, if so, is consent of the government or contractingauthority required?Yes, a concessionaire may grant a security interest over the project assets toits lenders. Consent of the relevant government department or contractingauthority will be required in most cases where a security interest is grantedover a concession agreement or licence.

Generally the rights, obligations and controlling interests of a concessionairein a PPP project cannot be transferred or assigned to a third party withoutprior written consent of the relevant contracting authority.

In the mining sector, under the Mining Development Agreement (MDA)with the Government in relation to a special mining licence for large scalemining, the investor is permitted, to grant, banks all security over its assetsfor loans incurred in pursuit of the development of the project.

In the petroleum sector, under the Production Sharing Agreement (PSA)the contractor may not transfer its rights or obligations under the PSA, toany third party without the prior written consent of the Minister for Energyand Minerals.

In the power sector, transmission, generation and distribution licencesgranted to a concessionaire may not be assigned or transferred to anotherparty without the approval of EWURA.

In the telecoms sector, a concessionaire may not transfer, pledge or otherwisedispose of its licence without prior written consent of TCRA.

In addition, prior written approval of the TIC is also required, if the con-cessionaire creates a mortgage over any derivative title that it has over projectland.

7.3 Are government guaranties or other payment obligations of thegovernment or contracting authority subject to appropriations orother periodic authorisations?Legislation is generally silent on this matter except in relation to loans tothe Government, in which case there is a five year service cost, and a three-year revenue and earnings ratio for foreign loans. All must comply withunder the Government Loans, Guarantees and Grants Act 1974 (asamended).

7.4 May the government or contracting authority unilaterally amendor terminate a concession?Generally, the Government or contracting authority does not have a uni-lateral right. Termination by the contracting authority is generally where:the concessionaire is in default; there are unforeseen events beyond the con-trol of the concessionaire; there is force majeure event; the concessionairebecomes insolvent; or, the concessionaire fails to comply with the laws ofTanzania.

Unilateral amendment of a concession by a contracting authority is similarlygenerally not permitted as an amendment can only be made with the con-sent of both the concessionaire and the contracting authority and generallyonly after approval by the relevant authorities.

Section 8 – National update

8.1 In no more than 250 words, please describe any relevant projectfinance developments within your jurisdiction. This can includenoteworthy projects, new structure or techniques.At least 10 major infrastructure projects are underway, including the expan-sion of existing ports, the construction of a super highway and a Bus RapidTransit (BRT) system in Dar es Salaam.

In 2013, the President of Tanzania launched the Big Results Now (BRN)initiative, and set up the Presidential Delivery Bureau (PDB), in order toensure that prioritised projects are fast-tracked.

There are six selected National Key Results Areas (NKRAs) of agriculture,education, energy, water, transport and resource mobilisation, which theGovernment has identified and believes require intervention from PDB inorder to achieve BRN.

PDB follows up closely on the implementation of projects and focuses theattention of top leaderships in monitoring investment in the prioritisedareas. The PDB can provide high-level intervention if needed by discussingchallenges in the identified projects at ministerial level.

TANZANIA


About the authorNicholas Zervos is is a partner at VELMA Law and a senior commercialtransactional lawyer with expertise in international corporate mattersand project and structured finance, particularly in East Africa, the UKand central and eastern Europe.

Zervos has lived and worked as a lawyer in Dar es Salaam sinceNovember 2006. Before then he was a senior partner with a major firmin London (and Hong Kong), advising sponsors and banks oncommercial and financing agreements for infrastructure projects indeveloped and emerging markets. His areas of specialism includecommercial law, project finance, finance and corporate law. He has alaw degree from the University of Nottingham, and is admitted to theEnglish, Tanzanian and Hong Kong bars.

Zervos is a member of the Law Society of Tanganyika and the LawSociety of England and Wales.

Nicholas ZervosFounder partner, VELMA Law

Dar es Salaam, TanzaniaT: +255 752 66 77 66E: [email protected]: www.velmalaw.com

About the authorVictoria Lyimo Makani is a partner at VELMA Law, specialising inemployment law and labour relations, immigration and citizenship law,intellectual property, mining law, corporate law, commercial litigationand arbitration.

Lyimo Makani holds an LLB (Hons) from the University of Dar esSalaam (1992), and is a member of the Tanganyika Law Society, theEast Africa Law Society and the Commonwealth Lawyers Association.She is fluent in English and Kiswahili.

Victoria Lyimo MakaniFounder partner, VELMA Law

Dar es Salaam, TanzaniaT: +255 786 74 62 49E: [email protected]: www.velmalaw.com

THAILAND



1.1 What types of collateral/security are available?Thai law officially recognises only two methods of taking security:

• a mortgage, which is available for security over immovable property (suchas land and buildings) and certain types of machinery (machinery whichis eligible for registration under the Machinery Registration Act); and

• a pledge, which is available for security over movable property, such asshares in the pledgor’s company, instruments of investment andunregistered machinery.

Although not recognised by Thai law as a form of security interest per se(such as under bankruptcy and court-supervised reorganisation proceedings)the taking of contractual quasi-security by means of assignment (absoluteor conditional) is also common in Thailand.

In project finance transactions, assignments will usually be provided forrights under the various project documents, monies in bank accounts, andinsurances.


2.1 How is a security interest in each type of collateral perfectedand how is its priority established? Thai law requires that a mortgage must be made in writing and registeredwith: the Land Department, for land, buildings and installations; or theCentral Machinery Registration Office of the Ministry of Industry, formachinery.

The mortgage registered first will take priority over any mortgages registeredat a later date.

Perfection of a pledge requires that the property which is the subject matterof the pledge is delivered by the pledgor to the pledgee (or a third party onits behalf ). A pledge of shares will be recorded in the pledgor’s share register.Otherwise, there are no registration, governmental consents or filingsrequired in order to perfect a pledge.

2.2 How can a creditor assure itself as to the absence of liens withpriority to the creditor’s lien? For mortgages, a search at the relevant office of registration should beconducted by the creditor to ensure that there are no other mortgages dulyregistered over the relevant property.

For pledges of shares, the share register of the relevant company should bechecked for existing pledges.

For pledges of other moveable property, physical inspection of the propertywill be required to ensure the property is not in the possession of anotherpledgee.

