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Project Finance Report 2014

IFLRinternational financial law review

PROJECTFINANCE REPORT 2014

Guest edited by Martin Kavanagh and Brendan Quinn

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INTRODUCTION

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

I n many ways, 2013 has seen the maturation of a number of trends, which have been bub-bling at and below the surface through the barren years since the onset of the global fi-nancial crisis. Yet in other ways, the year has seen nothing more than the slow

reconstruction of recent years. One thing is sure: it seems clearer where project finance debtmarkets are, and where they are going, than was the case a year ago.

In terms of major trends, there are several which have been clearly observable:

• a strengthening of the position and power of export credit agencies (ECAs), multilateraland development finance institution (DFI) lenders who are not only providing money butare increasingly influencing structuring, and in many cases in hitherto unfamiliar sectorssuch as oil and gas;

• the continued emergence (if not quite arrival) of Africa in more mainstream deals, and theundoubted strength of local bank markets to finance deals in several sub-Saharan jurisdictions;

• a deeper market of available equity for projects, due to the rise of funds willing to invest inthe emerging markets, and the involvement of private equity more generally;

• the ongoing discussions about project bonds, coupled with the frustration over deals actuallyreaching the market;

• the return of a broader group of commercial banks, especially in the oil and gas sector -there seems to be plenty of liquidity in the market for well-structured deals in oil and gas;

• the increasing importance of strategic finance, and hence the importance of ECAs – a largeproportion of debt-financing in the energy sector ties back to the delivery of oil and gasproducts;

• the apparent flood of money from the east, both in project finance, but also in substitutionfor project finance (in the case of Chinese funds); and,

• the move of trading houses into the project finance market.

Several of these trends intertwine with each other, and below we discuss some of those whichwe think will continue to be factors through 2014.

ECAs and DFIs in AfricaHistorically, project finance deals in Africa have fallen loosely into one of the following cate-gories:

• those that are impossible to ignore economically (liquified natural gas (LNG), and otherupstream oil and gas such as Nigeria LNG);

• marquee projects which require the support of DFIs, but also attract commercial bankmoney, require a lot of structuring and are relatively rare (for example Bujagali 2 in Uganda);or,

• those that are essentially DFI projects, which wouldn’t normally pass the credit committeetests of commercial banks.

We are now seeing an increased number of deals which are economically rational for abroader group of lenders, and which are structured in a way which would be acceptable to thetraditional project finance lender banks. DFIs are taking a stronger hand in structuring thesedeals and, perhaps unlike deals a decade ago, are seeking structures which will be bankable forcommercial banks both in local bank markets and internationally.

We are also seeing a much greater acceptance and willingness by African governments to getthe project contract matrix right, and structure deals in a bankable manner (for example recentpower deals in Nigeria and Kenya). Helping this trend to blossom is the increased involvementof companies that are experienced in doing project finance deals in established markets inAfrica.

The emergence ofa new orderGuest editors Martin Kavanagh and Brendan Quinn of Herbert Smith Freehills consider the evolving landscape ofproject finance

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INTRODUCTION

IFLR REPORT | PROJECT FINANCE REPORT 2014 WWW.IFLR.COM2

Increased depth in equity Crucial to the re-emergence of project finance lending will be the availabilityof reliable equity that is willing to invest in greenfield projects in emergingmarkets. We are seeing many funds, and other financial investors, showingan interest in these markets, and in what is perhaps a new trend, those in-vestors being willing to invest at earlier stages of project development, andthereby taking some of the development risk. These investors have a different risk appetite to the traditional investor in energy and infrastructureprojects in emerging markets, but they certainly have funds to invest. Fur-ther, because they are actively choosing to invest, they are keen to close deals.

The flood of cash from the eastFor many years, the markets have been talking about the incoming flood ofmoney from east Asia. Of course these funds take many forms – everythingfrom Japanese equity investment (and ECA lending) in LNG projects, toKorean ECA financings for almost any sort of large scale project, to the Chi-nese equity investment in Standard Bank, to direct Chinese state-owned en-terprise loans and investments.

Much of this money comes in the form of project finance loans as weknow them (or the equity to support them), but the recent trend has movedeven more towards strategic investing and lending which is directly linkedto some sort of national benefit. The most obvious example is the desire ofJapanese investors to import energy sources in the wake of the tragic earth-quake and resulting Fukushima accident.

In other cases, the funds available actually work in a way which replacesthe need for project finance as we know it, and some equity investments areundertaken in a way which will clearly not support the highly structuredcontracts that we are used to seeing in large projects.

A new orderWhile we certainly are not in the position where we can see a project financemarket which looks like the one we all knew in the mid-2000s, it does seemthat there is a an emergence of a new order, and one which finally, we canunderstand and recognise.

About the authorMartin Kavanagh is a partner in Herbert Smith Freehills’ London office.He specialises in energy and infrastructure finance and energy projectdevelopment, and has significant experience acting for corporates, lenders,borrowers, governments and export credit and multilateral agencies,particularly in Africa and other emerging markets. He has extensiveexperience in the project finance and project development fields, includingthe full oil and gas value chain, power, transport, hydroelectric andrenewable power and mining sectors.

Martin KavanaghPartner, Herbert Smith Freehills

London, UKT: +44 20 7466 2062E: [email protected]: www.herbertsmithfreehills.com

About the authorBrendan Quinn is Herbert Smith Freehills’ head of finance for Asia Pacificand is a project and project finance specialist advising on all aspects of thefinancing and development of projects including in the power, energy,industrial, social infrastructure, resources and transport sectors injurisdictions including Africa, Australasia, Asia, Europe, Latin America andthe Middle East.

He has experience of both common and civil law jurisdictions andexpertise in many forms of finance including commercial, export credit,multilateral and capital markets. He has worked in Australia, Hong Kongand London.

Brendan QuinnPartner, Herbert Smith Freehills

Melbourne, AustraliaT: +61 3 9288 1459E: [email protected]: www.herbertsmithfreehills.com

DisclaimerThe summaries provided herein should not be regarded as a definitive legal opinion or a substitute for seeking specific legal advice in relation to the subjectmatter that they cover and/or the legal processes that they describe. Any such legal opinion or legal advice would need to be tailored to specific circumstancesand the specific parties involved and would likely be subject to many qualifications and/or reservations.

CONTENTS


ContentsSurvey responses

Australia 14Brendan QuinnHerbert Smith Freehills

Colombia 19Cesar RodriguezBrigard & Urrutia

Germany 24Daniel Reichert-FacilidesFreshfields Bruckhaus Deringer

Hong Kong 26Alexander AitkenHerbert Smith Freehills

Lebanon 30Hala Raphaël-Abillama and Sabine El KhouryRaphaël & Associés

Macau 34Gonçalo Mendes da MaiaMdME

Malaysia 37Adrian Chee Meng Yang and Lai Kooi ThongAdnan Sundra & Low

8

Expert analysis

European Investment Bank

Innovationfinds a way

CONTENTS


6

10

International Project Finance Association

All change?

Inter-American Development Bank

Cutting thered tape

Survey responses

South Africa 41Phologo Pheko Fasken Martineau

Taiwan 44Jackson Shuai-Sheng Huang and Simon Hsien-Wen HsiaoFormosa Transnational

Tanzania 48Nicholas Zervos, Victoria Lyimo Makani and Joy Hadji AlliyVELMA Law

Thailand 52Maythawee Sarathai and Ben ThompsonMayer Brown JSM

UK 56Martin KavanaghHerbert Smith Freehills

US 60Kelley Michael Gale, Amy Maloney and Victoria SalemLatham & Watkins

Vietnam 65Nathan Dodd, David Harrison and Quynh-Anh LamMayer Brown JSM

EXPERT ANALYSIS GLOBAL

IFLR REPORT | PROJECT FINANCE REPORT 20146

A s governments short on cash search for ways to stimulate theireconomies, partnering with the private sector becomes an increas-ingly common practice to jump-start projects. According to the

World Bank, even more will be needed to meet the growing demand for infrastructure worldwide. Complications arising from national and crossborder regulations are beginning to ease, opening new opportunities in thetransport and energy sectors. The International Project Finance Association’s(IPFA’s) global executive chairman Geoff Haley, looks at the developmentsin this market place, and what can be expected moving forward.

With governments worldwide pulling back on infrastructurespending, what role do you see public private partnerships (PPPs)playing? Is this the best way to balance public and private needs?Is there a jurisdiction where you think they are executing thesebest? As we move out of the global financial recession, PPPs will have a greaterrole to play to provide the infrastructure that some countries are unable toprovide from their own resources. This is particularly important for the pro-vision of railways, roads, hospitals, schools, and government accommoda-tion. Therefore, what we will see over the next five to seven years is a furtherexpansion of PPPs around the world. There are quite a number of exampleswhere we’ve seen exceptional progress in the last year to 18 months, as inCanada and Columbia.

The PPP is the best way to balance public and private needs, because it isproving to be more efficient and cost effective then the provision of servicesby governments. It’s the successful utilisation of capital with the efficiencyof the private sector, but the strategic control remains with the public sector.It’s proving to be a good balance, and we are seeing cost saving in many sec-

tors of 12-17%.

What significant developments have there been in PPPs over thepast five years?It’s been a difficult period over the last five years. The bond market collapsedon the liquidation of Lehman brothers, and the effects of the global financialrecession on banks have substantially reduced their ability to lend to projects.What we are actually seeing is that developments are centred on alternativeforms of financing projects. Important developments are the European Investment Banks promoting a new bond structure, and private banks likeING promoting new initiatives, such as Pebble. This is an instrument thathas been created by ING and Allen Overy to provide all the necessary financing for a project, both during construction and operation. It has in-built guarantees and mechanisms to enhance the credit of the facility.

Globally, there have been and continue to be a number of cross-border projects, namely in the transport sector, how can sponsorsovercome the complexities of working in multiple jurisdictions forthese large-scale projects? There are a large number of cross-border projects coming up in Asia, andparticularly in the Association of Southeast Asian Nations (ASEAN) Pactcountries. For these projects to take off they need to be government-led andhave clear treaties between the countries established before the projects areput out to bid. In Asia, there are a lot of roads and bridges and railways thatwill be cross-border – they need to decide what the applicable law for theproject is, and what the decision-making process is going to be between thetwo countries. It’s very much a political project when it involves more thanone government.

All change?Geoff Haley, founder and executive chairman of the International Project Finance Association, looks at the changing role of the PPP, and new trends in project financing acrossthe globe

EXPERT ANALYSISGLOBAL

IFLR REPORT | PROJECT FINANCE REPORT 2014 7

What has been the biggest project finance development in the last20 years?In the last five years, there has been a reduction in the number of projectsand a number have only been closed because of support from public development banks. Manchester Waste was only closed because of help fromthe European Investment Bank. The Senegal toll road financing containedno commercial banks and consisted solely of public development banks (theAfrican Development Bank, World Bank, and others).

Since the global financial crisis, banks have been disinclined toparticipate in the long-term financing that many of these projectsneed. Are there viable alternatives to replace them as long-termfunders, or is their return into this market necessary? We have two prongs here. First, banks are becoming weaker because of theeffects of the financial crisis and the need for them to increase the capitalbase of the bank, which results in decreased lending. The second issue isthat the effects of the agreements under Basel III will prevent many banksin the future from participating in project finance deals, and that’s becauseof their inability to provide lending of long tenures. In the boom period upto 2007, some banks were lending into projects for up to 30 years. Nowunder Basel III, the banks will have to match their lending, which are lia-bilities, alongside their assets. In this way, the tenures will be reduced con-siderably.

The market is now looking for other long-term investors, and we’re seeingthis coming through from infrastructure funds, pension funds, and we willalso be looking at new financial structures to help fund projects in emergingmarkets.

There are a number of back-logged projects in developedcountries, as well new opportunities in the developing world. Howshould sponsors prioritise where they invest, and what cancountries do to attract them? What investors are looking for is whether there are strong and enforceable

legal systems in the country in question where they can receive a reasonablereturn on their capital invested and be able to remit it back to their owncountry. They are also looking at deal flow and the negotiation time frombid to financial close, as this reduces the cost of the bidding process. Andthey are looking at the political stability of the countries in which they areinvesting.

What countries have to do is provide an accelerated way of transferring abid into a completed project. That means that they have to provide cleardocumentation in order to limit the amount of time spent on negotiation.Canada is probably leading the way at the present time; in one of theirprovinces, they have financially closed a deal four months after the bid wasadvertised.

There are a growing number of energy projects, notably renewableenergy, in developing economies. Are these the flavour of themonth, or will these be a longer trend? What can the structures ofdeals tell us about completing projects that at first may seemprohibitively expensive? There have been quite a number of renewable energy projects closed in thelast couple of years, but within Europe they have required substantial in-volvement from development banks. On a longer term basis, they are veryclosely linked to politics, and these projects are not fundable unless theyhave long-term guarantees on the feed-in tariff. Some of the deals in Europehave a 20-year guarantee for the tariff to be paid by the government. So thebig question is, if governments start to reduce the feed-in tariff, will thismake the projects less attractive?

There are a lot of issues being raised in the UK on the tariff and subsidies

being given to renewable energy, so politically, they are being scrutinised. Ifyou look at Spain, they reduced their tariff quite substantially for futureprojects. The issue is very closely linked to politics, and if governmentschange, one can see the tariffs changing too.

About the contributorGeoff Haley is the founder and chairman of the International Project FinanceAssociation, the largest independent not-for-profit project finance tradeassociation in the world.

He is a solicitor with an LLB from the University of London, an MBA fromHenley Business School and a Diploma in marketing from the ChartedInstitute of Marketing.

Originally a construction lawyer, he has specialised in project finance andpublic private partnerships since 1985. He has specialist experience in largeand complex projects in transportation, energy, water treatment, healthcareand education. Projects include the Channel Tunnel, Channel Tunnel RailLink, DBFO Roads, PFI government hospitals and accommodation; overseasprojects in Dubai, Jordan, West Africa, Ukraine, Georgia, China and the US.

Haley is a trustee of First Initiative Resource Strategy and Technology – anOxford-based charity. He is non-executive director of Quantum, and visitingprofessor to the Metropolitan University. He lectures extensively on projectfinance and designs, and delivers a range of training courses for governments,public sector bodies and private companies.

Geoff HaleyGlobal executive chairman,International Project FinanceAssociation

London, UKW: www.ipfa.org

“The market is now looking forother long-term investors

“Canada is probably leading theway at the present time

EXPERT ANALYSIS EUROPE


S ince the financial crisis, infrastructure projects in Europe have beenslow to materialise, and those that have progressed have struggledto secure funding. Several innovations in financing have gradually

been developed. High-street banks, for example, are taking a different rolein projects, providing advice to institutional lenders that see a gap in themarket, or lending on a short-term basis until other funding can be secured.

The European Investment Bank (EIB) has provided its own support,through projects such as the Project Bond Initiative, which completed itsfirst project in Spain this year. And there seems to be scope for more capitalmarkets funding, through the European Commission’s (EC’s) ConnectingEurope Facility, for example.

Nicholas Jennett and Peter Jacobs at the EIB give their view on the mar-ket and explain the details of recent innovations.

Where does the infrastructure project market stand at the moment,both in terms of demand and supply?Nicholas Jennett (NJ): On the demand side, there is clearly a need for moreinfrastructure projects to come to market. In some sectors, unless govern-ments strengthen the existing project pipeline, there is certainly a risk to thedelivery of broader European policy objectives. Turning to finance, the EIBis working to reinvigorate capital market financing of infrastructure projectsthrough the Project Bond Initiative (PBI).

Traditional banks have backed away from long-term lending. Whatcan be done to bring them back into the process?Peter Jacobs (PJ): The reality is that high-street banks are at the momentless keen on providing long-term financing, although some improvement

has been noticeable recently. So institutional lenders have taken and shouldtake the opportunity to fill this void, and they clearly seem to be doing so.Banks are still not lending long-term yet, envisaging a further role in projectfinance, are redefining their business models. They are looking to provideadvice or agency roles to other investors, including institutional investors.In addition, the model of lending on a short-term basis during constructionin order to be refinanced later, is another route banks are pursuing

What lessons can be learned from Thameslink Rolling Stockregarding project structuring?PJ: Thameslink started developing in the middle of the financial crisis. Atthe time there wasn’t enough market liquidity. All parties to the transaction,sponsors, the procuring authority and lenders realised that a level of de-risk-ing the project was required to attract necessary financing. This proved tobe the right analysis, as under slightly improved market conditions and sup-ported by the A-rating resulting from the de-risking efforts, decent levels ofliquidity were available to get the project funded.

The project bond initiative launched last November. How has thepilot programme been going so far, and what are you expecting tosee?NJ: In July, we completed the first project to use the project bond credit enhancement scheme. This was for the Castor underground gas storage proj-ect in Spain. There are two issues to note from this project: firstly, that itreceived a rating one notch higher than the sovereign; and, secondly, thatwe were able to ensure investor support totalling the €1.4 billion ($1.9 mil-lion) needed for the project.

Innovation finds a wayNicholas Jennett and Peter Jacobs, director of new products and special transactions department and head of western Europe project finance at the European Investment Bank, explain how the bank has promoted alternative funding sources for infrastructure projects

EXPERT ANALYSISEUROPE


Spain is not the easiest county to raise capital in at the moment, and thefact that the issue was oversubscribed shows the clear potential and stronginvestor appetite. We hope by the end of this year to have at least one moreproject bond credit enhancement transaction, and this will allow a moremeaningful evaluation by both ourselves and the market. However, the firstdeal was clearly a good start to the initiative.

If the project bond initiative is successful in increasing capitalmarket activity in project financing, do you anticipate that theenhancement offer will become a more permanent part of projectbond offerings in Europe?NJ: The purpose of the initiative is to increase sources of funding for projectfinance. We are already beginning to see an increase in the willingness ofsome capital market players to get involved and eventually fund investments.Sometimes this engagement is done without enhancement. We have seenthis principally through the private placement route. I hope to see a broadermix of financing options from now on, and that during the pilot phase ofthe PBI we will come to better understand when credit enhancement isneeded (and perhaps when it is not). The mid-term review of the pilot phaseof the PBI is already under way, and the final review will take place in 2015-2016. Following this, the EC and the EIB will decide whether to expandand extend the programme.