2.3 Are any fees, taxes or other charges payable to perfect asecurity interest and, if so, are there lawful techniques to minimiseor defer them? To register a mortgage with the Land Department, a mortgage registrationfee of one percent of the mortgaged amount is payable, subject to amaximum fee of Bt200,000 ($6,200).

To register a mortgage of machinery with the Central MachineryRegistration Office, a mortgage registration fee of 0.1% of the mortgagedamount is payable, subject to a maximum fee of Bt100,000.

Stamp duty does not apply to a mortgage or pledge agreement, providedthat the required stamp duty applicable to the related loan agreement(0.05% of the principal amount of the loan, subject to a maximum stampduty of Bt10,000) has been paid.

There are no lawful techniques to minimise or defer the above fees or stampduties.

2.4 May a corporate entity, in the capacity of agent or trustee, holdcollateral on behalf of the project lenders as the secured party? In a syndicated project finance loan, the lenders will normally appoint oneof the lenders as a security agent for the purposes of administering thesecurity on behalf of each lender (however, note that for a mortgage, thelenders must all be named as mortgagees under the mortgage agreement,even if the lenders have appointed a security agent).

Thai law does not recognise the concept of a trust (and therefore the conceptof a security trustee). The security agent alternative creates merely acontractual relationship between the security agent and the secured parties,which will be documented in the loan agreement.


3.1 What restrictions, fees and taxes exist on foreign investment inor ownership of a project and related companies? The principal law relevant to restrictions on foreign investment in projectsin Thailand is the Foreign Business Act (FBA). The FBA lists three categoriesof business that may not be carried out by foreigners (a company in which50% or more of its share capital is owned by a foreign individual orcompany) unless permission under the FBA is obtained or an exemptiongranted. It is not, however, possible to obtain permission to carry on businessas a foreigner for certain category 1 business activities.

Power projects and oil and gas projects are not included within the FBArestricted activities. Mining is, however, a category 2 restricted activity andwould require approval under FBA.

The Land Code also restricts ownership of land by foreigners, although aforeigner can lease land or obtain a concession from the Government.

Thailand

Maythawee Sarathai and Ben Thompson, Mayer Brown JSM

www.mayerbrown.com

THAILAND


3.2 Are there any bilateral investment treaties with key nation statesor other international treaties that may afford relief from suchrestrictions? Would such activities require registration with anygovernment authority? Thailand has signed bilateral investment treaties with the US, Japan andAustralia. Citizens or companies from these countries are accorded the samestatus as Thai citizens under the FBA in respect of certain restrictedbusinesses.

3.3 Can a government authority block or unwind a transactioninvolving foreign investors after it has closed for strategic/nationalsecurity or other reasons?Yes, a government authority is entitled to block or unwind a transactioninvolving foreign investors after it has closed for strategic or national security,although this is rare in practice.


4.1 Is a submission to a foreign jurisdiction and a waiver ofimmunity effective and enforceable? Thai law does not expressly provide for the effectiveness and enforceabilityof a submission by a debtor to the jurisdiction of a foreign court.

A Thai court will not directly enforce a judgement obtained in a non-Thaicourt in connection with a non-Thai law governed document without re-examination of the merits of the case. Any judgment or order obtained in aforeign court may (at the discretion of the Thai courts) be admitted asevidence in new proceedings instituted in the Thai courts.

An express written waiver of sovereign immunity will be effective.

4.2 What are the relevant government agencies or departments withauthority over projects in the typical project sectors? What is thenature and extent of their authority? The Department of Mineral Fuels under the Ministry of Energy hasauthority over the petroleum and gas sector. This department has theauthority to issue concessions which allow parties to engage in petroleumand gas exploration and production.

The Department of Primary Industries and Mines under the Ministry ofIndustry has authority over the mining sector. This department has theauthority to issue concessions which allow parties to engage in mineralexploration and mining activities.

The Energy Regulatory Commission is Thailand’s independent regulatoryagency, with authority over the electricity business. Its authority includesregulating electricity operators, conducting tariff reviews and regulating tariffrates, granting licences for the electricity sector, and dispute settlement.

4.3 What government approvals are required in relation toenvironmental concerns for typical project finance transactions?What fees and other charges apply? Prior to undertaking any project in the petroleum and gas, mining orelectricity (in the case of a power plant with a capacity of 10MW or more)sectors, a project company must complete an environmental impactassessment (EIA), submit a report to the Office of Natural Resources andEnvironmental Policy and Planning (ONEP) and obtain a correspondingapproval from ONEP of the EIA.


5.1 How does a bankruptcy proceeding in respect of the projectcompany affect the ability of a project lender to enforce its rights asa secured party over the collateral/security? In a liquidation proceeding, the secured lender retains rights againstcollateral given by the debtor prior to the receivership order. Enforcementagainst this collateral can be achieved and the secured lender is not requiredto file a claim in bankruptcy unless there is a shortfall after the enforcementof security.

In a court-supervised reorganisation, upon a court’s acceptance of thereorganisation petition, a secured creditor’s ability to enforce its rights issubject to a stay order. Only the bankruptcy judge may permit enforcementagainst the security while the stay order is in effect.

5.2 What processes, other than court proceedings, are available toseize the assets of the project company in an enforcement? Forinstance, is contractual enforcement (such as receivership)recognised? Thai law permits enforcement of pledges and contractual quasi-securityarrangements without the need for court proceedings. In practical terms,however, enforcement may be difficult for lenders without court assistanceand cooperation from the relevant parties (for example, the account bankwith which the assigned bank account is held).

5.3 Outside the context of a bankruptcy proceeding, what stepsshould a project lender take to enforce its rights as a secured partyover the collateral/security? Before enforcing a mortgage, the mortgagee must first provide the debtorwith a notice demanding payment within a reasonable period. If the debtorfails to comply, the mortgagee may enforce the mortgage by commencinglegal action in court for a judgement ordering the mortgaged property tobe seized and sold by public auction, or by claiming foreclosure (taking titleover the property). Foreclosure is rarely used, however, given the conditionsrequired to be satisfied. In each case a judgement debt is required to beobtained before enforcing.

Enforcement of a pledge can be made without a court order. If the debtorfails to comply with a notice from the pledgee to make payment, the pledgeemay sell the pledged property by public auction.


6.1 What, if any, are the restrictions, controls, fees and taxes onremittances of investment returns or payments of principal, interestor premiums on loans or bonds to parties in other jurisdictions? Outward remittance of funds, such as repatriation of dividends and profits,loan repayments and interest, after tax deduction, may generally be madefreely through commercial banks in Thailand provided documentaryevidence of the underlying payment obligation (such as a copy of the creditagreement) is supplied to the commercial bank.

6.2 Must project companies repatriate foreign earnings? If so, mustthey be converted to local currency and what further restrictionsexist over their use? A Thai company must repatriate foreign earnings to Thailand within 360days of receipt, and either convert them to baht and deposit them in anauthorised bank account, or deposit them in a foreign currency accountwith an authorised bank.

THAILAND


6.3 What, if any, tax incentives or other incentives are providedpreferentially to foreign investors or creditors? What, if any, taxesapply to foreign investments, loans, mortgages or other securitydocuments, either for the purposes of effectiveness or registration? Tax incentives or other incentives providing preferential treatment to foreigninvestors or creditors are generally given by the Board of Investment (BOI).Key tax incentives available include a corporate income tax exemption ofup to eight years, and custom tariff exemptions for importing machineryand equipment for the project.

Other available incentives include the right to repatriate earnings in foreigncurrency, own land and hire skilled foreign workers.

Interest on offshore loans is subject to 15% withholding tax, subject to anyreduction under any applicable double taxation treaty which Thailand isparty to.


7.1 Is there a public private partnership act or similar statuteauthorising PPPs and are both Greenfield and Brownfield PPPprojects permitted?Yes. The Private Investment in State Undertaking Act (PPP Act) was enactedin 2013, replacing Private Participation in State Undertaking Act (which,unlike the new PPA Act, was not enacted with the intention of providing alegal framework for PPPs). The PPP Act covers government projects withan investment cost of Bh1 billion or above. The PPP Act is silent on theissue of whether only greenfield projects fall within its scope.

7.2 May a concessionaire grant security interest in the project to itslenders and, if so, is consent of the government or contractingauthority required?Yes. Note that the concession contract itself can be used as “quasi” securityby way of conditional assignment of the concession to the lender(s), andwould generally be included in the security package when applying forproject financing. Consent of the government or contracting authority isrequired.

7.3 Are government guaranties or other payment obligations of thegovernment of contracting authority subject to appropriations orother periodic authorisations?Given the long-term nature of the payment obligations for governmentcontracts in project financings, non-appropriation clauses are not usual.Government guaranties are, however, uncommon in build-operate-transferprojects in Thailand.

7.4 May the government or contracting authority unilaterally amendor terminate a concession?Generally, the concession terms themselves would prohibit the governmentfrom unilaterally amending or terminating a concession, triggering damagesif this were to occur.


8.1 In no more than 250 words, please describe any relevant projectfinance developments within your jurisdiction. This can includenoteworthy projects, new structures or techniques.The political protests in late 2013 and early 2014 and subsequent coup havenot had a substantial impact on project financing in Thailand, with thepower sector, and in particular small power projects, remaining active.Projects continue to attract financing from both Thai and internationalbanks, in particular Japanese banks, who are willing to lend in baht as wellas in dollars.

In July 2014, the new government approved a plan for further projectinvestment focusing on infrastructure, including city rail links, additionallines for the Bangkok mass transit system, and expansion of internationalairports in other provinces. The majority will be executed using a build-own-operate model.

About the authorMaythawee Sarathai is a partner of Mayer Brown JSM Thailand. Withmore than 10 years’ experience, Sarathai has advised on a broad range ofmatters relating to investment in Thailand, including projectdevelopment, mergers and acquisitions, corporate structures andregistrations. He advises investors in the energy, oil and gas sectors,including on applications for oil and gas concessions and acquisitions,and investors in independent power projects. Sarathai has actedextensively for bank steering committees in negotiating anddocumenting multi-bank cross-border corporate workouts and court-supervised reorganisations in Thailand. He also advises creditors,liquidators, planners, plan administrators, special managers and debtorson all aspects of both contentious and non-contentious corporatelending, restructuring and insolvency.

Maythawee SarathaiPartner, Mayer Brown JSM

Bangkok, ThailandT: +66 2 108 8564F: +66 2 108 1555E: [email protected]: www.mayerbrown.com

About the authorBen Thompson is a consultant in the Singapore office of Mayer Brown’sglobal projects group. He has more than 10 years’ experience in projectfinancings throughout Asia – with six years based in Bangkok. He hasadvised both sponsors and lenders on a number of high-profile powerprojects in the region, including the Nam Ngiep 1, Nam Ngum 3 andXe Pian Xe Namnoy hydropower projects in Laos PDR and the NongSaeng and Rojana IPP projects in Thailand. Thompson also hassubstantial experience in Indonesia and has been advising on a numberof projects in Myanmar. He was named a ‘rising star lawyer’ inSingapore and Thailand by IFLR1000 2013 and 2014.

Ben ThompsonConsultant, Mayer Brown JSM

SingaporeT: +65 6327 0247F: +65 6225 3166E: [email protected]: www.mayerbrown.com


1.1 What types of collateral/security are available? Secured parties in US project financings typically require a security interest inall equity interests in the owner of the financed project. This is to allow the se-cured parties, in the event of a foreclosure, to acquire the project (or, in thecase of a portfolio financing, any or all of the projects) indirectly through equityownership of the project owner. Secured parties also typically require a securityinterest in substantially all assets owned by the project owner, whether tangible(for example real estate and equipment) or intangible (contract rights).

Where the borrower is not a project owner (such as a holding company of aproject portfolio), the secured parties would typically also expect a security in-terest in the equity interests in, and the assets (most notably accounts) of, theborrower.

There are limited exclusions from the collateral, most notably an exclusion ofrights which are not assignable by law or would become void or unenforceableas a result of the grant of the security interest therein and/or resulting assign-ment thereof. As part of due diligence, secured parties should confirm that thisexclusion does not cover any rights which, if not available in foreclosure, wouldhave a significant impact on the economics of the project.

Although technically not a security, third party consents to collateral assignmentof material project contracts are also typically required to overcome restrictionson assignablility (if applicable). These are also used to provide the secured par-ties further comfort that the relevant contract rights will be available to the se-cured parties (or their designee) in a foreclosure scenario.