Are you seeing or anticipating any new innovations in projectfinancing? NJ: We are already seeing a greater variety of funding sources available inthe market. Under the European Union’s Connecting Europe Facility (theCEF), there is scope to use EC funds to develop other types of debt instru-ments, but also to develop equity instruments where these are appropriate.The European 2020 Marguerite fund, which is a very large, very significantequity fund, shows the innovation already taking place, but the CEF pro-vides us with further opportunities to create new equity initiatives. If thereis a case for these, the Bank and EC will work to develop them.

The EIB is engaged across all 28 EU member states and elsewhereto ensure projects are bankable. What examples do you think canbe given to projects around the world in terms of practicalapproaches to infrastructure development?NJ: If I’m looking for clear lessons and best practice to share, I would lookat the demand and supply sides of the financing market. I think there hasbeen a good deal of imagination – and innovation – shown on the supplyside, from banks, from capital market players and from the EC. Where Eu-rope is weak at the moment is on the demand side, and we need to see moreconcrete project proposals or ideas developed into sound and bankable projects.

About the contributorNicholas Jennett is director of the EIB’s new products and specialtransactions department. The department is responsible for a number ofthe joint financial instruments on which the bank and EC cooperate –notably the Risk Sharing Finance Facility, the Loan Guarantee for TENTransport and JESSICA. It is currently working with the EC on the pilotphase of the EU 2020 Project Bonds Initiative. Jennett has been with theEIB for 15 years, the majority of this time working on project finance andother structured transactions in infrastructure and energy. Before taking uphis current post, he was head of the European PPP expertise centre, a jointEIB, EC and member state initiative.

Prior to joining the Bank, Nick worked as a consultant, an economist ingovernment service and a university teacher. He has degrees from theUniversities of York and Keele, and the London School of Economics.

Nicholas JennettDirector, new products and specialtransactions department, EuropeanInvestment Bank

London, UKW: www.eib.org

About the contributorPeter Jacobs has headed the EIB’s project finance lending in the UK,France, Ireland and the Benelux since 2011.

He joined the Bank 13 years ago following 10 years of commercialbanking and has a master’s degree in economics and accounting.

Peter JacobsHead, western Europe project finance,European Investment Bank

London, UKW: www.eib.org

“We are already seeing agreater variety of fundingsources available in the market

“Where Europe is weak at themoment is on the demand side

EXPERT ANALYSIS AMERICAS


O pportunities for energy and infrastructure projects continue togrow in Latin America and the Caribbean as the developingeconomies there strengthen and seek to attract new investments.

The desire to improve access to infrastructure to grow the economy haslead countries, including Mexico, to cut some of the red tape associated withinitialising projects. Attracting stable, long-term funding will be the nextchallenge for projects in the region, requiring new consideration as to dealstructure and risk allocation. Jan Weiss, lead syndications officer at the Inter-American Development Bank (IDB) looks at some ways investors canbe coaxed into the market.

Speculation about the potential use of project bonds has beencirculating for a while. Do you think project bonds are going tobecome a viable product in Latin America and the Caribbean andwhen might we expect that process to begin?I think projects bonds have been under discussion for a long time. At theIDB, we are aggressively looking for ways to expand this market. I thinkthere are risks that are inherent in project bonds that institutional investorshaven’t historically been comfortable with, such as construction risk. Weneed structures that allocate risk to those investors who are comfortabletaking those risks. That might mean creating a hybrid where the construc-tion risk is taken by banks or other types of guarantors. Until those typesof construction risks can be adequately mitigated, it will be hard to takepure project bonds to market. I think the first big deal will likely be a cor-porate hybrid. I expect once that first deal gets done, it will open the flood-gates.

Banks are coming back into the project finance market in LatinAmerica and the Caribbean in a significant way. What is it that hasbrought them back, and why are we seeing more activity andcomfort in Latin America then in other regions of the world?I think overall the comfort level has increased for banks, many of whomhave had issues with funding and liquidity in the past. Now those banks areready to get back in the market. The returns in Latin America tend to behigher than in other regions which, combined with stable commercial andpolitical risks, make Latin America a strong investment option.

I think that both energy and infrastructure are the keys to development inthe region. Latin America has significant needs in both of those areas. As privatesector sponsors move in to meet those needs, the banks will follow their coreclients.

Given the political uncertainly of certain countries in the region andregulatory developments that are still in the works as projects arebeing drawn up, how do you structure a deal to get over theregulatory risks and timing issues that might be raised? When you’re looking at transactions – especially in energy and infrastruc-ture, regulatory risks are quite important. Given our relationship with ourmember countries, we believe that our involvement in transactions can bebeneficial in helping to improve the bankability of project contracts. Help-ing investors become more comfortable with regulatory regimes is key if weare to bring more investors into the project finance field.

Commercial banks are also offering longer tenors for core clients in theircore markets. However, the availability of those tenors can be limited in

Cutting the red tape

Jan Weiss, lead syndications officer at the Inter-American Development Bank discusses howto get investors comfortable with project finance investments in Latin America and theCaribbean

EXPERT ANALYSISAMERICAS


smaller markets and for medium-sized enterprises. As we expand into morerenewable projects and other types of transactions that need longer tenors,the role of multilaterals will become important for those projects that needlong-term financing and aren’t on the radar of large commercial banks.

Six percent of the IDB’s investment budget in 2012 was spent onrenewable energy. The field has attracted investors from all overthe world including North America and Europe to invest in a rangeof energy’s including solar, hydro and wind. Do you expect thisflurry of projects to continue and given the type of funding theseprojects need how do you get investors comfortable with this field?I think the market for renewable will remain strong in Latin America. We’vegone through an initial wave of projects looking for financing, many ofwhich were funded by multilaterals and export credit agencies (ECAs). Inthe next wave, I think we will see greater involvement by commercial banks,many of whom are looking at B loan programmes because they give themthe ability to do longer-term projects outside their core markets.

We are seeing more and more transactions completed in localcurrency. Is this a trend we can expect to see more of? I think it’s going to depend on the type of project that is getting done. Thereare deals that lend themselves to local currency, such as toll roads. I thinkwe will see a lot of these types of financing in the upcoming Colombian tollroad concessions. As most international banks are reliant on the swap marketfor funding, we are going to see a lot more local banks taking the lead inthe funding of these deals. In addition, we should also highlight the rolethat local capital markets could play in these transactions. Particularly incountries like Mexico and Peru, we have seen institutional investors displaya healthy appetite for infrastructure investments. As these markets becomestronger in the region, we expect that more deals will be financed locally.

Where do you think the biggest development in Latin Americanproject finance will be? I would continue to keep an eye on the project bond market. While we hadthe Oaxaca wind deal last year, there haven’t been very many new bonds inthe region. Many institutions are looking at ways to bring in bond investors,given their appetite for long-tenored deals.

I think there was a greater need for project bonds when the commercialbanks were out of the market. We may see more in the future because longertenors are so appealing to sponsors. However, other structural componentssuch as long draw-periods and higher pre-payment costs don’t lend them-selves to all project finance transactions, but could lend themselves to veryspecific ones. The success of future placements will take the right investorswith the right type of project, and strong risk mitigants.

About the contributorJan Weiss is lead syndications officer in the structured and corporate financedepartment at the Inter-American Development Bank, where she isresponsible for mobilising financing for infrastructure and project financetransactions.

Prior to joining IDB in 2011, Weiss was an executive director in the LatinAmerica division of WestLB, where she headed up the group’s infrastructureorigination in the region. As a group vice president in the structured tradegroup at ABN AMRO Bank, Weiss was responsible for structuring projectfinance transactions in conjunction with multilateral and bilateral institutions,as well as export credit agencies. Weiss began her career in banking as aninvestment officer at the Overseas Private Investment Corporation, focusingon project financings in Africa and Asia.

Weiss holds an MBA in finance from the University of Maryland and an ABin French Literature from Dartmouth College.

Jan WeissLead syndications officer, Inter-American Development Bank

Washington D.C., USW: www.iadb.org

“I would continue to keep aneye on the project bond market

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COUNTRYREPORTS

PROJECTFINANCE REPORT 2014

Section 1 – Collateral/security

1.1 What types of collateral/security are available? The following types of security are typically required:

• a charge over project assets;• equitable mortgage over shares or units, including rights attached to

them, in the project entity and possibly its holding company;• legal mortgages over land; and, • tripartite agreements with counterparties to key project contracts.

Section 2 – Perfection and priority

2.1 How is a security interest in each type of collateral perfectedand how is its priority established? The Personal Property Securities Act 2009 (Commonwealth) – the PPSA –governs the taking of security over almost all types of tangible and intangibleproperty except land and certain statutory licences. Under the PPSA, a security interest is perfected by registering the interest on the PPS Register.

Additionally, where the subject of the security interest is controllable prop-erty, perfection can be achieved by control of that property.

The PPSA establishes default priority rules:

• a perfected security interest has priority over an unperfected security in-terest;

• between two perfected interests, first in time of registration (assumingcontinuous perfection) has unlimited priority over later perfected interests;

• between two perfected interests, one of which is perfected by control,the security interest perfected by control has priority;

• between two security interests perfected by control, the first in time ofperfection by control (assuming continuous perfection by control) haspriority; and,

• between two unperfected interests, in order of time of attachment.

Secured parties can agree to alter these default priority rules, by enteringinto priority or subordination agreements.

A mortgage over land is perfected by registering the mortgage with the relevant state’s land registry.

In most states and territories, separate registers are maintained for mineraland petroleum rights. A charge over a mining or petroleum licence is perfected by obtaining the approval of the relevant government minister,and having the security registered on the relevant mining or petroleum register.

2.2 How can a creditor assure itself as to the absence of liens withpriority to the creditor’s lien? Searches of the PPS Register, the relevant mining and petroleum registerand the relevant land registry, are conducted prior to taking security to ensure that there are no other registered security interests.

The borrower is required to warrant and represent that no unpermitted security interests exist, and to undertake not to grant any other security in-terest until the loan has been repaid.

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? (a) PPS registration fee

A small fee is payable upon registration of a security interest on the PPSRegister.

(b) Land mortgage registration fee

A fee is payable upon registration of a mortgage at the land registry of eachstate and territory.

(c) New South Wales mortgage duty

Mortgage duty is payable where a mortgage or charge is created over prop-erty that is located within New South Wales. Because mortgage duty is notimposed in the other Australian states, this duty can be lawfully avoided byensuring that none of the property over which security is being taken is located in New South Wales.

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 may act as trustee and hold securities on trust for theother financiers. This is the usual scenario where there are two or morelenders.

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?Under the Foreign Acquisitions and Takeovers Act 1975 (Commonwealth)(FATA) the treasurer can review foreign investment proposals and blockthose that are deemed contrary to the national interest, or apply conditionsto the way proposals are implemented to ensure they are not contrary to thenational interest. The treasurer relies on advice from the Foreign InvestmentReview Board (FIRB), and FIRB gives this advice on the basis of its ForeignInvestment Policy (the Policy).

However, not all foreign investment proposals require approval. Certain criteria and monetary thresholds apply before approval is required. For ex-ample, the FATA provides an exception for investments made pursuant toa moneylending agreement.

Private foreign investors must obtain approval before acquiring a substantialinterest in a corporation or control of an Australian business that is valuedabove A$248 million ($227 million). They are also required to obtain priorapproval if they wish to acquire a substantial interest in an offshore companywhose Australian subsidiaries or gross assets are valued above A$248 million.

Private foreign investors are required to obtain approval before acquiring aninterest in certain types of land. Regardless of the value of the investment,private foreign investors need to obtain approval prior to acquiring an interest in residential real estate, vacant land or shares or units in Australianurban land corporations or trusts. They also require approval to obtain aninterest in developed commercial real estate that is valued at A$54 millionor more.

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Australia

Brendan Quinn, Herbert Smith Freehills

www.herbertsmithfreehills.com

AUSTRALIA


Despite the moneylending exception in the FATA, the Policy provides thatforeign government investors are required to obtain FIRB approval beforemaking a direct investment in Australia. A direct investment is defined inthe Policy to include retaining an interest of 10% or more following the enforcement of a security interest.

Most foreign export credit agencies and commercial lenders active in theAustralian debt market are foreign government investors for the purposesof the Policy.

Given that it is not usually possible for a lender to know in advance whetherit will hold an interest of 10% or more upon enforcement of security, it iscommon practice for lenders that are foreign government investors to seekpre-approval from FIRB at the time of taking security.

It is also generally accepted that the need for approval is not negated by having the security held by a security trustee rather than directly by the foreign government investor.

3.2 Do these restrictions also apply to foreign investors or creditorsin the event of foreclosure on the project and related companies?Under the Policy, a foreign government investor regulated by the AustralianPrudential Regulation Authority as an authorised deposit-taking institution,does not need the treasurer’s approval when it enforces a security interest,unless it gains control over the asset and retains it for more than 12 months.

3.3 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 treaties which afford relief from the requirements of the FATA.

However, higher monetary thresholds apply for US and New Zealand investors. For both business and land acquisitions, investors from thesecountries only require the treasurer’s approval where the investment is valuedabove A$1,078 million.

Section 4 – Documentation formalities and governmentapprovals

4.1 Is a submission to a foreign jurisdiction and a waiver ofimmunity effective and enforceable?The parties to a contract are free to submit to the courts of a foreign juris-diction and have a contract governed by the law of that foreign jurisdiction,if their intentions are bona fide, legal and not contrary to public policy.

Further, under section 10 of the Foreign States Immunities Act 1985 (Commonwealth), clauses whereby a state submits to a foreign jurisdictionor waives its immunity are effective and enforceable. Therefore, an Aus-tralian government entity may submit to a foreign jurisdiction or waive its immunity, and this will be recognised by Australian courts.

4.2 Must any of the financing or project documents be registered orfiled with any government authority or otherwise comply with legalformalities to be valid or enforceable? For instance, does collateralneed to be notarised?Certain documents need to be registered in order to have their full effect,including trust deeds, which must be stamped by the relevant state revenueauthority in order for a trust to formally come into existence, and securitydocuments which must be registered (see 2.1).

Collateral does not need to be notarised.


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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?A significant number of government departments have authority over projects in typical project sectors.

(a) Petroleum

Both state and Commonwealth departments have authority over the petroleum sector. State departments regulate the onshore (and near-shore) petroleum industry, while the Commonwealth has authority over the off-shore petroleum industry.

The state departments have the authority to issue licences which allow par-ties to explore for and produce petroleum. They also support the onshorepetroleum industry by providing advice and industry liaison services for investment and project development.

The Commonwealth departments are responsible for policing safety andwell integrity, protection of the environment, managing the award and administration of petroleum licences, resource management and attractinginvestment in the petroleum sector.

(b) Mining

Each state has its own department which regulates mining in that state.These departments have the authority to issue exploration and productionlicences. They also provide advice to potential investors and regulate the industry more generally.

(c) Electricity

The Australian Energy Regulator regulates the wholesale electricity marketin south-eastern Australia. It regulates the revenues of transmission and distribution network service providers, monitors the electricity wholesale market to ensure compliance with the national electricity law and establishesservice standards for electricity transmission network service providers. TheIndependent Market Operator performs similar functions in Western Australia.

Each state has its own Environmental Protection Authority (EPA) as wellas a state department that is charged with the conservation and sustainableuse of that state’s natural environment and biological diversity. These bodiesissue environmental licences and approvals, which are required to carry oncertain activities.

4.4 What government approvals are required in relation toenvironmental concerns for typical project finance transactions?What fees and other charges apply?(a) State and territory

General environmental and land use planning regimes apply in each stateand territory. These typically require that:

• planning approvals be obtained prior to constructing any new works orusing land for a new purpose, such as construction of a mine; and,

• environmental protection licences be held by any operator who carriesout an environmentally prescribed activity, such as operating a mine.

(b) Commonwealth

Any action that has, will have or is likely to have a significant impact onany matters of environmental significance requires Commonwealth approvalunder the Environment Protection and Biodiversity Conservation Act 1999(Commonwealth) (EPBC Act). As such, projects which are in sensitive areas(such as World Heritage properties or national heritage places) may requireEPBC Act approval.

Section 5 – Natural resources

5.1 Who has title to natural resources? What rights may privateparties acquire to these resources and what obligations does theholder have? May foreign parties acquire such rights?Title to natural resources resides with the relevant state or territory in whichthe natural resources are located.

Each state or territory issues licences which give private parties rights to ex-plore for and acquire these resources. Although each state or territory regimefor each type of resource is slightly different, these licences are broadly sim-ilar and can be split into three categories.

(a) Production licences

These licences entitle the licence holder to conduct production activitiesnecessary for the recovery of commercial quantities of the resource. The licensee must:

• conduct operations with due diligence, in accordance with licence conditions and an approved work programme;

• pay annual fees and royalties;• prepare an environmental impact report and a statement of environmen-

tal objectives;• keep records relating to the licence; and,• carry out regular assessments of the risk posed by production facilities

to public health, safety and the environment and report back to the relevant state government.

(b) Exploration licences

These licences entitle the licence holder to undertake exploratory works fora particular natural resource in accordance with an approved work programme. The licensee must:

• relinquish part of the licence area upon expiration of the licence term;• pay annual fees and royalties; and,• prepare an environment impact report and a statement of environmental

objectives.

(c) Pipeline licences

These licences entitle the licence holder to construct, maintain and operatepipelines for petroleum transmission purposes. The licensee must:

• comply with directions from the government in relation to the alterationor modification or pipelines or pipeline operations;

• consult with affected landowners and keep the department appraised oftheir activities; and,

• when required, show evidence of relevant titles and agreements whichare necessary for a pipeline to operate.

There are no specific restrictions on foreign parties acquiring these rights(however see 3.1 above regarding approval of FIRB).

5.2 What royalties and taxes are payable on the extraction of naturalresources, and are they revenue- or profit-based?(a) Petroleum

A royalty obligation of 10% of the wellhead value is levied by the state/ter-ritory against all petroleum produced. This royalty obligation is revenuebased.

(b) Minerals

The amount of royalty payable varies in each state and territory, but is gen-erally revenue based. Additionally, the Commonwealth imposes a 30% min-

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erals resource rent tax on annual profits that exceed A$75 million in respectof iron ore and coal mining, subject to certain deductions. However, thenewly elected coalition government has introduced legislation abolishingthis tax. This legislation is still required to pass the senate before cominginto effect.

5.3 What restrictions, fees or taxes exist on the export of naturalresources?There are no restrictions on the export of minerals, other than uranium.