2.1 How is a security interest in each type of collateral perfected andhow is its priority established? In the case of personal (as opposed to real) property, perfection and priorityare primarily governed by the Uniform Commercial Code (UCC) as in effectin the relevant US state. Article 9 of the UCC permits several methods of per-fection depending on the type of property, including:

• filing of UCC financing statements, for all personal property collateral thatis subject to article 9 of the UCC, other than deposit accounts, letter ofcredit rights and money;

• physical possession, for certificated securities, instruments and tangible chat-tel paper (and, uncommonly, for goods and money); and

• ‘control’, as the only permitted method of perfection for deposit accountsand letter of credit rights, and the stronger method of perfection for secu-rities accounts, commodity contracts, uncertificated securities and electronicchattel paper. This is typically effected by entering into an agreement thatprovides the secured party with ‘control’ (for UCC purposes) over the col-lateral.

Perfection of security interests in certain types of personal property (for exampleinsurance) is not addressed in the UCC, and other personal property (such asintellectual property (IP)) may require compliance with other laws.

In the case of real property, perfection and priority are primarily governed bythe law of the jurisdiction in which the real property is located. Local law typ-ically provides that a security interest in real property is perfected by recordinga mortgage or deed of trust in proper form in the relevant jurisdiction.

Unless otherwise agreed among the creditors, the first to properly perfect a se-curity interest generally has priority. The caveat is that certain security interests(for example mechanics’ liens) have priority by law irrespective of whether andwhen perfected. Where multiple perfection options exist, a security interestperfected by possession or control generally has priority over a security interestperfected merely by filing, notwithstanding the timing of perfection.

2.2 How can a creditor assure itself as to the absence of liens withpriority to the creditor’s lien? Secured parties can identify tax liens, judgment liens and liens perfectedthrough filing by searching (or, more commonly, engaging a service companyto search) the relevant filing offices in the relevant jurisdictions. This is typicallydone early in the negotiation phase to identify liens which need to be removed,and or shortly before closing to ensure that the identified liens have been re-moved and no liens have arisen since. For IP rights, secured parties can alsosearch the registries at the US Patent and Trademark Office and the US Copy-right Office.

Secured parties also typically require a title insurance policy (insuring good titleto the relevant real property, subject to agreed exceptions) for the benefit of thesecured parties. In construction financings, a bring-down of the title insurancepolicy (showing no additional exceptions) is commonly required at each bor-rowing and at conversion of the construction loan.

Further comfort as to the absence of prior liens is derived through representa-tions and warranties made at closing, and from time to time thereafter underthe financing documents. Financing documents also typically include provi-sions to mitigate the risk of intervening liens arising during the financing term.For example, a provision may require delivery of lien waivers from materialcontractors who might otherwise be eligible for a mechanics’ lien.

2.3 Are any fees, taxes or other charges payable to perfect a securityinterest and, if so, are there lawful techniques to minimise or deferthem? Filing and recording fees payable to perfect a security interest vary dependingon the type and location of collateral, but are usually nominal. Mortgagerecording and similar taxes are imposed in about one-quarter to one-third ofUS states, and can vary by county and municipality. These can constitute a sig-nificant cost. Title insurance premiums, which vary widely by state, can alsobe significant. Lawful techniques (again, varying by location) are available tominimise or defer these costs.

2.4 May a corporate entity, in the capacity of agent or trustee, holdcollateral on behalf of the project lenders as the secured party? Yes. This is common in large transactions. The agent/trustee acts at the directionof the secured parties and typically requires broad indemnification and limita-tion of liability protections.


3.1 What restrictions, fees and taxes exist on foreign investment in orownership of a project? The Committee on Foreign Investment in the United States (Cfius) is an inter-agency committee authorised to review any transaction in the US that couldresult in control of a US business by a foreign individual or entity. Althoughthe requirement to file notice with Cfius is voluntary, the Committee can blockor unwind a transaction if it reviews the deal and concludes that the transactionwill have a detrimental impact on the national security of the US. Whether

US


US

John Marciano, Chadbourne & Parke

www.chadbourne.com

US


parties should submit a Cfius filing, which are confidential, depends on thefacts, including: identity of the acquirers; whether the acquirer is controlled bya foreign government; and the nature of the US business being acquired. Forexample, a deal involving acquirers from China or Middle Eastern countriestypically warrant a closer analysis of whether to file than a deal involving aCanadian or British acquirer.

3.2 Are there any bilateral investment treaties with key nation statesor other international treaties that may afford relief from suchrestrictions? Would such activities require registration with anygovernment authority? There are currently no treaties that afford relief from Cfius.

3.3 Can a government authority block or unwind a transactioninvolving foreign investors after it has closed for strategic/nationalsecurity or other reasons? Cfius regulations provide the US Government authority to unwind transactionsinvolving foreign investors that it views as presenting unmitigated national se-curity risks. Therefore, parties can choose to file the transaction with Cfiusprior to closing the deal, and include clearance of Cfius review as a conditionprecedent to closing. However, some parties move ahead with closing prior toCfius filings, after which there is a risk that Cfius can initiate its own review orrequest the filing of a notice and possible the deal can be unwound. This oc-curred in late 2012 when Chinese investors purchased wind farms near USmilitary installations. After Cfius’s review and investigation, it recommendedto the President of the US that the transaction be unwound. The President fol-lowed the recommendation and forced the Chinese investors to divest them-selves of their interest in the wind farms.


4.1 Is a submission to a foreign jurisdiction and a waiver of immunityeffective and enforceable? Submissions to a foreign jurisdiction and waivers of immunity are not effectiveand enforceable in the US.

4.2 What are the relevant government agencies or departments withauthority over projects in the typical project sectors? What is thenature and extent of their authority? Projects in the US are subject to numerous government agencies or depart-ments, and they often have the ability to significantly alter or prevent a projectfrom moving forward. Some examples include wholesale power contracts thatare subject to the review of the Federal Energy Regulatory Commission(FERC). Public utilities and transmissions agreements are subject to federalstatutes, and possibly state utility jurisdiction over rates and construction permitrequirements. New construction can be subject to both state and federal envi-ronmental laws, and any project that involves wetlands or bodies of water pres-ent a myriad of issues and agencies that can review it.

4.3 What government approvals are required in relation toenvironmental concerns for typical project finance transactions? Whatfees and other charges apply? Projects in the US are subject to numerous environmental laws and regulations.As a result, environmental concerns and governmental approvals can be a sig-nificant component of project finance transactions in the US. Environmentalconcerns and governmental approvals can vary tremendously by type of project(for example, wind power as opposed to coal-fired power) and are specific tothe project location and associated environmental conditions. In some cases,project developers may spend years and millions of dollars developing projects.