With regards to petroleum, Western Australia has a gas reservation policyin place, which affects the amount of gas available for export. Under thispolicy, the Western Australian government aims to secure domestic gas commitments up to the equivalent of 15% of liquid natural gas (LNG) pro-duction from each export LNG project.

5.4 Can private parties grant security over any such rights in naturalresources, and in the event of enforcement of that security wouldthe local granting body be bound by that security. Would change ofcontrol in the borrower (for example, upon exercise of sharesecurity) trigger a forfeit of those rights?Private parties may grant security over their rights in natural resources. Thesecurity will only be effective with the approval of the relevant governmentauthority.

In addition, government approval is required before rights in natural resources can be transferred.

A change of control in the borrower does not automatically trigger a forfeitof rights in natural resources. However, the licence terms often provide thatgovernmental consent must be obtained before any change in control of thelicence holder.

Section 6 – Bankruptcy proceedings

6.1 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? Insolvency of the borrower can impact on the ability of a financier to enforceits security. Directors may resolve to put a company, which is in or near in-solvency, in administration.

The purpose of administration is to maximise the company’s chances to remain viable and meet its debts.

Appointment of an administrator creates a moratorium for a limited periodon creditors pursuing claims against the company. A secured creditor whohas security over the whole or substantially the whole of a company’s assetshas a period of 13 business days following the appointment of an adminis-trator within which to enforce its security. If it does not enforce its securitywithin this time, the secured creditor will also be subject to the morato-rium.

6.2 Are there any preference periods, clawback rights or otherpreferential creditors’ rights with respect to the collateral/security? Certain creditors (in particular, employee entitlements and costs of insol-vency practitioners) are given priority over a company’s assets that are circulating assets, or are the subject of a floating charge.

Circulating assets include inventory, currency, negotiable instruments, orother assets that the security holder has given express or implied authorityfor the company to transfer in the ordinary course of its business.

Floating charges are security interests over property that is not governed bythe PPSA , and that can be dealt with by the company without having toseek the consent of the security holder, until the occurrence of a specifiedevent when the floating charge crystallises and converts into a fixed charge.

Once the property is subject to a fixed charge, the company may not dealwith it in any way without the security holder’s consent.

6.3 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? Contractual enforcement is recognised in Australia. Generally, a securedcreditor will be entitled to appoint a receiver in accordance with the termsof the security. The receiver is appointed to take possession of the assets ofthe company and to realise sufficient assets to pay the secured creditor andreturn any surplus to the company.

Receivership is terminated when the debt of the secured creditor is dis-charged or there is no more property left to be realised.

6.4 Outside the context of a bankruptcy proceeding, what stepsshould a project lender take to enforce its rights as a secured partyover the collateral/security? The steps which should be taken by a project lender to enforce its rights depend on the terms of the agreement and the nature of the security.

The project lender should ensure that it has all of the documentation necessary to enforce its security without any further action being requiredon the part of the security provider. For example, in the case of a share mort-gage, the project lender should ensure that it has the original share certificates and blank share transfer forms in its possession, so that it mayimmediately enforce the security.

The steps a project lender should take will also be determined by referenceto what is defined as an event of default under the finance documents, andwhat the consequences of an event of default are.

6.5 Does the jurisdiction recognise the concepts of trustees inbankruptcy, receivership, liquidators or similar persons? Trustees in bankruptcy, receivers and liquidators are all recognised in Australia.

Section 7 – Foreign exchange, remittances and repatriation

7.1 What, if any, are the restrictions, controls, fees, taxes or othercharges on foreign currency exchange? There are no governmental restrictions, controls or fees payable on foreigncurrency exchange. However, gains and losses from foreign currency exchange can be assessable income or allowable deductions under the Income Tax Assessment Act 1936 (Commonwealth) or the Income Tax Assessment Act 1997 (Commonwealth). Amounts earned from foreign currency exchange may therefore be subject to income tax.

7.2 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? Interest withholding tax of 10% is levied on interest that flows from anAustralian company to a non-resident financier. However, Australia has a

number of double taxation treaties with various countries, including theUS, the UK, Finland, France, Japan, New Zealand, Norway and SouthAfrica, the effect of which is that certain entities from thesecountries may, depending on certain conditions, be exempt from Australianwithholding tax.

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

7.4 May project companies establish and maintain foreign currencyaccounts in other jurisdictions and locally? Major banks and authorised deposit taking institutions in Australia generallyprovide a service whereby companies can establish and maintain a foreigncurrency account.

There is no restriction on companies establishing and maintaining foreigncurrency accounts in other jurisdictions, subject to compliance with UNand other international sanctions.

7.5 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? The Australian Trade Commission (Austrade) is responsible for the promo-tion, attraction and facilitation of productive foreign direct investment intoAustralia.

It provides assistance in coordinating investment into Australia, informationon the Australian business and regulatory environment, market intelligenceand investment opportunities, and advice on Australian government programmes and approval processes.

In addition, the Australian government runs a Major Project Facilitation(MPF) programme, which aims to provide assistance with government ap-provals and processes and to identify existing government assistance pro-grammes for proponents of strategically significant major projects. It alsoaims to coordinate Australian state and territory government processes sothat, where feasible, they occur simultaneously and without duplication.

Section 8 – Other restrictions

8.1 What restrictions exist on bringing in foreign workers,technicians or executives to work on a project?There are no general restrictions or limitations on the use of foreign workers,however, all foreign employees must comply with the visa requirements im-posed by the Commonwealth.

There are also a number of powerful trade unions in Australia, and companies may face scrutiny and criticism if they utilise foreign workerswhen Australian labour is available.

8.2 What restrictions exist on the importation of project equipment?An import permit is required to import used agricultural, earthmoving andmining machinery into Australia. Additionally, all machinery imported intoAustralia requires a cleanliness declaration, which states that the machineryis clean and free of all soil, plant and animal debris.

About the authorBrendan Quinn is Herbert Smith Freehills' head of finance for Asia Pacificand is a project and project finance specialist advising on all aspects of thefinancing and development of projects including in the power, energy,industrial, social infrastructure, resources and transport sectors injurisdictions including Africa, Australasia, Asia, Europe, Latin America andthe Middle East.

He has experience of both common and civil law jurisdictions andexpertise in many forms of finance including commercial, export credit,multilateral and capital markets. He has worked in Australia, Hong Kongand London.

Brendan QuinnPartner, Herbert Smith Freehills

Melbourne, AustraliaT: +61 3 9288 1459E: [email protected]: www.herbertsmithfreehills.com

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1.1 What types of collateral/security are available?(a) MortgageSecurity on real estate, major vessels, fishing ships and aircraft registered inColombia.

(b) Pledge on movable assetsThere are two kinds of pledge agreements: possessory pledge agreements(the creditor keeps possession of the assets); and, non-possessory pledgeagreements (debtor keeps possession and exploitation of the assets).

(c) Pledge on floating charges and commercial establishmentsThis is possible by means of a pledge on a debtor’s commercial establishment. Generally, regulations regarding pledges of movable assetsapply to floating charges and commercial establishments.

(d) Collateral trust agreementsBy means of an irrevocable trust agreement, a debtor (settlor) transfers itsownership rights and title to specified assets to a trust company, with thepurpose of creating a trust with such assets, in order to secure the obligationsof the settlor to one or more creditors that would be the beneficiaries of thetrust.


2.1 How is a security interest in each type of collateral perfectedand how is its priority established?(a) MortgageMortgages are perfected with the registration of the public deed in whichthe mortgage is incorporated, before the Registry of Public Instruments.Priority is determined in order of registration of the mortgage.

(b) Pledge on movable assetsPossessory pledges are perfected by the delivery of the asset. Non-possessorypledges are perfected by means of a written pledge agreement that, for pub-licity purposes, has to be registered in the relevant chamber of commercewhere the pledged assets are located. This also applies to pledges over com-mercial establishments. However, certain assets, such as shares in corpora-tions and pledges over vehicles have different methods of registration.

(c) Collateral trust agreementsThese agreements are generally perfected with the execution of the trustagreement. For trust agreements over real estate property, perfection willalso require registration before the Registry of Public Instruments. To en-force trust agreements over movable assets against third parties, such trustagreements need to be registered before the settlor’s chamber of commerce.

Recently, Congress enacted Law 1676 of 2013, which will enter into forcein February 2014. Under this law, a national unified system for the registryof collateral over movable assets will be created. The registry will be admin-istered by the Confederation of Chambers of Commerce. This registry willbe opened to the public, so that parties may file registration forms online.Any modifications, extensions, extinctions and performance of the securedtransactions may also be done online, allowing for easier and faster consul-tation by potential creditors. The regulation that will establish the standardregistration form and other details is still pending, and will be issued by theGovernment.

2.2 How can a creditor assure itself as to the absence of liens withpriority to the creditor’s lien?By requesting certificates issued by the corresponding registrars (such as theRegistry of Public Instruments, a chamber of commerce) which list the existence of any liens.

However, for most pledges over movable assets, the Public Registry of Security Interests (unified registry) will be in place as of February 2014.

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?(a) MortgagesCosts for executing a mortgage involve notarial expenses equivalent to 0.3%over the obligation value (plus VAT, registration tax and registration rights).

The registration tax is set as a percentage of the secured obligation value;such tax ranges between 0.5% and 1% depending on the municipality wherethe mortgage is registered. If the mortgage is an open-ended mortgage, therate is levied on the amount disbursed under the loan agreement.

(b) Pledge on movable assetsCosts of registration may vary depending on the jurisdiction where the assetsare located. The registration tax is a set percentage of the secured obligationsvalue and ranges between 0.3% to 0.7%.

(c) Collateral trust agreementsGenerally, notarisation expenses are not required unless the assets beingtransferred to the trust are real estate or assets requiring a public deed. Inthese events, notarisation fees will vary depending on the value of the assetand the type of asset being transferred. If the trust is registered in a chamberof commerce, registration taxes will be levied at a rate ranging from 0.3%to 1% over the estimated value of the trustee’s fees over the life of the trust.

Additionally, it is necessary to negotiate applicable fees with the trustee,which range on average from $600 to $2,000 per month (depending on,for example, the complexity of the structure, the number and type of entrusted assets).

2.4 May a corporate entity, in the capacity of agent or trustee, holdcollateral on behalf of the project lenders as the secured party?It is possible to transfer property rights over assets that constitute collateralor security, to a trust, and the trustee will be instructed to sell, auction ordirectly deliver the assets to the guaranteed creditor upon default.


3.1 What restrictions, fees and taxes exist on foreign investment inor ownership of a project and related companies?Foreign investment is allowed in all sectors of the economy, with the excep-tion of national security and the disposal of hazardous waste products produced outside Colombia. There are percentage limits on foreign capitalparticipation in certain sectors of the economy (such as television and radioservices of the telecommunications sector), and some prior authorisationsare required for certain sectors, (for instance, finance). All foreign investmentmust be registered with the Colombian Central Bank (CCB).

Colombia

Cesar Rodriguez, Brigard & Urrutia

bu.com.co

COLOMBIA


The CCB can impose temporary restrictions on foreign investment repatri-ation conditions whenever international reserves drop below three months’worth of imports.

3.2 Do these restrictions also apply to foreign investors or creditorsin the event of foreclosure on the project and related companies?Yes.

3.3 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?Colombia has implemented a policy of negotiation and ratification of International Investment Agreements (IIAs), which include Bilateral Invest-ment Treaties (BITs) (with for example, India, China, and the UK), andFree Trade Agreements (FTAs) with chapters on investment and DoubleTaxation Agreements (DTAs).


4.1 Is a submission to a foreign jurisdiction and a waiver ofimmunity effective and enforceable?A Colombian resident may submit to foreign law and jurisdiction. Suchagreement does not per se exclude the possibility of a Colombian court assuming jurisdiction over a matter if so allowed under civil procedure rules.

A Colombian party may waive immunity if it explicitly accepts it, and ifsuch a waiver does not affect the rights of third parties or public assets.

4.2 Must any of the financing or project documents be registered orfiled with any government authority or otherwise comply with legalformalities to be valid or enforceable? For instance, does collateralneed to be notarised?Collateral documents have to be registered before the corresponding authority to be valid and enforceable as explained above.

Additionally, all transactions over real state property must be recorded inthe form of a public deed.

Public or notarised documents executed outside Colombia should be executed before a notary public and duly apostilled or consularised.

For the remittance of the proceeds from the execution of a security or collateral granted in favour of a foreign creditor, the security documentsneed to be previously registered before the CCB.

Please note that loan agreements and promissory notes do not need any specific registration for their validity or enforceability (although, upon ini-tiation of a judicial proceeding, any document not written in Spanish needsto be translated by an official translator, or by a court appointed translator).In addition, it is necessary to register the loan agreement (and report anydisbursement and repayments) to the CCB.

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 agencies’ nature and extent of their authority vary depending on theproject sector and the way the project is contractually structured. At a national level, Colombia has a governmental agency specialised in projectsstructured under concession contracts and other public-private partnershipschemes (PPPs). The Agencia Nacional de Infraestructura (ANI) has the mission to plan, coordinate, structure, award, execute, manage and evaluateconcessions and PPPs for the design, construction, maintenance, and operation, administration of public transport infrastructure (highways,ports, railways and airports).

Instituto Nacional de Vías (INVIAS) works to develop all infrastructure projects and plans under its competence (covering approximately 13,000kmof road) as well as executing the relevant contracts for such purposes.

Cormagdalena is in charge of developing and structuring the plans and projects related to the Magdalena River.

For airport-related infrastructure, Aeronaútica Civil (Aerocivil) develops thepublic policies with respect to air transportation infrastructure. Even thoughconcession contracts related to new airports projects are now under ANI’scompetence, Aerocivil has executed concession contracts with respect to theconstruction, operation and maintenance of existing airports in Colombia.

Comisión de Regulación de Energía y Gas (CREG) and Unidad de PlaneaciónMinero Energética (UPME) are the relevant governmental agencies with respect to gas and power projects. Even though CREG and UPME havemainly regulatory and public policy functions, UPME is in charge of struc-turing and awarding contracts for the construction of national power trans-mission lines. In addition, at a regional level, both governmentaldepartments and municipalities develop infrastructure projects in their localjurisdictions.

4.4 What government approvals are required in relation toenvironmental concerns for typical project finance transactions?What fees and other charges apply?The use of renewable natural resources or activities that may affect the environment are subject to strict controls. Consequently, it is necessary toapply for environmental licences, concessions, permits or authorisations be-fore the environmental authorities prior to the execution of such projects.

The environmental licence is the main administrative mechanism to controlthe use and exploitation of natural resources. The environmental licence isrequired to initiate any project that may have an impact on the environment.It is granted either the Ministry of Environment or the Regional Environ-mental Authorities (CAR), depending on the distribution of territorial jurisdictions and the magnitude of the project.

Depending on the scope of the environmental licence granted and the typeof project, different fees may be applicable.


5.1 Who has title to natural resources? What rights may privateparties acquire to these resources and what obligations does theholder have? May foreign parties acquire such rights?The general rule under mining law is that the state is the owner of all minerals regardless of whether they are located on the soil or the subsoil. Therefore, the exploration and exploitation of mineral resources requiresprior authorisation from the state in the form of a concession contract.

Depending on the minerals, concession contracts may only be entered intoby national entities. However, it is possible that the foreign party through aColombian vehicle may acquire rights over these types of contacts.

5.2 What royalties and taxes are payable on the extraction of naturalresources, and are they revenue- or profit-based?Depending on the type of environmental instrument, different rates androyalties (separate from taxes) may be applicable.

Oil and gas projects are subject to the payment of royalties, and miningprojects are subject to royalties and surface fees, depending on the phase ofthe mining concession agreement.

The extraction of natural resources does not trigger taxes in Colombia, butthe sale, commercialisation, transportation and exploitation of the samedoes.

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Turnover tax accrues at a rate ranging between 0.4% and 1.4%, dependingon the municipality in which the activities are carried out. Income tax accrues at the statutory corporate income tax rate of 34% (which includesan ordinary income tax rate of 25% and an additional income tax rate, calledCREE, at 9%, which will be reduced to 8% as of 2016). Oil transportationtax may also apply in addition to certain other transactional taxes (VAT ora 0.4% debit tax on dispositions of funds in savings and similar bank accounts).

5.3 What restrictions, fees or taxes exist on the export of naturalresources?Under custom regulations, export activities do not trigger the payment ofcustoms duties. Nevertheless, in order to export certain minerals (such asgold, silver and platinum), it is necessary to certify before the Colombiancustoms authorities that the royalties for the exploitation of such productshave been paid. Additional prior authorisations issued by relevant authoritiesmay be needed to undertake exportation of natural resources. Additionalauthorisations are determined by the tariff subheading under which theproducts to be exported are classified.

According to decree 2637 of 2012, any individual or company establishedin Colombia that regularly trades minerals and hydrocarbons to transformthem for distribution, exportation, intermediation or for self-consumption,is required to be registered with the National Mining Agency in the MineralTraders Registry (Rucoms).

5.4 Can private parties grant security over any such rights in naturalresources, and in the event of enforcement of that security wouldthe local granting body be bound by that security. Would change ofcontrol in the borrower (for example, upon exercise of sharesecurity) trigger a forfeit of those rights?Private parties may grant securities in connection with rights over naturalresources.


6.1 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?As of the date of filing of the insolvency petition, the creditors are stayedfrom enforcing security interests over the debtor’s property. The collateralmay only be enforced as part of the reorganisation agreement approved bothby the absolute majority of votes and the vote of the beneficiaries of the col-lateral, or with the express authorisation of the insolvency court. Please notethere are two exceptions where no authorisation is required: collateral trustsset for the securitisation of assets in the public market; and, collateral truststhat are part of a structure for the issuance of securities in the public market.

Law 1676, modified the rules on the enforcement of security interests withininsolvency proceedings. It provides that the secured creditors may enforcethe security interests even though the debtor is subject to a reorganisationproceeding, unless the asset is required for the operation of the debtor.

6.2 Are there any preference periods, clawback rights or otherpreferential creditors’ rights with respect to the collateral/security?In the course of insolvency proceedings, any creditor, the promotor or theliquidator may request revocation or declaration of fraudulent transfer ofsome acts executed by the debtor if such acts adversely affect any creditor,or the priority order among creditors and the assets that comprise thedebtor’s patrimony are insufficient to satisfy all credits recognised withinthe proceeding.