SECTION 5 – BANKRUPTCY PROCEEDINGS

5.1 How does a bankruptcy proceeding in respect of the projectcompany affect the ability of a project lender to enforce its rights as asecured party over the collateral/security? Upon the filing of a US bankruptcy case, an automatic stay arises in favour ofthe debtor that prevents parties from enforcing rights against the debtor’s prop-erty. Although the US Bankruptcy Code provides certain protections for se-cured lenders, absent relief from the automatic stay, which will rarely be grantedif the collateral is necessary for the debtor’s business and for any prospects of asuccessful reorganisation, the lenders will not be able to enforce their rightsagainst the collateral for the duration of the bankruptcy case.

5.2 What processes, other than court proceedings, are available toseize the assets of the project company in an enforcement? Forinstance, is contractual enforcement (such as receivership)recognised? Generally speaking, contractual remedies are usually enforceable. Lenders mayalso enforce state law rights, which often includes the right to foreclose on col-lateral. Certain types of foreclosure proceedings are non-judicial in nature. Ju-dicial action typically arises when the debtor does not cooperate in theproceeding.

5.3 Outside the context of a bankruptcy proceeding, what stepsshould a project lender take to enforce its rights as a secured partyover the collateral/security? Prior to enforcing its rights, it is important for a secured lender to ensure thatits security interests in collateral are properly recorded and perfected. Typically,that will be done by the collateral agent. A secured lender should also carefullyexamine their credit and security agreements to fully understand their contrac-tual rights. This includes, for example, understanding the events of default thatmay trigger the lender’s rights to enforce remedies, the procedural steps thatmust be taken to enforce rights (for example providing notice of default to theborrower), and whether remedies may be pursued individually by each lenderor may only be pursued as a group upon the consent of a requisite number oflenders (typically no less than 50%).

SECTION 6 – Foreign exchange, remittances and repatriation

6.1 What, if any, are the restrictions, controls, fees and taxes onremittances of investment returns or payments of principal, interest orpremiums on loans or bonds to parties in other jurisdictions? There are no restrictions on return of principal to a lender or bondholder. How-ever, other amounts payable by a borrower to a foreign person and dividends,rents, commissions, fees, broker payments, royalty payments and certain otherpayments made to a foreign person may be subject to withholding tax. This isthe case unless the payee provides a withholding certificate stating that with-holding is not required or that the payee is a US person. Information reportingis required.

Foreign owners of a US project will be subject to US income taxes on the pro-ject’s income, regardless of whether cash is distributed to the owner. The foreignowner will have to file US tax returns. Investing directly from abroad also willsubject the foreign company to a branch profits tax in the US, which is effec-tively a tax on a deemed dividend to the foreign parent.

Tax treaty benefits often reduce the withholding rate for the items noted above.In addition, a partnership must withhold a portion of income sourced to theUS attributable to foreign partners.

US


6.2 Must project companies repatriate foreign earnings? If so, mustthey be converted to local currency and what further restrictions existover their use? No. Project companies are not required to repatriate foreign earnings. However,a large US shareholder of a foreign corporation must include in the share-holder’s income certain income of the subsidiary, without regard to whetherthe subsidiary distributed any cash to the shareholder.

6.3 What, if any, tax or other incentives are provided preferentially toforeign investors or creditors? What, if any, taxes apply to foreigninvestments, loans, mortgages or other security documents, either forthe purposes of effectiveness or registration? In certain cases, a foreign investor in a US corporation can sell its shares in thecorporation without being subject to US federal income tax.


7.1 Is there a public private partnership act or similar statuteauthorising PPPs and are both greenfield and brownfield PPPprojects permitted? PPPs in the US are authorised by state and local laws, or enabling statutes, thatallow PPPs for various types of infrastructure projects in the relevant jurisdic-tions. Some of these laws provide broad authority for public officials to enterinto PPPs, but others are limited, either in the number or type of PPPs thatmay be pursued or in the extent of the authority granted by the legislature.Some enabling statutes give state and local governments authority to executegreenfield and brownfield PPPs, while other statutes provide authority to enterinto one or the other of these kinds of transactions. Most states have some formof PPP enabling statute, but there are still some states that do not allow PPPs.The federal government recently launched a Build America initiative to pro-mote sharing of best practices among states and improved access to federalcredit assistance programmes that are available to facilitate PPPs.

7.2 May a concessionaire grant security interest in the project to itslenders and, if so, is consent of the government or contractingauthority required? A concessionaire in the US is generally able to grant lenders a security interestin the concessionaire’s rights to the project and the project’s revenues. The stateor local contracting authority may consent to the assignment of these rightsthrough a direct agreement or consent agreement, which it enters into withthe lenders and the concessionaire. The form of this agreement may be devel-oped, with the opportunity for input from potential lenders, during the pro-curement process. Because a concessionaire in the US is not typically grantedownership of a PPP project, the concessionaire typically cannot assign owner-ship of the project to the lenders. It also means the lenders may not be able toexercise certain other remedies that could affect the government’s ownershipor ability to control the project.

7.3 Are government guaranties or other payment obligations of thegovernment or contracting authority subject to appropriations orother periodic authorisations? PPPs in the US have primarily employed two types of payment mechanisms.Some PPPs have relied on real toll or demand-based structures for which theconcessionaire and lenders take the revenue risk without guarantees from thegovernment or contracting authority. Other PPPs, including some of the morerecent highway, bridge, tunnel and transit PPPs, have utilised availability pay-ment structures pursuant to which the state or local government agrees to makeperiodic payments if the concessionaire meets certain performance standards.These availability payments are generally subject to appropriation of funds bythe relevant legislative authority.

7.4 May the government or contracting authority unilaterally amend orterminate a concession? Amendments to concession agreements generally require the consent of boththe contracting authority and the concessionaire. However, state and local gov-ernments in the US may reserve the right to terminate a PPP unilaterally, attheir convenience. In these circumstances, the contracting authority generallyagrees to make certain termination payments to the concessionaire to mitigatelosses that might otherwise result from the termination.