Different periods are applicable depending on the type of transaction:

• 18 months for onerous transactions;• 24 months for gratuitous transactions; and, • any amendment to the by-laws executed within six months of

commencement of the insolvency proceeding when such amendmentreduces the debtor’s patrimony or reduces the liability of the membersof the debtor entity.

6.3 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?The enforcement of security interest must be performed within judicial pro-ceedings. However, Law 1676, established three mechanisms for the enforcement of the security interest by the secured creditors: (i) direct pay-ment; (ii) adjudication proceeding; and, (iii) extrajudicial proceeding.

6.4 Outside the context of a bankruptcy proceeding, what stepsshould a project lender take to enforce its rights as a secured partyover the collateral/security?The enforcement of security interest must be performed within judicial proceedings.

6.5 Does the jurisdiction recognise the concepts of trustees inbankruptcy, receivership, liquidators or similar persons?Yes. In bankruptcy proceedings, usually an officer from the bankruptcycourt will be appointed. In reorganisation proceedings, a promotor is ap-pointed to help the debtor company with some tasks in the reorganisationproceedings. In judicial liquidation proceedings, a liquidator is appointed.The liquidator holds the legal representation of the debtor.


7.1 What, if any, are the restrictions, controls, fees, taxes or othercharges on foreign currency exchange?There are no existing restrictions on currency exchange. However, theColombian foreign exchange regime is divided into two different markets:(i) the foreign exchange market; and, (ii) the free market.

The foreign exchange market consists of all foreign exchange transactions(regulated foreign exchange transactions) that must be completed throughauthorised foreign exchange intermediaries (banks and other financial institutions) or compensation accounts (offshore bank accounts held byColombian residents and registered with the Colombian Central Bank).Regulated foreign exchange transactions must also be reported or registeredbefore the Colombian Central Bank.

The following transactions are regulated foreign exchange transactions: import and export of goods; foreign indebtedness operations; international investments; guarantees and collateral in foreign currency; and, derivativestransactions.

Failure to duly conduct regulated foreign exchange transactions is a violationto applicable regulations and may result in the imposition of fines.

7.2 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?Other than the temporary restrictions on foreign investment repatriationconditions described in 3.1 above, there are no restrictions for the remittanceof investment returns or payment of principal, interest or premiums onloans or bonds to parties in other jurisdictions.

COLOMBIA


7.3 Must project companies repatriate foreign earnings? If so, mustthey be converted to local currency and what further restrictionsexist over their use?Project companies must repatriate earnings of any international investmentsthey make. Such repatriation does not necessarily mean conversion into localcurrency, since the funds will be deemed to have been repatriated if the sameare transferred back to the project company’s compensation account. Earnings may be reinvested abroad whether in foreign entities, securities orassets.

7.4 May project companies establish and maintain foreign currencyaccounts in other jurisdictions and locally?All Colombian residents (including project companies domiciled in Colombia) are allowed to open and hold bank accounts in foreign currencywith foreign financial institutions.

7.5 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?There are significant incentives for foreign investment in Colombia, suchas follows:

(a) Special deductionsThe default rule is that taxpayers can deduct expenses that are necessary,proportional and cause-related to their income producing activities. TheColombian Tax Code (CTC) provides for certain itemised special deduc-tions (for investments in: investigation and technological development; control and environmental improvement; fixed assets; for amortisable in-vestments in the petroleum and mining industry; among others).

The CTC also provides for specific sources of exempt income (such as forthe sale of electric energy generated by Eolic resources, biomass or agricultural residues; and the provision of river and sea transportationthrough ships).

(b) Capital gainsAre taxed at a preferential rate of 10%. This includes profits from the saleof fixed assets owned for at least two years prior to the sale.

(c) Benefits of Law 1429 of 2010This law creates a special tax regime for new small enterprises (companieswhich have fewer than 50 employees and total assets not exceeding approximately $1.5 million). This benefit only applies to ordinary incometax, and not to the CREE.

Income from investments in Colombia is received as dividends, interests orcapital gains. Capital contributions into Colombian subsidiaries trigger a0.7% registration tax on the amounts contributed as ordinary capital. Sharepremium amounts are subject to a 0.3% tax. If the contribution is legalisedwith a public deed, notary fees, and VAT will also accrue.

There is an exemption system in which income tax is only levied on dividends paid out of profits that were not taxed at corporate level. Divi-dends paid out of non-taxed profits will be subject to a 33% withholdingtax unless a double tax treaty rate applies. The only enforceable treaties arewith Spain, Canada, Chile and Switzerland.

As from 2013, profits distributed by branches and permanent establishmentsare deemed dividends for tax purposes.


8.1 What restrictions exist on bringing in foreign workers,technicians or executives to work on a project?There are no general restrictions on bringing in foreign workers or executives. Depending on the activities performed in Colombia, visa autho-risations or temporary professional permissions may be necessary.

Certain professions and activities are regulated, and for the exercise of thoseactivities it is mandatory to acquire a temporary professional permit (for in-stance, engineering). Such requirements will be set on a case-by-case basisfor each foreigner. Some of the engineering professional councils require theentity to hire and have in its payroll a minimum number of Colombian en-gineers.

8.2 What restrictions exist on the importation of project equipment?Colombia has a regime of unrestricted importation of goods. However, ifproject equipment is under special market conditions (such as used, imper-fect, repaired, rebuilt, second-hand, or other similar condition), the importation will be subject to prior authorisation. Only in limited cases,importation is restricted or banned, such as used automobiles and toxicwaste.

There are various types of importation regime; one key importation regimefor projects is the temporary importation for subsequent re-exportation inthe same condition.

About the authorPrior to joining Brigard & Urrutia, Cesar Rodriguez worked inmultinational companies, law firms, and consulting firms, providinglegal advice on loan agreements and infrastructure contracts for over 10years. He was involved in several public-private partnerships and projectfinance transactions. Since joining Brigard & Urrutia, he hasparticipated in numerous financial transactions representing lenders andborrowers, private and public entities, and local and internationalinstitutions. Rodriguez has advised IFC, KEXIM and HSBC as localcounsel for the financing of Bogotá’s fare collection, fleet management,and real-time information technology system for Bogotá’s IntegratedPublic Transportation System.

Rodriguez is a law graduate from Universidad de los Andes in Colombiaand he is a specialist in financial law and in civil procedural law. Heholds a Masters in Law (LLM) in international business law from theUK’s University of Liverpool.

Cesar RodriguezAssociate, Brigard & Urrutia

Bogotá, ColombiaT: +571 346 2011 Ext. 8265E: [email protected]: bu.com.co


1.1 What types of collateral/security are available? For analytical purposes, types of security available under German law canbest be categorised as follows:

• mortgages or, occasionally, easements over real property and fixtures;• pledges or security transfers of tangible moveable assets, including

constructive movables (Scheinbestandteile) such as wind turbines;• pledges or security assignments of intangible moveable assets, including

bank accounts;• share pledges or security transfers of shares;• sureties or guarantees granted by third parties; and,• parent support letters, subordination agreements and direct agreements.

The typical security package differs depending on the asset sub-class:

• infrastructure public-private partnerships (PPP) projects: share pledge,direct agreements, assignment of receivables under project agreementsand insurances, account pledges, but no mortgage over real estate andfixtures, and occasionally security transfer of title (similar to a mortgage)of tangible moveable assets;

• conventional power plants: all of the above plus security transfer in tangible movable assets, mortgage over fixtures and real estate, sometimesno direct agreements; and,

• renewable power plants: as for conventional power plants, but easementsinstead of mortgages of fixtures and real estate (except if these are ownedby the project company, which is the exception), and no security overland rights in off-shore wind projects.


2.1 How is a security interest in each type of collateral perfectedand how is its priority established? While there is no general concept of perfection under German law, certaintypes of collateral require additional steps in addition to agreement on thesecurity document in order to become opposable to third parties. Mortgagesand easements must be registered in the land registry; pledges of claims mustbe notified to the third party debtor; and, partnership agreements and arti-cles of association may stipulate perfection requirements for share pledges.

2.2 How can a creditor assure itself as to the absence of liens withpriority to the creditor’s lien? Liens pertaining to land can be searched in the land registry with respect toprivate encumbrances. Liens created under public law can also be searched,albeit with a lesser degree of certainty. By contract, lies over tangible andintangible movable assets and share pledges can generally not be searched.Therefore, representations by the grantor of the lien are generally accepted.

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?Mortgages, easements and certain share pledges require notarisation, whichwill trigger fees. Additional fees are charged for the registration of mortgagesand easements in the land registry.

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 security agent may hold collateral on behalf of project lenders as the secured parties. This general principle is subject to two main qualifications.

First, pledges, sureties and certain types of mortgages are accessory to thesecured claims; that is, the beneficiary of the security interest must be inprivity of contract with the grantor under the security document. In agencysituations, this restriction is overcome by stipulating an abstract claimagainst the borrower as parallel debt for the benefit of the security agent. Inthis way, the collateral secures the parallel debt owed to the security agent,whereas the claims of the project lenders are secured by the parallel debt.

Second, there is no concept of trust comparable to common law jurisdic-tions under German law. Accordingly, the right of secured parties to separatecollateral from the general estate in an insolvency of the security agent isnot universally recognised. Since only banks with strong credit ratings actas security agents in German project finance transactions, this has not beenperceived as a significant issue in the past.


3.1 What restrictions, fees and taxes exist on foreign investment inor ownership of a project and related companies? Foreign and German investors are generally subject to the same restrictions,fees and taxes. Additional restrictions may be imposed under the ForeignTrade Regulation (Außenwirtschaftsverordnung), but will typically not affectproject finance transactions.

3.2 Do these restrictions also apply to foreign investors or creditorsin the event of foreclosure on the project and related companies? None of these restrictions has been known to interfere with foreclosure proceedings in project finance transactions.

3.3 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?Germany is party to the Energy Charter Treaty, and has been a defendantin an investor arbitration under that convention in the Moorburg powerplant case. It is also a party to 131 Bilateral Investment Treaties.


4.1 Is a submission to a foreign jurisdiction and a waiver ofimmunity effective and enforceable?Submission to foreign jurisdiction is generally recognised in civil and commercial matters without discrimination between public and private en-tities. Also, sovereign immunity does not extend to commercial activities.There are, however, a number of public service exceptions that may becomerelevant in project finance transactions, notably in the infrastructure andtransportation sectors.

GERMANY


Germany

Daniel Reichert-Facilides, Freshfields Bruckhaus Deringer

www.freshfields.com

GERMANY


4.2 Must any of the financing or project documents be registered orfiled with any government authority or otherwise comply with legalformalities to be valid or enforceable? For instance, does collateralneed to be notarised?Mortgages, easements and certain share pledges require notarisation. Mortgages and easements must also be registered in the land registry.

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?Jurisdiction of government agencies depends not only on the sector, but alsoon the specific type of project. Larger projects will often require the involve-ment of several different authorities. As a general rule, most administrativefunctions are concentrated at regional level, and federal agencies are onlyconcerned with strategic assets.

4.4 What government approvals are required in relation toenvironmental concerns for typical project finance transactions?What fees and other charges apply?The most typical environmental permits are emissions permits and waterpermits, but careful analysis is required on a case-by-case basis.


Except for renewable energies, which are not subject to a specific propertyregime, natural resources do not play a significant role on German projectfinance transactions.


6.1 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? As a general rule, the enforcement of pledges and mortgages is not affectedby bankruptcy proceedings.

6.2 Are there any preference periods, clawback rights or otherpreferential creditors’ rights with respect to the collateral/security? Except for statutory subordination of certain types of claims, notably share-holder debt, all unsecured creditors will be treated pari passu in Germanbankruptcy proceedings. There is an elaborate system of clawback rightswhich may, in particular, affect payments made and the security interestgranted during the last three months prior to filing.

6.3 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? Contractual enforcement is recognised under security transfer and assignment agreement and for direct agreement, although the latter hasrarely been tried. Generally, the alternative is between consensual restruc-turing and in-court bankruptcy proceedings. Due to the relatively smallnumber of stakeholders, project finance transactions will typically be

restructured out of court.

6.4 Outside the context of a bankruptcy proceeding, what stepsshould a project lender take to enforce its rights as a secured partyover the collateral/security? Appropriate enforcement measures will depend both on the type of collateraland security interest and on the enforcement strategy. The most commonsteps are to freeze bank accounts prior to opening of bankruptcy proceedingsand to revoke the right of the project company to collect assigned receivables. For practical purposes, these, as most other enforcement meas-ures, are likely to accelerate a bankruptcy filing.

6.5 Does the jurisdiction recognise the concepts of trustees inbankruptcy, receivership, liquidators or similar persons?German bankruptcy proceedings are conducted by an insolvency adminis-trator or – more often recently – a supervisor under the auspices of the court.


7.1 What, if any, are the restrictions, controls, fees, taxes or othercharges on foreign currency exchange?Since German project finance transactions are conducted in euros, there areno relevant restrictions on foreign exchange, remittance and repatriations.

7.2 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? See 7.1

7.3 Must project companies repatriate foreign earnings? If so, mustthey be converted to local currency and what further restrictionsexist over their use? See 7.1

7.4 May project companies establish and maintain foreign currencyaccounts in other jurisdictions and locally? See 7.1

7.5 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?See 7.1


8.1/8.2 What restrictions exist on bringing in foreign workers,technicians or executives to work on a project? What restrictionsexist on the importation of project equipment?There are no regulations in place that restrict the employment of foreignworkers, technicians or executives, or the importing of equipment in a waythat would be perceived as an impediment to project finance transactions.

About the authorDaniel Reichert-Facilides is a partner in the Frankfurt office ofFreshfields Bruckhaus Deringer, and a leading practitioner in theGerman project finance market.

Over the past 15 years, he has been advising sponsors and lenders on awide range of energy, infrastructure and transportation projects, and onnumerous cross-border transactions with KfW or Euler Hermesbacking. Reichert-Facilides also serves as chairman of the Germanchapter of the International Project Finance Association.

Daniel Reichert-Facilides Partner, Freshfields Bruckhaus Deringer

Frankfurt am Main, GermanyT: +49 69 27 30 80E: [email protected]: www.freshfields.com

Section 1- Collateral/Security

1.1 What types of collateral/security are available? In a project financing in Hong Kong, creditors typically require the following security:

• a fixed and floating charge over project assets;• an equitable mortgage over shares in the project company and,

depending on the project structure, its holding company;• a mortgage by way of legal charge over land and immovable property

comprising the project site; and,• assignments by way of security over key project contracts.

In addition to project security, creditors may require direct agreements(including step-in rights) with counterparties to key project contracts.


2.1 How is a security interest in each type of collateral perfectedand how is its priority established? Perfection requirements in a project financing depend on the type of collateral and the nature of the security. Perfection may require registeringthe security document, or delivering notice to a contract counterparty, orboth.

Registrable security created by a Hong Kong company or a foreign companyregistered in Hong Kong as a non-Hong Kong company, should be regis-tered at Hong Kong’s Companies Registry within five weeks after the datethe security was created. Failure to register within that time period couldmake the security void against the security provider’s liquidator and creditors.

Security over real and immovable property which complies with the LandRegistration Ordinance and the Land Registration Regulations, should beregistered at Hong Kong’s Land Registry within one month after the datethe security was created. Failure to register within that time period couldaffect the creditor’s priority position at the Land Registry.

Depending on the nature of the project assets, certain other registrationsmay be required on specialist asset registers, for example, the TrademarksRegistry or the Patents Registry.

Generally, priority between competing securities over the same asset is determined by its date of creation (the first security prevails). The followingrules apply to specific types of security created on the same date:

• legal security ranks above equitable security;• priority between floating charges is determined by the crystallisation

date; and,• priority between competing securities over receivables is determined by

the order in which written notices are delivered to the debtor.

Those principles are subject to an overriding rule that a bona fide pur-chaser, including a subsequent chargee or morgagee, only loses priority if ithas notice of the prior security. Consequently, it is important to register aregistrable security in order to protect a creditor’s priority position againstsubsequent creditors.

2.2 How can a creditor assure itself as to the absence of liens withpriority to the creditor’s lien? To reduce the risk of a security provider granting security in favour of othercreditors, a creditor should:

• as a condition precedent to financial close, search Hong Kong’s LandRegistry and Companies Registry;

• in respect of any Hong Kong obligor, as a condition precedent to financial close, take possession of instruments of transfer, contract notesand share certificates;

• require security providers to warrant that there is no existing securityover project collateral; and,

• require security providers to covenant that they will not grant securityover project collateral in favour of other creditors.

Those measures will not eliminate the risk of obligors granting security overHong Kong assets in favour of other creditors. For example, searches of theregistries will not reveal the existence of non-registrable security. In addition,creditor protection provisions set out in the finance documents will be lim-ited by the creditor’s ability to enforce those provisions.

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 only relevant fees, taxes and charges required to perfect security are thefollowing:

• a nominal stamp duty of HK$5 ($1.3) payable on a transfer instrumentfor a legal mortgage over registered shares;

• a registration fee of HK$340 for each security document registered atthe Companies Registry;

• a registration fee of HK$230 per mortgage registered at the Land Registry, where the consideration for the underlying property is not morethan HK$750,000; and,

• a registration fee of HK$450 per mortgage registered at the Land Registry, where the consideration for the underlying property isHK$750,000 or more.

If a creditor exercises its power of sale in a security document and sells land,immovable property or shares, certain registration fees and ad valorem stampduty (stamp duty payable in proportion to the underlying collateral value)may be payable, but they are usually paid by the purchaser.

2.4 May a corporate entity, in the capacity of agent or trustee, holdcollateral on behalf of the project lenders as the secured party?Hong Kong law recognises trusts, and a corporate entity may act as trusteeand hold security on trust for the benefit of other creditors. Security trustsare typical in Hong Kong financings where there are two or more creditors.

HONG KONG


Hong Kong

Alexander Aitken, Herbert Smith Freehills


HONG KONG



3.1 What restrictions, fees and taxes exist on foreign investment inor ownership of a project and related companies?There is no investment approval procedure directed specifically towards foreign investors. With the exception of the broadcasting industry, HongKong law does not subject foreign investors to special regulatory require-ments, restrictions, fees or taxes. Hong Kong generally encourages foreigninvestment.

Hong Kong law does not restrict buyers (including foreign buyers) from acquiring companies or assets in the oil and gas, electricity, natural resourcesor mining industries. However:

• a buyer of a business in the oil and gas, natural resources or mining industries, would need to apply for a licence from the Hong Kong Government in order to operate that business; and,

• a buyer of a business in the electricity industry, would likely be subjectto a Scheme of Control Agreement (a long-term bilateral agreement) between the Hong Kong Government and the relevant electricity com-pany. Scheme of Control Agreements allow electricity companies toenjoy certain permitted returns in exchange for promised levels of service.

3.2 Do these restrictions also apply to foreign investors or creditorsin the event of foreclosure on the project and related companies?Please refer to 3.1 above.

3.3 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?Please refer to 3.1 above.


4.1 Is a submission to a foreign jurisdiction and a waiver ofimmunity effective and enforceable?Hong Kong courts generally recognise and enforce contracts governed byforeign law.

Hong Kong courts generally recognise and enforce waivers of sovereign orcrown immunity, although they may accept claims of immunity from, anddecline jurisdiction over, states and state-owned entities, including in circumstances where those parties have previously waived their immunity.

4.2 Must any of the financing or project documents be registered orfiled with any government authority or otherwise comply with legalformalities to be valid or enforceable? For instance, does collateralneed to be notarised?Certain security documents are registrable and stamp duty may be payable.Please refer to 2.1 and 2.3 above. Security does not need to be notarised inHong Kong. Finance documents and project documents are not subject toany other registrations, filings or other legal formalities in Hong Kong.

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?There are few government agencies and departments with authority overprojects in typical project sectors.

The Electrical and Mechanical Services Department enforces the safety ofHong Kong’s electricity supply, in line with the Electricity Ordinance. TheElectricity Ordinance’s scope covers the registration of generating facilities,transmission, distribution and use of electricity.

The Environmental Protection Department is the principal enforcementagency for Hong Kong’s environmental legislation and regulation, includingthe ordinances listed in 4.4 below.

Private construction projects in Hong Kong are regulated by the BuildingAuthority and the Planning Authority, but private construction projects arenot typically financed by limited recourse debt.

4.4 What government approvals are required in relation toenvironmental concerns for typical project finance transactions?What fees and other charges apply?Different permits and licences are required for different types of pollution.There is no integrated system for issuing permits and licences, although theytend to be issued by the same department, the Environmental ProtectionDepartment. The discharge and emissions permit and licensing regime isspread across various Hong Kong ordinances and regulations. Businessesfalling within designated projects under the Environmental Impact Assess-ment Ordinance must obtain permissions, permits or licences, dependingon the activities in question. Environmental impact assessment reports mayalso be required.

The designated projects under the Environmental Impact Assessment Ordinance include (without limitation): roads, railways and depots; airportsand port facilities; reclamation, hydraulic and marine facilities, dredgingand dumping; energy supply facilities; water extraction and supply facilities;facilities for sewage collection, treatment, disposal and reuse; waste storage,transfer and disposal facilities; utility pipelines, transmission pipelines andsubstations; waterways and drainage works; mineral extraction projects; fa-cilities for industrial activities; facilities for storage, transfer and trans-ship-ment of fuel; and, facilities for agriculture and fisheries activities.

Hong Kong’s principal environmental legislation comprises the following:

• the Air Pollution Ordinance, which manages Hong Kong’s air quality;• the Water Pollution Control Ordinance, which controls the effluent dis-

charge from all types of industrial, commercial, institutional and con-struction activities into public sewers, rainwater drains, river courses orwater bodies;

• the Waste Disposal Ordinance, which manages waste disposal, includingthe production, storage, collection, treatment, recycling and disposal ofwaste;

• the Noise Control Ordinance, which applies to noise from construction,industrial and commercial activities;

• the Hazardous Chemicals Control Ordinance, which regulates the import, export, manufacture and use of non-pesticide hazardous chem-icals that have potentially harmful or adverse effects on human healthor the environment;

• the Dumping at Sea Ordinance, which promotes the protection of themarine environment in areas of sea under Hong Kong jurisdiction; and,

• the Ozone Layer Protection Ordinance, which prohibits the manufac-turing of substances that deplete the ozone layer and imposes control onthe import, export and production of those substances.

There is no existing emissions trading scheme in Hong Kong.

HONG KONG



5.1 Who has title to natural resources? What rights may privateparties acquire to these resources and what obligations does theholder have? May foreign parties acquire such rights?All Hong Kong’s natural resources are owned by the state. The Hong KongGovernment is responsible for managing, using and developing natural resources and for leasing or granting rights in natural resources to individ-uals, legal persons or organisations.

5.2 What royalties and taxes are payable on the extraction of naturalresources, and are they revenue- or profit-based?The revenues derived from any lease or grant of rights in natural resourcesis exclusively for the benefit of the Hong Kong Government.

5.3 What restrictions, fees or taxes exist on the export of naturalresources?No restrictions, fees or taxes apply to the export of natural resources fromHong Kong. In practice, natural resources are not exported from HongKong in commercial quantities.

5.4 Can private parties grant security over any such rights in naturalresources, and in the event of enforcement of that security wouldthe local granting body be bound by that security. Would change ofcontrol in the borrower (for example, upon exercise of sharesecurity) trigger a forfeit of those rights?In Hong Kong, title to land, including natural resources is held by the state.


6.1 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 commencement of insolvency proceedings does not typically affect acreditor’s rights to enforce its security, unless the security can be set aside orthe underlying payments can be clawed back by a liquidator. Hong Konglaw does not provide for a moratorium to prevent creditors enforcing theirsecurity. Hong Kong does not have an administration regime. Please referto 6.2 below.

6.2 Are there any preference periods, clawback rights or otherpreferential creditors’ rights with respect to the collateral/security? Security or, in some cases, the creditor’s right to recover the project debt,can be unenforceable if the security is granted within a hardening period,before the security provider’s insolvency commences. The relevant hardeningperiods under Hong Kong law are the following:

• unfair preference: six months before insolvency commences, or two yearsif security is granted to an associate of the security provider;

• a security is an unfair preference if: (i) it puts the creditor in a better position than other creditors; (ii) the security provider intended to putthat creditor in a better position than other creditors; and, (iii) at thetime it gave the preference, the security provider is insolvent or becomesinsolvent;

• avoidance of floating charge: 12 months before winding up commences,except: (i) if the security provider was solvent immediately after creatingthe floating charge; or, (ii) to the extent of new money received in con-nection with the floating charge;

• extortionate credit transactions: three years before insolvency commences;

• an extortionate transaction is a transaction where the debtor’s obligationsunder that transaction appear extortionate compared with the risk assumed by the creditor.

In addition:

• security granted with an intention to defraud creditors is voidable on theapplication of the prejudiced creditor; and,

• a liquidator may, with the court’s leave, disclaim onerous property heldby an insolvent company (for example, land burdened with onerouscovenants).

Preferential creditors’ rights

Upon an insolvency of a security provider, the following priority of payments typically applies:

• first, fixed charge holders are entitled to sale proceeds from collateral,subject to the receiver’s costs and expenses;

• second, winding up costs and expenses, and payments to preferentialcreditors, including: employees’ wages and statutory debts due to theHong Kong government (for example, tax claims);

• third, floating charge holders are entitled to sale proceeds from collateral;and,

• finally, claims from unsecured creditors, whose claims are settled paripassu.

6.3 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? Contractual enforcement of security is available in Hong Kong, and is preferred by creditors over other remedies, such as foreclosure, that requirecourt assistance. Hong Kong security documents typically include a powerof sale and a right for creditors to appoint a receiver with broad powers toenforce security. A receiver’s role generally is to collect, protect and receiveproperty from the collateral, and to collect income from the collateral.

6.4 Outside the context of a bankruptcy proceeding, what stepsshould a project lender take to enforce its rights as a secured partyover the collateral/security? The steps a creditor should take to enforce its rights during enforcementdepend upon (among other things) the provisions of the finance documents,including the events of default and acceleration provisions, and the natureof the security. A creditor will typically appoint a receiver to enforce securityover a project asset.

6.5 Does the jurisdiction recognise the concepts of trustees inbankruptcy, receivership, liquidators or similar persons? Receivers and liquidators are recognised in Hong Kong.


7.1 What, if any, are the restrictions, controls, fees, taxes or othercharges on foreign currency exchange? There are no governmental restrictions, controls or fees applicable to foreigncurrency exchange in Hong Kong.

Renminbi is currently not freely convertible and is subject to regulatory restrictions, which may be changed from time to time. For example, forHong Kong residents, conversions conducted through renminbi deposit ac-counts with banks in Hong Kong are subject to a limit of up to Rmb20,000($3,300) per person per day.

7.2 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? Hong Kong does not have a capital gains tax regime, and does not imposea withholding tax on dividends or interest payments.

HONG KONG


7.3 Must project companies repatriate foreign earnings? If so, mustthey be converted to local currency and what further restrictionsexist over their use? Hong Kong does not require any companies to repatriate earnings. Fundsin Hong Kong can be freely repatriated and remitted overseas.

7.4 May project companies establish and maintain foreign currencyaccounts in other jurisdictions and locally? There are no restrictions on project companies establishing and maintainingforeign currency accounts in Hong Kong or in other jurisdictions.

7.5 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? Hong Kong does not specifically encourage foreign investment through taxincentives. However, Hong Kong’s tax environment is favourable to investors.


8.1 What restrictions exist on bringing in foreign workers,technicians or executives to work on a project?Any person other than a person who has the right of abode or right to landin Hong Kong, must obtain a visa before coming to Hong Kong for thepurpose of taking up employment, training, investment or residence.

8.2 What restrictions exist on the importation of project equipment?No restrictions apply to the importation of typical items of project equipment.

About the authorAlexander Aitken is a partner in Herbert Smith Freehills' Hong Kongoffice. He has many years of international finance experience, with aparticular focus on complex secured financings of companies,infrastructure, real estate and projects across the world for both borrowersand lenders. He has also worked on a number of complex restructuringsand work-outs. He holds a BA (Hons) Law from Cambridge Universityand is qualified as a solicitor in England and Wales and Hong Kong. Hehas previously worked in Herbert Smith Freehills' London and Singaporefinance teams, and has spent time on secondment at a leading Europeanreal estate lender in London and at a Russian bank in Moscow

Alexander AitkenPartner, Herbert Smith Freehills

Hong Kong, Hong Kong SART: +852 2101 4019E: [email protected]: www.herbertsmithfreehills.com


1.1 What types of collateral/security are available? Lebanese law recognises four types of collateral/security listed below:

• mortgage over real property; • pledge over movable goods (such as shares, furniture, equipment, cars);• guarantee; and,• assignment of insurance rights or payouts.


2.1 How is a security interest in each type of collateral perfectedand how is its priority established? For all types of collateral, a security interest is perfected by signing a writtenagreement between the parties. For some types of security interests, thereare specific additional requirements. For mortgages over real property, a security interest is perfected by registering it with the Real Estate Registry.Security interests over some goods such as cars and boats must be filed withspecial registries established for each type of good. Pledges for shares of stockmust be registered before the Commercial Registry.

The priority of a security interest in all collaterals is established through theprinciple of first in time, first in right.

2.2 How can a creditor assure itself as to the absence of liens withpriority to the creditor’s lien?In order for a creditor to ensure that no lien has priority over their lien, thecreditor must check the registries mentioned in question 2.1. The creditorwill generally require the borrower to submit a certificate (such as a real es-tate certificate, a certificate submitted by the Cars Register) ensuring thatno other liens exist over the collateral.

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? Yes, the amount varies proportionately according to the value stated in thesecurity interest agreement, but no lawful techniques exist to defer or minimise it.

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


3.1 What restrictions, fees and taxes exist on foreign investment inor ownership of a project and related companies? According to Lebanese law, a majority of the members of the board of directors in a joint stock company must be Lebanese.

In a Lebanese joint stock company whose purpose is the provision of publicservice, one third of the capital must be formed of nominal shares, the own-ership of which is restricted to Lebanese individuals or entities.

In commercial representation, decree 34/67 states that the commercial repre-sentative must be Lebanese and have a commercial establishment in Lebanon,unless a reciprocity agreement exists with the foreign country involved.

In the event that the commercial representative is a company:

• partnerships and limited liability companies: a majority of partners andthe agent with the authority to sign for the company must be Lebanesenationals. The majority of the capital must also be held by Lebanese nationals.

• joint-stock companies: the shares must be registered, a majority of thecapital must belong to Lebanese nationals, and two thirds of the members of the board of directors and the general manager must beLebanese nationals.

Regarding the banking sector, the ownership of 50% of the bank companyshares, the entirety of which is registered, is restricted to Lebanese individualsor entities whose shares should also belong to Lebanese persons and maynot be transferred to non-Lebanese.

Finally, regarding real estate, foreigners cannot own over 3000 metre squaredof real estate in Lebanon unless an authorisation is granted by a special decree issued by the Council of Ministers.

3.2 Do these restrictions also apply to foreign investors or creditorsin the event of foreclosure on the project and related companies? Yes. Normally, in the event of a foreclosure, seized goods must be sold atauction and may only be owned by the foreign investor or creditor withinthe limits of the restrictions mentioned in 3.1.

3.3 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, there are no treaties which relieve these restrictions.


4.1 Is a submission to a foreign jurisdiction and a waiver ofimmunity effective and enforceable? Yes, except in commercial representation, notwithstanding any agreementto the contrary, the courts of the jurisdiction where the commercial representative acts are deemed solely competent to settle disputes arisingout of commercial representation contracts.

4.2 Must any of the financing or project documents be registered orfiled with any government authority or otherwise comply with legalformalities to be valid or enforceable? For instance, does collateralneed to be notarised? Yes. The financing or project documents must be notarised or signed in thepresence of an agent of the relevant registry in order to be valid or enforceable.

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 relevant government authorities are the various ministries; each ministryis fully competent and has authority over any project that falls within itsobjectives. Projects providing services to the public sector require licencesor pre-approvals granted by the appropriate ministries.

LEBANON


Lebanon

Hala Raphaël-Abillama and Sabine El Khoury, Raphaël & Associés

LEBANON


4.4 What government approvals are required in relation toenvironmental concerns for typical project finance transactions?What fees and other charges apply? Generally, the Ministry of Environment and the Ministry of Public Healthmust grant a permit before the commencement of any project in relation toenvironmental concerns. Fees are determined by these Ministries on an individual basis.


5.1 Who has title to natural resources? What rights may privateparties acquire to these resources and what obligations does theholder have? May foreign parties acquire such rights?As a general principle, the state has title to natural resources. For instance,according to article 4 of Law 132/2010, the state has the exclusive right toextract and use petroleum resources.

The Ministry of Energy and Water has an administrative guardianship overwater, mines, quarries, and petroleum.

Private parties may acquire rights to resources, including but not limited to,the following:

(a) Petroleum The Council of Ministers may, on the basis of a proposal by the ministerwhich is based upon the recommendation of the petroleum administration,award an exclusive right to carry out petroleum activities in accordance withan exploration and production agreement under article 4 of Law 132/2010.The exploration period should not exceed 10 years, and the production period should not exceed 30 years. A licence issued by the government isnecessary to undergo such activities.

(b) WaterThe owner of a parcel of land is entitled to consume a maximum of 100metre cubed per day of the water found on that land. Private parties can acquire the right to explore the water and drill wells within the limits of thelaws and regulations.

(c) Mines and quarriesPrivate parties can acquire rights to explore and use the mines and quarriesprovided they acquire a licence from the relevant ministries.

The licence holder is normally required to:

• pay annual fees, royalties and taxes; • submit a report to the relevant ministry on production and facility

related matters;• comply with specifications set forth in the decree issued by the ministry

granting the licence.

Like any other activity by a foreign company, the activities related to naturalresources are subject to the restrictions mentioned above in Section 3.

5.2 What royalties and taxes are payable on the extraction of naturalresources, and are they revenue- or profit-based? The state is entitled to taxes and royalties, payable in cash, in kind orthrough profit sharing mechanisms, in accordance with the agreement withthe investment company.

5.3 What restrictions, fees or taxes exist on the export of naturalresources? The quantity of natural resources in Lebanon is limited. Therefore, naturalresources are normally extracted for local use.


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LEBANON


Consequently, to date there is no data providing for restrictions, fees or taxeson the export of natural resources.

5.4 Can private parties grant security over any such rights in naturalresources, and in the event of enforcement of that security wouldthe local granting body be bound by that security. Would change ofcontrol in the borrower (for example, upon exercise of sharesecurity) trigger a forfeit of those rights? Right holders may only mortgage a participating interest in a petroleumright for the purpose of financing petroleum activities associated with thatpetroleum right, after obtaining approval from the minister, as set out inthe Council of Minister’s decree related to the terms and conditions of themortgage.

The terms and conditions related to the mortgage of a facility need to beapproved by the Council of Ministers in a decree based on the opinion ofthe Petroleum Administration.

Facilities and equipment related to a main facility may not be mortgagedseparately.

In the event of enforcement of the security, the local granting body will bebound by that security.

Change of control in the borrower does not trigger a forfeit of those rights.


6.1 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 judgment of bankruptcy suspends the unsecured creditor’s right to pursuethe bankrupt individual or entity. Individual proceedings, from the filingof bankruptcy forward, are in the hands of the receivers, with no distinctionbetween a civil or trade debt.

However, mortgagees, preferential creditors over both movable and immovable property, and pledgees have the right (notwithstanding the bank-ruptcy proceedings) to pursue enforcement proceedings against the debtorregarding the good or the property given as a security to guarantee the payment of the debt, up to the amount stated in the security agreement.

6.2 Are there any preference periods, clawback rights or otherpreferential creditors’ rights with respect to the collateral/security? According to Lebanese Law, the following transactions when recovered bythe receiver will enter into the bankruptcy estate, and thus are accessible forpayment of debts to the debtor’s joint creditors when those transactions havebeen made by the debtor during the period of suspension of payment suchas has been laid down by the court or within twenty days prior to such period (this period is known as the suspect period, and begins eighteenmonths prior to the day the judgment of bankruptcy is released):

• gratuitous acts and conveyances, except the usual minimal donations orthe creation of wakfs (endowments for charitable purposes);

• advance payments in any form;• satisfaction of a due and payable monetary debt by means other than

cash, bills of exchange or money orders; and,• the creation of a conventional or judicial mortgage, or a pledge or other

surety on a debtor’s goods as collateral of a prior debt.