8.1 In no more than 250 words, please describe any relevant projectfinance developments within your jurisdiction. This can includenoteworthy projects, new structures or techniques.Major export credit agencies (ECAs) have been providing money on big-ticketproject and infrastructure transactions. Most notable are the recently approvedliquefied natural gas export terminals. The size of those transactions has madethe financing challenging from a commercial bank perspective, so several ECAshave been able to carve a sizeable niche in the US market.

ECAs are expected to play a major role over the next few years as these projectsmove forward, assuming the commercial bank market does not open up widely.

There has also been an increase in transactions where project developers sellwind and solar farms with construction financing lined up at the time of sale.

Notably, wind and solar developers that own projects through partnershipshave been able to raise debt against their share of cash flow at rates only mod-estly higher than partnership level debt.

Lenders have been chasing yield and the debt market has become competitivefor wind and solar projects. Equity pricing has come down substantially withthe rise of yieldcos, which is causing a flurry of M&A activity involving solarand wind projects.

About the authorJohn Marciano is a transactional lawyer who focuses on providing tax,legal and commercial advice to a broad range of clients in the energyand financial sectors. Marciano regularly advises clients on energy taxcredits, government incentive programmes, project development andfinance, M&A, capital raising and deployment strategies. Most recently,he has advised clients on numerous multibillion dollar renewable energytransactions. His client representations range from startups andgovernmental entities, to Fortune 500 companies. He is the editor of acomprehensive resource on grants from the US Treasury Department,the author of numerous articles relating to project development andfinancing strategies, and a frequent speaker on a wide range of topicsrelated to the energy industry.

John MarcianoPartner, Chadbourne & Parke

Washington DCT: +1 202 974 5678F: +1 202 974 6778E: [email protected]: www.chadbourne.com

VIETNAM



1.1 What types of collateral/security are available? (a) Movable property

Movable property including offshore and onshore bank accounts, receiv-ables, contractual rights, and equipment, machinery, and inventory,possibly mortgaged to foreign lenders.

(b) Immovable property

Land use rights and assets attached to land may only be mortgaged to Viet-namese credit institutions. Authorities have consistently interpreted this asa prohibition of foreign lenders taking security interests over immovableproperty.

A Vietnamese branch of a foreign bank is treated as a Vietnamese credit in-stitution. In the context of major infrastructure projects, such as thermalpower plants, the project company will typically mortgage land use rightsand assets attached to land to a Vietnamese branch of a foreign bank withinthe syndicate on behalf of the lenders. Lenders will obtain comfort on thisstructure through a special approval of the office of the Prime Minister sup-ported by a legal opinion issued by the Ministry of Justice (MOJ). The gov-ernment is reluctant to grant these approvals, and obtaining one is rare.

(c) Equity interests

Foreign lenders will typically take security over the sponsors’ equity interestsin the project company. Please refer to sections 3.1 and 3.2.

(d) Security interests in Vietnam

Certain types of security arrangements in common law jurisdictions suchas charges and collateral assignments do not exist in Vietnam, though theseare used in financings to grant security over contractual rights governed byforeign law. The two most prevalent types of security interests used with re-spect to financings in Vietnam are the pledge and the mortgage.


2.1 How is a security interest in each type of collateral perfectedand how is its priority established? A mortgage over land and assets attached to land must be recorded at thedistrict or provincial land use registration office.

While registration is recommended to put third parties on notice, registra-tion of security interests over movable property with the National Registryof Secured Transactions (NRAST), an agency under the MOJ, is generallynot mandatory. Registration is required when a single asset is used to securemultiple obligations.

Priority between creditors is generally established under a first in line prin-ciple. One important exception is when a deferred sales contract is registeredwith the NRAST within 15 days of execution. In this case, the vendor willhave a first priority security interest in the assets subject to the sales contract,regardless of whether another creditor has previously filed a registrationstatement covering those assets.

Separate registration procedures exist for security interests over forest rights,aircraft, and sea vessels.

2.2 How can a creditor assure itself as to the absence of liens withpriority to the creditor’s lien? A lender should conduct a NRAST database search against the borrower toensure that there are no existing security interests against the same collat-eral.

Prior existing mortgages over movable property should be annotated on theland-use rights certificate, which is delivered to the secured party for theduration of the security interest. A lender may also inspect the records atthe relevant land use registration office to ensure that there are no priormortgages recorded against the property.

2.3 Are any fees, taxes or other charges payable to perfect asecurity interest and, if so, are there lawful techniques to minimiseor defer them? Fees associated with registering mortgages over immovable and movableproperty are negligible.

2.4 May a corporate entity, in the capacity of agent or trustee, holdcollateral on behalf of the project lenders as the secured party?Under Vietnamese law the term agency, as used in a security agreement, cre-ates merely a contractual relationship between the agent and the securedparties.

Vietnamese law does not generally recognise agency structures where a Viet-namese bank holds security over immovable property on behalf of foreignlenders. The security interest extends up to the amount of the onshore lend-ing tranche advanced by the secured party of record, and the surplus of en-forcement proceeds is payable to the borrower.

The structure may offer some benefits to foreign lenders, as it provides alegal basis to foreclose on the property. Other security structures, such asequity and account mortgages in favour of the foreign lender, would stillneed to complement the security arrangements.


3.1 What restrictions, fees and taxes exist on foreign investment inor ownership of a project and related companies?A foreign investor is required to apply for an investment certificate from thelicensing authority to identify the equity holders in the project company,its capital structure, and key information about the project, which is usuallythe Department of Planning and Investment (DPI) of the province wherethe project is located. The licensing authority may also be the Ministry ofPlanning and Investment, and for most investments in the oil and gas sector,the licensing authority is the Ministry of Industry and Trade (MOIT). Proj-ect sponsors may need to fulfil one or more of the following requirements:

• In-principle approval of the National Assembly. Certain projects of na-tional importance require approval of the National Assembly, such asprojects valued at D35 trillion or more ($1.7 billion) of which the statecapital is D11 trillion or more.

• In-principle approval by the Prime Minister. This approval is requiredfor projects in key sectors, including airports, national ports, and oil andgas exploration and production.

Vietnam

Nathan Dodd and David Harrison, Mayer Brown JSM

www.mayerbrown.com

VIETNAM


• Conditional sectors. Sectors including banking and mining must meetsector-specific conditions, for foreign investors.

• Appraised projects. Projects of over D300 billion must be appraised bythe relevant licensing authority. Criteria may include the requirementfor a feasibility study and environmental impact assessment report (EIAreport).