After deducting (a) the charges and expenses for the management of thebankruptcy; (b) the fees of the assistant who may have been granted to thebankrupt individual; and, (c) the sums paid over the preferential creditorsfrom the value of the assets, the remainder shall be apportioned among thecreditors in percentages equal to their share of the verified claim.

The debts of preferential creditors are paid in the following order:

• state’s debts duly registered before the competent authorities and the So-cial Security’s debts;

• employees’ salaries; and, • other debtors with preferential rights.

6.3 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? There are no processes other than court proceedings available to seize theassets of the project company in enforcement proceedings.

6.4 Outside the context of a bankruptcy proceeding, what stepsshould a project lender take to enforce its rights as a secured partyover the collateral/security? In order to enforce its rights as a secured party over the collateral/security, aproject lender must submit a request to the Enforcement Bureau to seizethe good or the property given as collateral.

6.5 Does the jurisdiction recognize the concepts of trustees inbankruptcy, receivership, liquidators or similar persons? Lebanon recognises the concept of a receiver, a proxy who manages the assetsof a bankrupt individual or entity throughout the process and is appointedon the date the bankruptcy judgment is released.


7.1 What, if any, are the restrictions, controls, fees, taxes or othercharges on foreign currency exchange? There are none.

7.2 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, controls, fees, taxes on remittances of investmentreturns or payments of principal, interest or premiums on loans or bondsto parties in other jurisdictions.

7.3 Must project companies repatriate foreign earnings? If so, mustthey be converted to local currency and what further restrictionsexist over their use? No, project companies do not have to repatriate foreign earnings.

7.4 May project companies establish and maintain foreign currencyaccounts in other jurisdictions and locally? Yes, project companies can freely establish and maintain foreign currencyaccounts in other jurisdictions and locally.

7.5 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? There are many incentives provided to foreigners investing in Lebanon.

The Council of Ministers created the National Investment Guarantee Cor-poration (NIGC), which offers insurance covering many regional risks suchas war, expropriation and civil unrest. Other major investment insuranceprograms exist, such as the Multilateral Investment Guarantee Agency(MIGA). In addition, the Investment Development Authority of Lebanonprovides foreigners or local investors with a range of incentives and businesssupport services to help them establish their operations in Lebanon.

LEBANON


Further, bank secrecy protects an account owner’s personal and financial information in Lebanese banks while liberty of exchange and liberty of foreigncurrency exchange create an unrestricted environment for foreign currencyusage and conversion.

There are no taxes for foreign activity for the purposes of effectiveness orregistration.


8.1 What restrictions exist on bringing in foreign workers,technicians or executives to work on a project? Any foreigner intending to work in Lebanon must obtain a work permitand a residence permit.

(a) Work permit All foreign workers have to obtain a prior approval from the Ministry ofLabour before entering the Lebanese territory, and must arrive within threemonths from the date they are granted such approval in order to avoid itscancellation. In addition, they must apply for a work permit before the Min-istry of Labour within ten days of entering the Lebanese territory.

While giving preference to Lebanese citizens and remembering the reciproc-ity applied by the home country of the concerned foreigner, a work permitmay be granted if one of the following conditions are met:

• the foreigner must be a specialist and an expert, Lebanese citizens beingunable to perform such work. The administration is entitled to requestthat the employer publishes three times, in three magazines, an announcement with respect to the position;

• the foreigner must be a director or a representative of a foreign companyor of a branch of a foreign company registered in Lebanon or a directorof an offshore company.

(b) Residence permit A residence permit is issued for long-term stays in Lebanon. The residencepermit required for foreign workers is issued by the General Security Agency.

8.2 What restrictions exist on the importation of project equipment?The importation of project equipment is regulated by the Customs Law,which provides that some equipment requires that a licence or a permit beissued by the competent authorities or ministries to be imported intoLebanon (for example, importation of telecommunication equipment requires a licence issued by the Lebanese Ministry of Telecommunications,

About the authorHala Raphael-Abillama is co-managing partner of Raphaël & Associés.She has more than 23 years of experience in law in France and Lebanon.She has handled major privatisation and public bidding/licensingtransactions including for construction projects, mobile operations andin the cement sector. She also advises private companies and non-governmental organisations in the energy sector. She handled the saleand/or acquisition of several telecom operations in various countries ofthe Middle East, Africa and other countries where Raphaël & Associéshandled all legal aspects of the entire legal operations and set up. Forseveral years, Raphaël-Abillama led the firm’s operations in Paris. She isa member of various boards.

She obtained a Master of Laws (LLM) from Georgetown University, USin 1991 and she holds a Master of French and Lebanese Laws from theSt. Joseph University, Beirut.

Hala Raphaël-AbillamaCo-managing partner, Raphaël &Associés

Antelias, LebanonT: +961 4 405 401/406 477/406 478 E: [email protected]

About the authorSabine El Khoury completed her studies at Saint Joseph University whereshe obtained her law degree in 2009 and was awarded her Diplômes d’EtudesApprofondies in 2011. She was admitted to the Beirut Bar Association in2009. Her main areas of practice are banking law, commercial law, corpo-rate law, medical liability and labour law. She renders legal opinions in Ara-bic, English and French languages on various legal matters. She drafts andnegotiates agreements in several fields such as in relation to real estate anddistribution transaction. She represents clients in civil and commercial casesas well as in labour disputes before Lebanese courts. She has successfullypassed the nationally organised notary public exam and was ranked amongthe best three participants.

Sabine El KhouryAssociate, Raphaël & Associés

Antelias, LebanonT: +961 4 405 401 E: [email protected]


1.1 What types of collateral/security are available? These generally include mortgages on real estate property, pledge of shares,charges over accounts, promissory notes, letters of credit, bank guarantees,cash bonds and liens over movable assets or over rights (assignment of pro-ceeds and revenues).


2.1 How is a security interest in each type of collateral perfectedand how is its priority established? Regarding real estate property, perfection is obtained by mandatory registration of a mortgage in the relevant land registry. Once registered, themortgage takes priority over all subsequent interests over the relevant property.

Pledges of shares and other securities over equity assets also require registration at the Macau commercial registry.

Other collateral, depending on the chosen method, may be secured by liens,pledges, assignments or issuance of negotiable or non-negotiable instru-ments such as promissory notes, most of which require notarisation and, incertain cases, registration.

Certain credits enjoy prevalence and priority over any registered or unregistered securities, such as credits to the government, intellectual prop-erty rights, non-contractual civil liability, alimony and employees’ credits.

2.2 How can a creditor assure itself as to the absence of liens withpriority to the creditor’s lien? If the relevant liens are subject to registration, a creditor can performsearches with the land and commercial registries.

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? Perfection of a security interest (execution and registration) often requirespayment of fees, taxes and charges, which depend, inter alia, on the amountssecured. The possibility of minimisation or deferment of such payments canonly be ascertained on a case-by-case basis.

2.4 May a corporate entity, in the capacity of agent or trustee, holdcollateral on behalf of the project lenders as the secured party? The fiduciary relationship by which one party (trustor) grants another party(trustee) the right to hold title to property or assets for the benefit of a beneficiary, is not a typical civil law institute, and it is not expressly foreseenunder Macau law. Therefore, trust arrangements may be deemed invalid according to Macau law.

Nevertheless, generally speaking, and depending on the type of collateralinvolved, it is possible for the security agent to enforce claims on behalf ofthe lenders and the other secured parties as long as the security agent isgranted with a notarised power of attorney.


3.1 What restrictions, fees and taxes exist on foreign investment inor ownership of a project and related companies? Foreign investment and ownership restrictions are practically inexistent.Macau’s trade and investment policies are one of the most open in the world.Procedures for new projects, investment and companies’ formation are relatively simple and inexpensive. The same procedures, fees and taxes applyto both local and overseas investors without discrimination.

3.2 Do these restrictions also apply to foreign investors or creditorsin the event of foreclosure on the project and related companies? Yes.

3.3 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? As mentioned above, there are no relevant restrictions. Notwithstanding, itshould be mentioned that certain bilateral investment treaties such as theMainland and Macau Closer Economic Partnership Agreement (CEPA),the Pan-Pearl River Delta Regional Co-operation Framework Agreementand the Framework Agreement on Co-operation Between Guangdong andMacau, provide additional benefits, facilitation and privileges. Macau is alsoan economic and trade co-operation platform for China and the Portuguese-speaking countries (Portugal, Brazil, Angola, Mozambique, Guinea-Bissau,East Timor, Cape Verde and Sao Tomé e Príncipe).


4.1 Is a submission to a foreign jurisdiction and a waiver ofimmunity effective and enforceable? Yes.

4.2 Must any of the financing or project documents be registered orfiled with any government authority or otherwise comply with legalformalities to be valid or enforceable? For instance, does collateralneed to be notarised? Yes. Certain securities contracts and documentation require notarisationand registration in order to be fully effective towards third parties (for instance, securities over real estate and other registrable assets, share transfersand pledges).

Each type of collateral has different requirements and the principal securitiestaken by lenders require notarisation.

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? Macau’s major project sectors are gaming and infrastructure.

The Gaming Inspection and Coordination Bureau (DICJ) provides guid-ance and assistance to the Macau Chief Executive on the definition and execution of the economic policies for the operations of the casinos and thegaming industry.

MACAU


Macau

Gonçalo Mendes da Maia, MdME

mdme.com.mo

MACAU


The Infrastructures Department (GIT) falls under the Land, Public Works andTransport Bureau and is responsible for promoting and coordinating infrastruc-tural projects in Macau. Most of these projects are subject to public tender.

The Monetary Authority of Macau (AMCM) advises and assists the chiefexecutive in formulating and applying monetary, financial, exchange rateand insurance policies. It regulates the financial sector and its institutions,issuing the necessary licences.

4.4 What government approvals are required in relation toenvironmental concerns for typical project finance transactions?What fees and other charges apply? No specific government approvals are required in relation to specific environmental concerns for typical project finance transactions. Projectcompanies need, however, to comply with the existing urban planning andheritage protection regulations and shall obtain licences from the Land, Pub-lic Works and Transport Bureau before engaging in construction projects.


5.1 Who has title to natural resources? What rights may privateparties acquire to these resources and what obligations does theholder have? May foreign parties acquire such rights? The land and natural resources in Macau are government property, exceptfor land which has been recognised as private property before December1999, in accordance with the law. The Macau Government is responsiblefor the management, use and development of the land and natural resources,and can lease or grant its use or development to individuals or companies,whether local or foreign, under certain specific conditions to set out by theGovernment on a case-by-case basis.

5.2 What royalties and taxes are payable on the extraction of naturalresources, and are they revenue- or profit-based?Royalties are always determined by the Macau Government on a case-by-case basis.

5.3 What restrictions, fees or taxes exist on the export of naturalresources?There are no existing restrictions on exports.

5.4 Can private parties grant security over any such rights in naturalresources, and in the event of enforcement of that security wouldthe local granting body be bound by that security. Would change ofcontrol in the borrower (for example, upon exercise of sharesecurity) trigger a forfeit of those rights? Private parties are generally not allowed to grant any security over their rightsin natural resources, unless expressly allowed by the Macau Government.

Change of control in the borrower would typically trigger an approval requirement.


6.1 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 secured creditors can judicially request foreclosure on their collateraland apply to their credits the proceeds from such foreclosure, provided thereare sufficient assets to cover the credits entitled to legal priority, such asworkers’ compensations and unpaid taxes (see answer 2.1), and that suchassets are not strictly necessary for continuation of business operations.

However, with the initiation of bankruptcy proceedings, any existing enforcement legal actions are interrupted, and all credits are frozen andadded to a list. Creditors then need to await the conclusion of the liquida-tion proceedings, the determination of their credit rights and ranking of thecreditors in accordance with the nature of their credits.

The declaration of insolvency or bankruptcy does not constitute groundsfor termination of existing contracts, especially if these are a source of revenue for the debtor. An insolvency administrator is designated by thecourt at the beginning of the proceedings, with the intent of maximisingthe continuity of the business and payment of debts. The insolvent companymay need to comply with a plan of payments to all or part of its creditors,while the insolvency administrator may also decide to satisfy immediatelyany interest or due amounts to the secured lenders.

6.2 Are there any preference periods, clawback rights or otherpreferential creditors’ rights with respect to the collateral/security? See answers 2.1 and 6.1 above, concerning preferential creditors’ rights.

The acts practised by the insolvent debtor or by the insolvency administratorduring the bankruptcy proceedings will be closely scrutinised by the courtand by the creditors. Ultimately, unlawful payments may be clawed back.

6.3 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? In specific and very limited circumstances, duly justified, the courts maygrant freeze or restraining orders, as well as injunctive relief. Other thanthat, self-executory or non-judicial actions are not generally available. Assuch, except in very limited circumstances, collateral may not be kept bythe creditor in satisfaction of the debt.

6.4 Outside the context of a bankruptcy proceeding, what stepsshould a project lender take to enforce its rights as a secured partyover the collateral/security? The necessary steps to be taken depend on the type of collateral and securityinvolved, as well as on the severity of the debtor’s default and its conse-quences. Originals of all the documents should be kept safe at all times, andthe project lender should also verify beforehand the compliance with therelevant laws and regulations for the perfection of the security, and performthe searches mentioned above in 2.2.

6.5 Does the jurisdiction recognise the concepts of trustees inbankruptcy, receivership, liquidators or similar persons? The Macau jurisdiction recognises the concept of liquidators (bankruptcyadmininstrator), but not the concept of trustees in bankruptcy, nor receiver-ship per se.


7.1 What, if any, are the restrictions, controls, fees, taxes or othercharges on foreign currency exchange? Macau does not apply exchange controls and there are no restrictions oncapital transactions in Macau or fees payable. Compliance with the anti-money laundering and anti-terrorism financing legislation needs to be assured at all times.

7.2 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? Cash transactions exceeding MOP2,000,000 ($250,400) or its equivalent,and cross-border wire transfers exceeding amounts equivalent toMOP800,000, require the keeping of proper records and presentation ofvalid identification documents.

Cash transactions equal to or exceeding MOP25,000,000, although allowed,are considered high risk transactions and require additional verification andreports to the competent authorities for investigation.

MACAU


7.3 Must project companies repatriate foreign earnings? If so, mustthey be converted to local currency and what further restrictionsexist over their use? There is no such obligation to repatriate foreign earnings.

7.4 May project companies establish and maintain foreign currencyaccounts in other jurisdictions and locally? Yes, project companies may establish and maintain foreign currency accounts. There is also no restriction on maintaining foreign currency ac-counts in other jurisdictions.

7.5 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? To attract foreign investment, the Macau SAR Government offers invest-ment incentives to investors on a national treatment basis. Tax incentivesare therefore universal and include full or partial exemption from profit orcorporate tax, industrial tax, property tax, stamp duty for transfer of properties, and consumption tax. Macau Trade and Investment PromotionInstitute is responsible for the promotion, attraction and facilitation of for-eign direct investment in Macau.

The taxes or charges on loans, mortgages or other security documents depend on the amounts secured and the type of security used.


8.1 What restrictions exist on bringing in foreign workers,technicians or executives to work on a project? Foreign workers, technicians or executives need to be granted with a workingpermit (locally called a blue-card) by the Macau Government. The lack oflocals available to perform the services contracted abroad is one of the mostimportant factors for the success of the work permit applications.

Top technicians or executives may, under specific conditions, be grantedwith a residency permit.

8.2 What restrictions exist on the importation of project equipment?In principle, there are no restrictions on the importation of project equip-ment.

About the authorGonçalo Mendes da Maia is a founding partner of MdME and a highlyregarded Macau lawyer, with significant experience in major Macaufinancings, projects, tenders and acquisitions.

He has been recognised by Chambers and Partners Asia 2011, 2012and 2013, IFLR and Asialaw Profiles.

In his banking and finance practice, Mendes da Maia advises lendersand borrowers on secured syndicated credit facilities, distress financing,debentures and complex structured financings. He has drafted andadvised on the full range of Macau-based securities and participated onlandmark registrations with the Macau Commercial Registry.

He is also currently acting as head legal counsel to two Macau licensedbanks and regularly assisting several top financial services institutions.

Gonçalo Mendes da MaiaPartner, MdME

Macau, MacauT: +853 2833 3332E: [email protected]: mdme.com.mo

MALAYSIA



1.1 What types of collateral/security are available?The common types of collateral/security include:

(a) a charge on the project land or its lease; (b) a debenture (fixed and floating charges over all assets of the project company); (c) a charge on shares in the project company; (d) a charge and an assignment on the project accounts; (e) an assignment of the project agreements, licences, insurance policies andperformance bonds issued with respect to the project;(f ) corporate guarantees from the sponsors;(g) direct agreements between the project company, the financiers and theproject counterparties; and, (h) a subordination of loans to that of the financiers by the shareholders ofthe project company.


2.1 How is a security interest in each type of collateral perfectedand how is its priority established?a) Registration of charges with the Companies Commission of Malaysia(CCM)Certain types of security charges need to be registered with the CCM bylodging a statement of particulars of the charge within 30 days after the creation of the charge.

Failure to comply with this requirement will render the charge void and themoney secured will immediately become payable.

b) Registration of the power of attorney with the High Court in MalayaIf a charge document contains a power of attorney clause, such documentneeds to be authenticated in the manner prescribed under the Powers of Attorney Act 1949 and deposited with the High Court in Malaya, otherwisethe power of attorney is not valid within Peninsular Malaysia.

c) Registration of charge on the project land or its lease with the land registryIf a separate document of title for the project land has been issued, thecharge on the project land or its lease will be created by a charge form pre-scribed under the National Land Code 1965 (or where the project land issituated in the state of Sarawak or Sabah, the Sarawak Land Code 1958 andthe Sabah Land Ordinance 1930 respectively) and registered with the rele-vant land registry. The terms of the charge will normally be included as anannexure to the prescribed form.

If no separate document of title for the project land has been issued, securityover the project land or its lease may be granted by way of an assignment ofthe relevant sale and purchase or lease agreement; such assignments do notneed to be registered with the land registry.

d) Notice of assignmentFor an assignment to be a legal assignment, certain criteria need to be fulfilled which include an express notice in writing to the debtor or contractcounterparties. Typically, the financiers will require notices of assignmentto be served on the debtor or contract counterparties. The notice may contain instructions to direct payments owed to the assignor to be made toa designated account (if required under the terms of the assignment).

e) Stamp dutyStamp duty is payable on instruments creating charges as security within30 days from the date of execution if executed in Malaysia, or 30 days afterthey have been received in Malaysia if executed out of Malaysia, unless exempted by the Minister of Finance.

f) Approval from Bank Negara Malaysia (the Central Bank of Malaysia –BNM) in relation to financial guaranteesApproval from BNM will be required for obtaining or giving certain financial guarantees from or in favour of non-residents.

g) Registration of financial guarantees with BNMIf no approval from BNM under sub-paragraph (f ) above is required, financial guarantees given in favour of or obtained from a non-resident shallbe registered with BNM no later than seven business days after giving orobtaining the financial guarantee, if the aggregate amount of the financialguarantees issued or obtained exceed RM50 million ($15.5 million).

In determining the priorities between competing charges, the common lawpriority rules apply. Generally, priority is established in order of the timewhen they were created. Public searches at the CCM and the relevant landregistry will reveal whether there is any prior charge on the assets of the project company or the project land (or its lease). It is also usual for the financiers to require representations and warranties from the borrower andthe sponsors that no prior security interests exist on the assets charged. Ifmore than one charge exist over the same assets, it is possible for financiersto agree amongst themselves in terms of priority of payment.

2.2 How can a creditor assure itself as to the absence of liens withpriority to the creditor’s lien?Financiers usually rely on the results of the public searches as well the representations and warranties from the borrower and sponsors to assurethemselves that no prior security interest exists.

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 fees payable for the perfection of security interest are generally insubstantial. However, in certain states, the fees payable to obtain state au-thority consent for the charge are calculated based on the value of the loanamount.

Charge instruments are subject to ad valorem stamp duty. The rate of theduty for principal instrument securing indebtedness in ringgit (RM) is 0.5%of the secured amount and for principal instrument securing indebtednessin other currencies, 0.5% of the secured amount with a capped amount ofRM500. Stamp duty payable for each secondary instrument is RM10.

Under an exemption order issued by the Minister of Finance, all instrumentsrelating to the issuance of debt securities as approved by the Securities Commission Malaysia are exempt from the payment of stamp duty.

Malaysia

Adrian Chee Meng Yang and Lai Kooi Thong, Adnan Sundra & Low

MALAYSIA


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.


3.1 What restrictions, fees and taxes exist on foreign investment inor ownership of a project and related companies?Following the liberalisation of Malaysia’s equity policy, foreign investors canhold 100% of the equity in all investments in new projects.

However, equity restrictions remain in several sectors, including high-tech-nology manufacturing, energy, information technology, telecommunicationsand other sectors of strategic importance to Malaysia. For instance, a foreigncompany that wishes to participate in tender and works in the upstreamsector of the oil and gas industry is required to either appoint a local company as an exclusive agent or form a joint venture company with a localcompany – there are Bumiputera (Malays and natives of any of the states ofSarawak and Sabah) participation requirements for equity, board of directors, management and employees in these companies.

The acquisition of lands in Peninsular Malaysia by foreign interests is subjectto the prior approval of the relevant state authority.

The fees involved in obtaining approvals for foreign investment in Malaysiavary depending on the sector or industry and the nature of the project.

Generally, all companies in Malaysia are liable for income tax on income orprofits derived from Malaysia. Withholding tax is payable on certain payments to non-residents, such as interest, royalties, and technical assistance fees. Certain activities attract additional taxes, for example, anyperson carrying on petroleum operations in Malaysia is also subject to petroleum income tax.

3.2 Do these restrictions also apply to foreign investors or creditorsin the event of foreclosure on the project and related companies?Yes.

3.3 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 none.


4.1 Is a submission to a foreign jurisdiction and a waiver ofimmunity effective and enforceable?Parties to a contract are free to choose the governing law and forum for disputes relating to their contract, provided that the choice is made in goodfaith, and is not be contrary to public policy in Malaysia.

It is possible for the Government to waive its immunity. However, underthe Rules of Court 2012, an application for summary judgment will not bemade against the Government, and no judgment in default of appearanceor pleading will be entered against the Government except with the leave ofthe court. Further, an order for the attachment of debts or for the appointment of a receiver shall not be made or have effect against the Government.

4.2 Must any of the financing or project documents be registered orfiled with any government authority or otherwise comply with legalformalities to be valid or enforceable? For instance, does collateralneed to be notarised?Please refer to our answer to question 2.1 above. Collateral does not needto be notarised, except for the charge forms prescribed under the relevantland codes and documents that contain a power of attorney clause.

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?(a) Oil and Gas

Under the Petroleum Development Act 1974, Petroleum Nasional Berhad(Petronas), a national oil and gas company wholly owned by the Government, has been vested with the entire ownership in, and the exclusiverights of exploring and obtaining petroleum, whether onshore or offshoreof Malaysia. Petronas is responsible for the issuance of licences relating tothe upstream activities.

(b) Minerals

Under the Mineral Development Act 1994, the Federal Government is responsible for the inspection and regulation of mineral exploration, miningand other related issues. However, mineral prospecting and exploration licences are issued by each state government according its own state mineralenactment.

(c) Telecommunications

The provision of network facilities or network services in Malaysia is regulated under the Communications and Multimedia Act 1998 and re-quires an individual licence issued by the Malaysian Communications andMultimedia Commission.

(d) Manufacturing

The Malaysian Investment Development Authority (MIDA) is the Govern-ment’s principal agency responsible for the promotion of the manufacturingand services sectors in Malaysia. MIDA evaluates and processes various applications for projects in the manufacturing and its related services sectors,including manufacturing licences, tax incentives, expatriate posts and dutyexemptions on raw materials, components, machinery and equipment.

4.4 What government approvals are required in relation toenvironmental concerns for typical project finance transactions?What fees and other charges apply?Industrial activities in Malaysia are required to obtain the following approvals from the director-general of environmental quality prior to projectimplementation:

(a) environmental impact assessment for certain prescribed activities;

(b) site suitability evaluation;

(c) written notification or permission to construct;

(d) written approval for installation of incinerator, fuel burning equipmentand chimney; and,

(e) licence to occupy and operate certain prescribed premises and prescribedconveyances.

There are fees payable for licences issued for palm oil and raw natural rubberprocessing mills and facilities for the treatment and disposal of scheduledwastes and prescribed conveyances.

MALAYSIA



5.1 Who has title to natural resources? What rights may privateparties acquire to these resources and what obligations does theholder have? May foreign parties acquire such rights?Natural resources are generally state-owned. Private parties may apply forlicences to acquire these resources, and will be bound by the conditions imposed. There are restrictions for foreign parties to acquire such rights –please refer to our answer to question 3.1 above.

5.2 What royalties and taxes are payable on the extraction of naturalresources, and are they revenue- or profit-based?Royalties and taxes payable on the extraction of natural resources are largelyrevenue-based. Generally stated, royalties payable in respect of petroleumare 10% of gross production and for minerals, 5% of the value of the mineral extracted.

5.3 What restrictions, fees or taxes exist on the export of naturalresources?There is a general export prohibition of all goods to Israel without an exportlicence. Under the Customs (Prohibition of Exports) Order 2012, the exportof certain chemicals and minerals are either absolutely prohibited or prohibited except under an export licence.

The exports of natural resources may be subject to export duty at the ratestipulated in the Customs Duties Order 2012.

5.4 Can private parties grant security over any such rights in naturalresources, and in the event of enforcement of that security wouldthe local granting body be bound by that security. Would change ofcontrol in the borrower (for example, upon exercise of sharesecurity) trigger a forfeit of those rights?Security over such rights is usually granted by way of an assignment of theagreement or the licence granting the rights in acquiring the natural resources. The agreement or the licence may stipulate that prior consent isrequired for security over such rights to be given. The security will bind thegranting body as long as the relevant consent requirements are met and theconditions are complied with. There may be restrictions on change of control in the project company, and such restrictions will be applicable inthe event of enforcement.


6.1 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 following provisions may affect the ability of a project lender to enforceits rights over the collateral/security:

(a) a floating charge on the undertaking or property of a company createdwithin six months of the commencement of the winding-up will be invalid,unless it is proven that the company was solvent immediately after the creation of the charge;

(b) a charge created within six months before the date of the presentationof the winding-up petition or the date on which a resolution to wind up aMalaysian company has been passed, whichever is earlier, will be deemedfraudulent and void, unless made or incurred in good faith and for valuableconsideration; and,

(c) an assignment of existing or future book debts shall be void as againstthe director-general of insolvency for any book debts that had not been paidat the date of an available act of bankruptcy.

6.2 Are there any preference periods, clawback rights or otherpreferential creditors’ rights with respect to the collateral/security?Yes – please refer to our answer to question 6.1 above. Further, so far as theassets of the project company available for payment of general creditors areinsufficient to meet any preferential debts (wages or salary of employees, remuneration of vacation leave, contribution to provident fund and anyamount payable in priority on account of wages salary or vacation leave)those debts will have priority over the claims of a debenture holder underany floating charge.

6.3 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?Save for charges over lands under the relevant land codes and certain typesof mortgages, a project financier may generally enforce security, includingappointing a receiver, without court proceedings.

6.4 Outside the context of a bankruptcy proceeding, what stepsshould a project lender take to enforce its rights as a secured partyover the collateral/security?In relation to the enforcement of land charges registered with the land reg-istry, the project lender should apply to obtain an order for foreclosure bythe High Court or the land administrator. As for the other collateral andsecurity, the project lender may enforce security in accordance with its contractual terms.

6.5 Does the jurisdiction recognise the concepts of trustees inbankruptcy, receivership, liquidators or similar persons?Yes.


7.1 What, if any, are the restrictions, controls, fees, taxes or othercharges on foreign currency exchange?In Malaysia, foreign exchange matters are governed by the Foreign ExchangeAdministration Rules (FEA rules) issued by BNM. Generally, both residentsand non-residents are free to buy or sell RM against foreign currency withlicensed onshore banks.

There is a general prohibition to undertake or engage with any person inany dealing or transaction using the currency of Israel.

7.2 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?Non-residents are free to remit out divestment proceeds, profits, dividendsor any income arising from investments in Malaysia, provided that the repatriation is made in foreign currency.

The payments of principal, interest or premiums on loans or bonds to parties in other jurisdictions shall be made in foreign currency and are permitted other than for certain types of derivative transactions stipulatedunder the FEA rules.

7.3 Must project companies repatriate foreign earnings? If so, mustthey be converted to local currency and what further restrictionsexist over their use?No, there is no such requirement.

7.4 May project companies establish and maintain foreign currencyaccounts in other jurisdictions and locally?Yes.

MALAYSIA


7.5 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?Companies which are accorded the MSC Malaysia status (recognition forinformation and communication technology (ICT) and ICT-facilitatedbusinesses that develop or use multimedia technologies to produce and en-hance their products and services) by the Multimedia Development Cor-poration are given a number of incentives (financial and non-financial),including income tax exemption and investment tax allowance.

There are also a number of tax incentives given to companies investing inthe manufacturing sector, agricultural sector and tourism sector. Applications are made to MIDA, and are considered on a case-by-case basis.


8.1 What restrictions exist on bringing in foreign workers,technicians or executives to work on a project?Foreign workers from certain specified countries can be employed in themanufacturing, construction, plantation, agricultural, services and domestichelp sectors.

While the Government wishes to have Malaysians employed at all levels ofemployment, where there is a shortage of trained Malaysians, companies areallowed to bring in expatriate personnel to fill up either key posts (poststhat are permanently filled by foreigners) or time posts (posts that are filledfor a specified time only subject to certain conditions).

8.2 What restrictions exist on the importation of project equipment?The importation of project equipment may be subject to import duty underthe Customs Duties Order 2012, unless they are not locally produced orexempt by the Minister of Finance.

About the authorAdrian Chee Meng Yang graduated with an LLB (Hons) from the UK’sLeicester University in 1994, and was then admitted to the MalaysianBar in 1997. He began his career as a legal assistant in Adnan Sundra &Low in December 1997 and became a partner in August 2003.

In the first two years of his practice, he was extensively involved incorporate work including acquisitions, joint ventures and corporaterestructuring exercises, as well as corporate and commercial litigation.Since 1999, he has been primarily involved in banking and finance,debt and equity capital markets and mergers and acquisitions.

Adrian Chee Meng Yang Partner, Adnan Sundra & Low

Kuala Lumpur, MalaysiaT: +603 2070 0466E: [email protected]

About the authorLai Kooi Thong holds an LLB (Hons) from the UK’s ReadingUniversity. He was called to the English Bar in 2008 (non-practising)and was subsequently admitted to the Malaysian Bar in October 2009.He joined Adnan Sundra & Low in October 2013.

He has experience in various corporate transactions, with an emphasison debt capital markets and banking and finance, including corporatebonds offering, project finance, acquisition finance and other structuredfinance transactions. He was part of the team who advised the leadarranger on one of the largest sukuk issuances in the world to date.

Lai Kooi ThongLegal assistant, Adnan Sundra & Low

Kuala Lumpur, MalaysiaT: +603 2070 0466E: [email protected]

SOUTH AFRICA



1.1 What types of collateral/security are available?• mortgage bond;• pledge;• a general notarial bond;• a special notarial bond; and,• cession in securitatem debiti.


2.1 How is a security interest in each type of collateral perfected andhow is its priority established? (a) Mortgage bondA mortgage must be notarially executed in writing by the borrower and thelender and, be registered in the deeds registry.

The mortgage agreement must demonstrate an intention to grant security forthe performance of a principal obligation by the creation of a right to securityin an immovable asset of the borrower.

(b) Notarial bondsA notarial bond must be (i) registered within three months of its execution orwithin such extended period as the court may on application allow; (ii) attestedby a notary public; and (iii) registration must take place in the deeds registryfor the area where the debtor resides and carries on business.

(c) PledgeA pledge requires (i) an agreement demonstrating an intention to grant securityfor the performance of a principal obligation by the creation of a right in a tangible movable asset; and, (ii) the borrower to transfer possession of the tangible movable asset to be pledged to the lender by a legally recognised formof delivery.

(d) Cession in securitatem debitiA cession requires (i) an act of transfer; (ii) the subject matter of the transfermust be a right; and, (iii) the transfer should be effected by agreement betweenthe cedent and the cessionary.

2.2 How can a creditor assure itself as to the absence of liens withpriority to the creditor’s lien? There isn’t a database in South Africa which tracks the existence or absence ofa lien. An interested party can try a due diligence investigation in order to determine such fact.

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?These are court fees incurred in perfecting a bond and lawyer fees. The courtfees are prescribed by law, but the lawyer fees can be minimised by 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? South African law does not recognise the concept of an agent or trustee holdingsecurity in its capacity as agent or trustee, without any underlying obligationowed for which the security is given.


3.1 What restrictions, fees and taxes exist on foreign investment in orownership of a project and related companies? Assuming that the investment is made in rand, there aren’t any restrictions, feesand taxes on foreign investment in a project and related company. However,please bear in mind that the Exchange Control Regulations (Excon Regula-tions) are the relevant legislation to consider in relation to foreign direct investment in South Africa. Their purpose is, amongst other things, to preventthe loss of foreign currency resources through the transfer abroad of real or financial capital assets held in South Africa.

There is no specific legislation which regulates ownership of a project and related companies. However, South Africa has legislation which prescribes par-ticipation of historically disadvantaged South Africans in project companies.

3.2 Do these restrictions also apply to foreign investors or creditors inthe event of foreclosure on the project and related companies? Please see response to question 3.1 above. The Excon Regulations would haveto be complied with in relation to any repatriation of funds from South Africa.

Regarding ownership restrictions, such restrictions do apply to foreign investorsor creditors.

3.3 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.


4.1 Is a submission to a foreign jurisdiction and a waiver of immunityeffective and enforceable? (a) Submission to a foreign jurisdictionA South African court does not accept a complete ouster of its jurisdiction, although it usually recognises party autonomy and gives effect to provisions inan agreement conferring exclusive jurisdiction on a foreign court (an ousterclause) by ordering a stay of any proceedings instituted before it. Jurisdictionremains within the discretion of the South African court and it may assumejurisdiction despite the ouster clause, provided that grounds for doing so exist.

(b) Waiver of ImmunitySuch a waiver is effective and enforceable to the extent that the person providingthe waiver has been so authorised.

4.2 Must any of the financing or project documents be registered orfiled with any government authority or otherwise comply with legalformalities to be valid or enforceable? For instance, does collateralneed to be notarised? See responses under question 2.1.

South Africa

Phologo Pheko, Fasken Martineau

www.fasken.com

SOUTH AFRICA


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? There are no such specific government agencies or departments in South Africa.Every organ of state has the right to procure goods or services, subject to thelaws applicable to the organ of state or nature of procurement.

The authority of the organs of state is informed by section 217(1) of the Con-stitution of the Republic of South Africa 108 of 1996. Projects that qualify aspublic private partnerships are regulated by Treasury Regulation 16 to the Public Finance Management Act 1 of 1999 (as published in GovernmentGazette, 2004).

4.4 What government approvals are required in relation toenvironmental concerns for typical project finance transactions? Whatfees and other charges apply?South Africa has an overarching national, provincial and municipal frameworkof legislation and various subordinate pieces of legislation dealing with specificenvironmental aspects. The main pieces of legislation that feature in most projects include the National Environmental Management Act 107 of 1998,the National Water Act 36 of 1998, the National Environmental Management:Air Quality Act 39 of 2004, the National Environmental Management: WasteAct 59 of 2008 and the National Environmental Management: BiodiversityAct 10 of 2004.

The relevant authority may prescribe an application fee for the permit or consent. Additional fees include the environmental consultancy fees.


5.1 Who has title to natural resources? What rights may privateparties acquire to these resources and what obligations does theholder have? May foreign parties acquire such rights?Under the Mineral and Petroleum Resources Development Act, 28 of 2002(MPRDA), South Africa’s mineral and petroleum resources belong to the na-tion. Private parties may acquire various rights over these resources, which in-clude prospecting and mining rights, reconnaissance permits, exploration rightsand production rights.

The obligations of the holders in that regard include reporting to the Department of Mineral Resources (DMR), rehabilitation obligations, obliga-tions to employees, obligations to the surrounding community, obligations tocontinuously conduct their operations for the duration of the period of theright and compliance with the applicable environmental laws and provisionsrelating to that right, as well as black economic empowerment provisions.

Foreign parties may acquire such rights provided they fulfil the requirementsin order to be granted such a right, and meet the terms and conditions of theright.