Any onshore transfer will require amendment of the investment certificate.This will trigger a new appraisal process. A capital assignment will generallyrequire the approval of the government authority that initially approved theproject.

Vietnam’s schedule of exceptions to its World Trade Organisation (WTO)accession commitments, and its domestic law, contain other restrictions onforeign investment, which vary from sector to sector.

There are no fees or taxes on foreign investment or ownership of a projectcompany.

3.2 Are there any bilateral investment treaties with key nation statesor other international treaties that may afford relief from suchrestrictions? Would such activities require registration with anygovernment authority?There are no existing bilateral investment treaties that would allow relieffrom the regulatory requirements on approving projects and equity transfers.

3.3 Can a government authority block or unwind a transactioninvolving foreign investors after it has closed for strategic/nationalsecurity or other reasons?An expropriation or nationalisation may occur, subject to full compensation,for the limited reasons of national defence or security. In such a circum-stance, however, compensation (if any) should be made to investors or tothe project companies and not to offshore lenders unless there is relevantdirect agreement in place. We note that in practice the government’s exerciseof such discretion is rare.


4.1 Is a submission to a foreign jurisdiction and a waiver ofimmunity effective and enforceable?For disputes between a government authority and foreign investors or theproject company, the parties may provide in the concession agreement andproject documents that such disputes may be referred to international arbi-tration.

Vietnamese courts will only consider recognition of judgments issued bycourts of countries that have entered into judicial agreements with Vietnam,generally with former or current communist states, or on a reciprocal basis.In practice, very few judgments issued by foreign courts have been recog-nised and enforced in Vietnam.

Vietnam acceded to the 1958 New York Convention on the Recognitionand Enforcement of Foreign Arbitral Awards (NY Convention) with thereservation that Vietnam will apply the NY Convention only to disputesarising from legal relationships considered commercial under Vietnameselaw. In practice, few foreign arbitral awards have been enforced in Vietnam.

A state and its assets benefit from immunity which may be restricted, or ab-solute. Vietnamese law does not define the limits of sovereign immunity.When foreign investors enter into contracts with a government authorityor a state-owned enterprise (SOE), that government authority or SOEshould acknowledge that the arrangement is a commercial one and waiveits right to sovereign immunity. However, the enforceability of these waiversis unclear.

4.3 What are the relevant government agencies or departments withauthority over projects in the typical project sectors? What is thenature and extent of their authority?The National Assembly and Prime Minister must approve certain projectsof national importance. See section 3.1.

MOIT is responsible for power, oil and gas, energy, and other importantinfrastructure projects, and the Ministry of Transportation (MOT) is re-sponsible for road, airports and other transportation projects. The Ministryof Natural Resources and Environment (MONRE) is in charge of land,water, mineral resources, other natural resources, and environmental mat-ters. MONRE often acts through the local Department of Natural Re-sources and Environment (DONRE).

Local people’s committees and other government authorities have the au-thority to issue the investment certificate (and amendments) for most proj-ects, including those which have been approved by the Prime Minister. Theboards of management of industrial zones and export processing zones areresponsible for issuing investment certificates and amendments to projectslocated in an industrial zone or an export processing zone.

4.4 What government approvals are required in relation toenvironmental concerns for typical project finance transactions?What fees and other charges apply?In a typical project finance transaction, the investors must prepare an EIAreport and obtain the approval of MONRE (or the relevant DONRE). Afee is payable to MONRE or the relevant DONRE for review of the EIA.These fees range from D6 million to D96 million, depending on the projecttype and size.


5.1 How does a bankruptcy proceeding in respect of the projectcompany affect the ability of a project lender to enforce its rights asa secured party over the collateral/security? Upon a court’s acceptance of an insolvency petition, a secured creditor’s abil-ity to enforce its rights is subject to a stay. Only the bankruptcy judge maypermit enforcement against the security while the stay is in effect. The stayis lifted by the court upon entry of a liquidation order.

5.2 What processes, other than court proceedings, are available toseize the assets of the project company in an enforcement? Forinstance, is contractual enforcement (such as receivership)recognised? Secured creditors may enforce security without the need for judicial pro-ceedings. The party holding collateral is first required to deliver the collateralto the secured party upon prior reasonable advance notice. If it fails to doso before the expiry of the time set out in the notice, the secured party mayseize the asset or may refer the matter to the courts. In practice, it is difficultfor foreign lenders to enforce security without a court order.

5.3 Outside the context of a bankruptcy proceeding, what stepsshould a project lender take to enforce its rights as a secured partyover the collateral/security? If security is registered with the NRAST, the secured lender should file anotice of enforcement with the NRAST. This notice sets out informationsuch as the assets to be enforced against, the reason for enforcement, andthe method of enforcement. With respect to both movable and immovableproperty, the property must be disposed of through an auction, unless oth-erwise agreed by the parties. Security agreements should clearly set forthvarious options under which lenders can enforce the security.

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6.1 What, if any, are the restrictions, controls, fees and taxes onremittances of investment returns or payments of principal, interestor premiums on loans or bonds to parties in other jurisdictions? In order to issue offshore bonds, an entity is required to have been in exis-tence for three years. As project companies are unlikely to fulfil this require-ment, bonds are unlikely to be a source of international financing forprojects under the existing legal framework.

Investment returns may be remitted offshore either through the sale of eq-uity or through dividends.

6.2 Must project companies repatriate foreign earnings? If so, mustthey be converted to local currency and what further restrictionsexist over their use? A project company in Vietnam will likely not have earnings in foreign cur-rency.

Revenue in dong may be converted into foreign currency and exported off-shore, subject to the availability of the currency (see section 7.2).

Major infrastructure projects may benefit from a government guarantee ofavailability of foreign currency. Historically, thermal power projects devel-oped under the build-operate-transfer (BOT) model have benefitted fromsuch provisions. Under Official Letter 1604 of the Prime Minister, Septem-ber 12 2011 (OC 1604), the guarantee of foreign currency availability islimited to 30% of the project company’s turnover.

6.3 What, if any, tax incentives or other incentives are providedpreferentially to foreign investors or creditors? What, if any, taxesapply to foreign investments, loans, mortgages or other securitydocuments, either for the purposes of effectiveness or registration? Project in certain fields and geographical areas are entitled to favourable cor-porate tax treatment, tax-free importation of equipment and supplies, andexemptions or discounts on land use fees.

Thermal power projects developed according to the BOT framework enjoyadditional incentives as outlined in OC 1604, including exempting lendersfrom payment of withholding tax on loan interest, and duty exemptions onthe import of materials unavailable domestically.

Electricity tariffs may be paid in foreign currency to protect against depre-ciation. Thermal BOT projects are entitled to specific provisions of govern-ment, guarantees which historically have been difficult to negotiate, suchas foreign currency availability and performance guarantees of SOEs thatare off-takers (EVN) and suppliers (Vinacomin with respect to coal).

The government is considering new legislation that would expand the scopeof benefits offered to BOT and build-transfer-operate (BTO) projects tothose that operate according to a public private partnership model (see sec-tion 7).


7.1 Is there a public private partnership act or similar statuteauthorising PPPs and are both greenfield and brownfield PPPprojects permitted?The government issued in 2010 regulations on the pilot investment in PPPform under the Prime Minister’s Decision 71/2010/ND-CP. These pilotregulations have had limited import to date as the country’s first ever PPPproject – Dau Giay Phan Thiet expressway – is governed by a project specificdecision, Prime Minister’s Decision 1597/QD-TTg of October 26 2012and not the pilot regulations.

The government is in the public consultation phase on new legislation onPPP investment, which is scheduled to be passed by the end of 2014. Thisnew PPP legislation aims to consolidate the existing legal framework onBOT and BTO and the pilot regulations on PPP investment issued underthe Prime Minister’s Decision 71/2010/ND-CP.

Under the draft legislation, the PPP model is permitted for both greenfieldand brownfield projects.

7.2 May a concessionaire grant security interest in the project to itslenders and, if so, is consent of the government or contractingauthority required?Under the existing legal framework on BOT and BTO and the pilot regu-lations on PPP investment, investors and project companies may create se-curity interests over assets of the project company (including immovableassets) subject to the contracting authority’s consent. This principle remainsunchanged under the draft PPP legislation.

7.3 Are government guaranties or other payment obligations of thegovernment or contracting authority subject to appropriations orother periodic authorisations?Government guaranties or other payment obligations of the government orcontracting authority are not subject to appropriations or other periodic au-thorisations. However, obtaining a government guarantee in Vietnam is atime-consuming process involving various ministries and agencies, includingthe office of the Prime Minister, the Ministry of Justice, and the Ministryof Finance. Once issued, government guaranties are irrevocable and remainin full force and effect for as long as the guaranteed obligations remain out-standing.

7.4 May the government or contracting authority unilaterally amendor terminate a concession?Neither the government nor a contracting authority has an explicit statutoryright to unilaterally amend or terminate a concession. In the contractual ne-gotiations of investment projects in the BOT form (which by far, the legalframework in Vietnam for PPPs with the most successful examples to date),the investors in the project have generally been able to negotiate contractualprotections and damage triggers in the event that a concession is unilaterallyterminated or amended by either the government or contracting authority.

VIETNAM



8.1 In no more than 250 words, please describe any relevant projectfinance developments within your jurisdiction. This can includenoteworthy projects, new structures or techniques.As of the date of this update, the latest draft PPP decree dated September2014 was available for comments by the public. It resembles the existingdecree that governs the BOT framework (Decree 108) and aims to providea comprehensive legal framework for both BOT and PPP projects. The draftPPP decree has mostly adopted verbatim the language of Decree 108 andthere appears to be some reluctance to take the opportunity to address ex-isting concerns raised by project developers. The most notable issues include:(i) the developer and the project company’s unambiguous right to mortgageland; (ii) assurances that the government will meet the foreign currencyneeds of the project; and (iii) smooth transition of existing projects from

the existing legal framework (be it Decree 108 on BOT or Decision 71 ofthe Prime Minister on the PPP pilot programme). For instance, Article 72of the draft PPP decree provides that ‘projects which have been approvedprior to the effective date [of this decree] do not require re-approval in ac-cordance with [this decree]’, but it leaves open the question of whether thenew PPP decree will become the project’s applicable legal regime, and if so,whether the project needs to bridge the gap between any requirements ofthe previous legal regime and the one set out by the new PPP decree.

There are numerous capital-intensive energy and infrastructure projects inVietnam with funding needs in excess of $15 billion, which have been strug-gling to find funding in the last five years. The new draft PPP decree in itscurrent form does not offer any grounds for optimism that there will be anyrapid inflow of funds for those projects.

About the authorNathan Dodd is a partner of Mayer Brown’s global projects group. He isa highly-experienced projects and infrastructure lawyer with more than14 years’ experience in the development and finance side of projects inAsia, and regularly works on Asian investments into the Middle Eastand Africa. In addition to project finance, he has extensive experience inenergy, natural resources and infrastructure M&A. He has worked on anumber of award winning transactions, acting on the government,sponsor and lender side. Deal locations include Australia, Bangladesh,Brunei, Cambodia, Gabon, Ghana, India, Indonesia, Kenya,Mozambique, Myanmar, Oman, Pakistan, Philippines, Sierra Leone,Singapore, Sri Lanka, Thailand, the UAE and Vietnam. Dodd is nameda ‘leading lawyer’ in project finance in IFLR1000 (2014).

Nathan Dodd Partner, Mayer Brown JSM

SingaporeT: +65 6327 0235F: +65 6225 3166E: [email protected]: www.mayerbrown.com

About the authorDavid Harrison is a consultant and a member of Mayer Brown’s globalprojects group. He is named a ‘rising star lawyer’ in Vietnam inIFLR1000 (2014) and ‘up and coming’ in Chambers Asia Pacific (2014).He has practised in both New York and Vietnam.

Harrison has advised multilateral and commercial lenders and agents ona broad range of project financings and secured and subordinated creditfacilities extended to banks and corporations in Vietnam and otherAsian jurisdictions such as Cambodia, Mongolia, and Sri Lanka. He hasadvised foreign investors on numerous mergers and acquisitions,including Vietnamese commercial banks and corporate targets inVietnam and other Asian jurisdictions, such as Sri Lanka andBangladesh. He has also advised lenders and borrowers on out-of-courtworkouts and insolvency and restructuring matters in both Vietnamand the US. He speaks Vietnamese, Spanish, and French.

David Harrison Consultant, Mayer Brown JSM

Ho Chi Minh CityT: +84 8 3513 0310F: +84 8 3822 8864E: [email protected]: www.mayerbrown.com

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