5.2 What royalties and taxes are payable on the extraction of naturalresources, and are they revenue- or profit-based?The Mineral and Petroleum Resources Royalty Act 28 of 2008 imposes a royalty tax on an initial transfer of mineral resources extracted from within theRepublic of South Africa. The tax imposed is revenue based.

5.3 What restrictions, fees or taxes exist on the export of naturalresources?Please see response to question 3.1 above. There are various restrictions, fees ortaxes imposed on the exportation of natural resources extracted from withinthe Republic of South Africa. Their application is dependent on the nature ofthe relevant natural resource.

5.4 Can private parties grant security over any such rights in naturalresources, and in the event of enforcement of that security would thelocal granting body be bound by that security? Would change ofcontrol in the borrower (for example, upon exercise of share security)trigger a forfeit of those rights?The MPRDA does not prevent private parties taking security over such rights.However, under the MPRDA, a prospecting right or mining right (or an interest in any such right), or controlling interest in a company that holds suchrights, may not be disposed of without the written consent of the relevant min-ister, except in the case of a change of controlling interest in listed companies.

A failure to obtain consent to a change in control (where it is required) wouldbe an offence, and would render the holder liable to have its right terminatedby the state.


6.1 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?(a) Business rescue proceedingsDuring business rescue proceedings, no legal proceedings may be commencedor proceeded against the company without the written consent of the practitioner, the leave of the court or as a set-off against any claim made by thecompany in any legal proceedings.

The practitioner may suspend, for the duration of the proceedings, any obli-gation of the company under rescue that arises under an agreement to whichthe company was a party at the commencement of the business rescue proceedings (and would otherwise become due during such time). Subject toan order of court, the practitioner may further cancel, on any terms that arejust and equitable, any obligation of the company arising under an agreementto which the company was a party at the commencement of the rescue proceedings. A party to an agreement that has been suspended or cancelledmay assert a claim against the company only for damages.

(b) Attachments and executionAttachment and executions given effect to prior to the commencement of awinding up are valid.

However, when the court has made an order for the winding up of a company,or a company has passed a resolution for its voluntary winding up, an attachment or execution in respect of a pre-liquidation debt put in force againstthe assets of the company after the commencement of the winding up, is void.

Where the attachment or execution was put in force before the commencementof the winding up, but the execution was not completed before the commence-ment of the winding up, the winding up order is as follows:

• where the property was sold in execution and transferred to the purchaserbefore the commencement of the winding up, but the proceeds are still inthe hands of the execution officer, those proceeds are assets of the company;

• where the property was sold in execution before or after the commencementof the winding up, but it has not yet been transferred to the purchaser, theproperty remains the property of the company; and,

• where the sale in execution has not taken place, the property is administeredby the liquidator.

6.2 Are there any preference periods, clawback rights or otherpreferential creditors’ rights with respect to the collateral/security?In South Africa, the law distinguishes between secured creditors, preferred creditors and concurrent creditors. A secured creditor has a preferential rightover the property in an insolvent estate. A preferential creditor does not holdsecurity for its debt, but in terms of the Insolvency Act 24 of 1936, it is entitledto rank before the concurrent creditors. A concurrent creditor merely shares inthe free residue of the estate.

SOUTH AFRICA


In terms of the Insolvency Act 24 of 1936 the following transactions may beset-asides by the courts:

• disposition made without value;• voidable and undue preferences;• collusive dealings;• voidable sales of a business or of property forming part of it; and,• disposition of a company’s property after the commencement of winding-

up proceedings.

6.3 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?In the case of a pledge, the parties can agree to execution without recourse tothe court. In this case, the lender must act reasonably, which generally requiresthe asset to be sold by public auction to the highest bidder.

6.4 Outside the context of a bankruptcy proceeding, what stepsshould a project lender take to enforce its rights as a secured partyover the collateral/security?In the event of a default by the borrower on a mortgage or notarial bond, thelender can obtain judgment for the amount due against the borrower throughprovisional sentence proceedings.

See also the responses under question 6.3 above.

6.5 Does the jurisdiction recognise the concepts of trustees inbankruptcy, receivership, liquidators or similar persons?The Companies Act 71 of 2008 recognises the offices of a business rescue practitioner and that of a liquidator.


7.1 What, if any, are the restrictions, controls, fees, taxes or othercharges on foreign currency exchange?The Excon Regulations stipulate that “except with permission granted by theTreasury, and in accordance with such conditions as the Treasury may impose,no person other than an authorised dealer shall buy or borrow any foreign cur-rency or any gold from, or sell or lend any foreign currency or any gold to anyperson not being an authorised dealer” and “an authorised dealer shall not buy,borrow or receive or sell, lend or deliver any foreign currency or gold exceptfor such purposes or on such conditions as the Treasury may determine”.

With regards to the fees payable, one may need to liaise with the authoriseddealer, as each authorised dealer may have a different fee structure. The buyingand selling rates of currency quoted by authorised dealers are based on the supply of and the demand of that currency in the market at any given time.

The Income Tax Act 58 of 1962 requires that any amount received or accruedor expenditure or loss incurred by a person during any year of assessment inany currency, other than the currency of the Republic of South Africa, be translated to the currency of the Republic of South Africa by applying the spotrate on the date on which that amount was received or accrued, or expenditureor loss was incurred.

7.2 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?Please see responses under questions 3.1 and 3.2 above. The Income Tax Act58 of 1962 imposes a withholdings tax on any interest and dividends accruingfrom South Africans sources to parties in foreign jurisdictions.

7.3 Must project companies repatriate foreign earnings? If so, mustthey be converted to local currency and what further restrictions existover their use?No.

7.4 May project companies establish and maintain foreign currencyaccounts in other jurisdictions and locally?Yes.

7.5 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?Regarding tax incentives, there are none. In respect of taxes on foreigners, pleasesee responses to question 2.3 above.


8.1 What restrictions exist on bringing in foreign workers, techniciansor executives to work on a project?In order for a foreign national to be employed in South Africa, they will haveto be in possession of a valid work permit. There are four types of work permitsand they are:

• a general work permit;• a quota work permit;• an exceptional skills work permit; and,• an intra-company transfer work permit.

8.2 What restrictions exist on the importation of project equipment?The Customs and Excise Act 91 of 1964 is one of the primary pieces of legislation that provides for the control of the importation of certain goods.There are various pieces of legislation that regulate the importation of goods,and their application is dependent on the nature of the goods concerned.

About the authorPhologo Pheko is a partner in Fasken Martineau Johannesburg andspecialises in banking and finance, with a focus on infrastructure andproject finance. He has particular expertise in public privatepartnerships, public procurement, black economic empowerment andinfrastructure finance in the sectors of energy, road, transport, miningand telecommunications.

Pheko has advised lenders, sponsors and subcontractors in this area bothlocally and internationally. He has advised lenders in the public privatepartnership with the Department of Statistics South Africa on thedemolition of certain existing structures and the design, construction,financing, operation and maintenance of the new head office. Pheko hasalso worked with the preferred bidder in the public private partnershipwith the development authority for the Government of Mauritius inrespect of the design, construction, financing, operation andmaintenance of the road decongestion programme in Mauritius.

Phologo PhekoPartner, Fasken Martineau

Johannesburg, South AfricaT: +27 11 586 6043E: [email protected]: www.fasken.com


1.1 What types of collateral/security are available?In Taiwan, although there are no special regulations governing types of collateral/security required in project finance, a project lender, in general,may request the following types of collateral/security to minimise the riskof the project company’s default:

• mortgages over immovable (for example, land) or movable (such asequipment, ships, bank accounts) assets;

• pledges over chattels or rights (for example, future credit);• equitable mortgages over the shares or units in the project company or

its holding company, and any rights attached to them; and, • assignments by way of a direct or tripartite agreement as security of key

project contracts, insurances, or relevant project documents.


2.1 How is a security interest in each type of collateral perfectedand how is its priority established?

Mortgages over land or other real property (immovable assets)Under Taiwan’s Civil Code, mortgages over land or other real property areperfected by registering the mortgage with the competent registration authorities, the local land offices, and are prioritised by their respective filingdate, After registration, a mortgage over land or other real property takespriority over all subsequent security interests in that land or other real property.

Mortgages over chattels (movable assets)Under Taiwan’s Personal Property Secured Transactions Act, a written contract will be entered into for a movable property secured transaction.Unless registered, a personal property secured transaction will not be effec-tive against a bona fide third party. Such mortgages are also prioritised bytheir respective filing date.

Pledges over chattels or rightsDue to Taiwan’s Personal Property Secured Transactions Act, the projectcompany and the project lender tend to adopt mortgages over movables instead of pledges over the same because the movables secured can be keptand utilised by the project company by mortgages. However, pledges overrights are still a main security method in project finance. The creation of apledge over movables becomes effective and is perfected by the transfer ofthe same from the debtor to the creditor. As to a pledge over rights, the creation of it should be made in accordance with the provisions concerningthe transfer of such rights, and with the provisions of Taiwan’s Civil Code.In other words, the pledge should be created in writing, and if there is anydocument evidencing such rights, the debtor or pledgor is obligated to deliver it.

2.2 How can a creditor assure itself as to the absence of liens withpriority to the creditor’s lien?Before taking security and closing the financial deal, the project lender cancheck with the competent local land offices and the relevant personal prop-erty registration authorities, such as the Industrial Development Bureau,the Ministry of Economic Affairs or the Ministry of Transportation andCommunications (if applicable) to ensure that there are no other registeredsecurity interests in respect of the relevant immovable or movable assets. In

addition, the lender can also request the project company to warrant andrepresent that no other security interests have existed.

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?

Real property mortgage registration fee A fee is payable at the rate of 0.1% of the declared value of real property or0.1% of the value of any right over it other than ownership, as the case maybe upon registration of a mortgage at the land offices.

Mortgages over chattelsA small fee of NT$900 ($31) per case is payable upon registration of a security interest at the relevant personal property registration authorities.

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 may act as trustee or agent and hold securities on trustfor the other project lenders, provided that the security trustee or agent isone of the project lenders. In addition, a security trustee or agent can enforcethe security and distribute the proceeds from the sale of the security to satisfythe respective debts to all the project lenders if authorised by an agreementamong the lenders.


3.1 What restrictions, fees and taxes exist on foreign investment inor ownership of a project and related companies?There is a list of industries which are prohibited or restricted for overseasChinese and foreign investment for national security or public policy reasons. According to the Statute for Investment by Foreign Nationals, theStatute for Investment by Overseas Chinese and the Regulations GoverningInvestment in Securities by Overseas Chinese and Foreign Nationals, all foreign investment is subject to the approval of the Investment Commission(IC), the Ministry of Economic Affairs, except foreign portfolio investmentin publicly traded securities.

In addition, as to investment from the People’s Republic of China (PRC),a list of industries which are permitted will apply instead. There are manyspecial restrictions such as limitation on share holdings.

3.2 Do these restrictions also apply to foreign investors or creditorsin the event of foreclosure on the project and related companies?See 3.1.

In addition, the following types of land should not be transferred or leasedto foreign investors or creditors, nor may encumbrance on them be createdin favour of foreign investors or creditors: forest lands, fisheries, huntinggrounds, salt fields, lands with mineral deposits, sources of water and, landslying within fortified and military areas and lands adjacent to the nationalfrontiers.

Foreign investors or creditors may acquire the following types of land forself-use, investment and public welfare (but the area and location of suchland shall be subject to restrictions imposed by the competent local govern-ments): residences; business places, office buildings, shops and factories;churches; hospitals; schools for the children of aliens; diplomatic and

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Taiwan

Jackson Shuai-Sheng Huang and Simon Hsien-Wen Hsiao, Formosa Transnational

www.taiwanlaw.com

TAIWAN


consular buildings and office buildings of organisations for the promotionof public welfare; cemeteries; and, investments helping important construc-tion in the country, the economy as a whole, and agriculture and pasture,which have been approved by the central authority in charge of the busi-ness.

3.3 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 bilateral or multinational investment treaties signed by Taiwanaffording any exemption from the restrictions stated in question 3.1.


4.1 Is a submission to a foreign jurisdiction and a waiver ofimmunity effective and enforceable?Under the laws of Taiwan, parties are free to agree to submit their disputesto a foreign jurisdiction or an arbitral tribunal located outside of Taiwan,and also to execute a contract governed by the law of that foreign jurisdic-tion. In other words, such contracts are effective and enforceable, and arerecognised by Taiwanese Courts. However, the waiver of sovereign immunitydoes not apply to projects in Taiwan.

4.2 Must any of the financing or project documents be registered orfiled with any government authority or otherwise comply with legalformalities to be valid or enforceable? For instance, does collateralneed to be notarised?In general, a specific financing or project document need not be registeredor filed with any government authorities to be valid or enforceable, nor dothe laws require that such documents comply with specific legal formalities.However, written contracts or certain application documents are requiredwith respect to security. Whether registration is required depends on typesof assets provided as security (see 2.1). In addition, collateral does not needto be notarised.

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?There are various central and local governments being authorised to imple-ment projects. The Promotion of Private Participation Department, theMinistry of Finance, is responsible for administering and overseeing projectsin the typical project sectors.

4.4 What government approvals are required in relation toenvironmental concerns for typical project finance transactions?What fees and other charges apply?In general, according to the Environmental Impact Assessment Act, envi-ronmental impact assessments will be conducted and approved by the En-vironmental Protection Administration, Executive Yuan, for the followingdevelopment activities for which there is concern of adverse impact on theenvironment: the establishment of a factory or the development of an in-dustrial park; the development of a road, railway, mass rapid transit system,harbour or airport; the extraction of soil and rock or the exploration andextraction of minerals; the development of water storage, water supply, floodcontrol or drainage projects; the development or use of land for agriculture,forestry, fisheries or livestock; the development of recreational areas, scenicareas, golf courses or sports fields; the development of cultural, educationalor medical facilities; the construction of new municipal districts, construc-tion of tall buildings or renovation of old municipal districts; the construc-tion of environmental protection projects; the development of nuclearenergy or other energies or the construction of radioactive waste storage ortreatment facilities; and, those other activities officially announced by thecentral competent authority.


5.1 Who has title to natural resources? What rights may privateparties acquire to these resources and what obligations does theholder have? May foreign parties acquire such rights?According to the Mining Act, all mineral ownerships within the territory,the exclusive economic marine zone and continental shelf of Taiwan areowned by the government of the Republic of China (Taiwan) and shall notbe exploited unless a mineral right has been acquired. Under the Act onRegulating Private Utilities Enterprises, operations supplying water, elec-tricity, gas, and so on also require a licence.

Also see 3.2.

5.2 What royalties and taxes are payable on the extraction of naturalresources, and are they revenue- or profit-based?Under the Mining Act, only Taiwanese persons or legal entities can obtainmineral rights to exploit natural resources. The mineral right holder shallpay mineral royalties of the mineral price at the rate of 2% to 50% for petroleum and natural gas, 2% to 20% for metallic minerals, and 2% to10% for other minerals. Such mineral royalties and mineral rights feesshould be paid twice a year.

5.3 What restrictions, fees or taxes exist on the export of naturalresources?There is no tariff for exporting natural gas and petroleum, but there maybe a fee imposed on the export of petroleum for the Petroleum Fund underthe Petroleum Administration Act.

5.4 Can private parties grant security over any such rights in naturalresources, and in the event of enforcement of that security wouldthe local granting body be bound by that security. Would change ofcontrol in the borrower (for example, upon exercise of sharesecurity) trigger a forfeit of those rights?Regulatory approvals are not required for the creation of security over realproperty, chattels, unless the owner has made contractual commitments withthe government agencies. As, the relevant facilities of utilities are owned bythe government or government-owned enterprises, such assets are unlikelyto be provided as security.

In addition, according to the Mining Act, only Taiwanese persons or entitiesare allowed to obtain the mineral right in Taiwan, and the establishment,extension, alteration, closing or transfer due to assignment or entrustmentwill not be valid without approval by and registration with the competentauthorities.

A change of control in the project company does not automatically triggera forfeit of rights in natural resources. However, there might be some termsas set forth in the licence, which confers rights to exploit natural resources,providing that the approval of the relevant competent authorities is obtainedprior to any change of control in the project company. If that approval isnot granted, the licence will generally be cancelled.

Under the Act for the Promotion of Private Participation in InfrastructureProjects, a project company may not, without approval of the competentauthorities, transfer, lease or create any encumbrance on the operating assetsor machinery or its rights under the investment agreement with the govern-ment agency, or have such rights subject to compulsory enforcement. Without said approval, any such action would be rendered void.

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6.1 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? If the project company goes bankrupt, the assets it owned and provided assecurity will become a part of the bankruptcy estate. In general, a securedproject lender has its preferential right to claim proceeds from the sale ofthe assets through the bankruptcy proceeding. If the sale proceeds are insufficient to repay the claims in full, the project lender could still partic-ipate in the bankruptcy proceeding to get additional distribution, if any,with the unsecured creditors.

6.2 Are there any preference periods, clawback rights or otherpreferential creditors’ rights with respect to the collateral/security? There are no preference periods with respect to the security. Under the Bankruptcy Act, the trustee may apply for the invalidation of the followingacts made by the debtor, the project company, within six months prior tothe bankruptcy adjudication: (i) provision of security for outstanding debtswithin six months prior to the bankruptcy adjudication except when theprovision is due to a promise made by the project company more than sixmonths before the bankruptcy adjudication; and (ii) repayment of debtsnot yet due. In addition, costs of compulsory enforcement against the secu-rity and taxes, such as land value increment tax and house tax, have priorityover the claims of secured project lenders.

6.3 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 project lender and the project company may sign an agreement wherebythe ownership of the mortgaged or pledged assets will be transferred to themortgagee or pledgee automatically when the project company defaults.However, in the case of a pledged security, such agreement to transfer cannotbe enforced against a bona fide third party, and in the case of a mortgagedsecurity, such agreement is not a valid mortgage, unless the mortgage orpledge is registered with the competent authorities.

6.4 Outside the context of a bankruptcy proceeding, what stepsshould a project lender take to enforce its rights as a secured partyover the collateral/security? In general, the project lender should ensure that it has all of the documen-tation necessary to enforce its security without any further action being required on the part of the project company. Any steps a project lender isrequired to take are subject to the terms and conditions of the security agreement between it and the project company.

6.5 Does the jurisdiction recognise the concept of trustees inbankruptcy, receivership, liquidators or similar persons?The concept of trustees in bankruptcy, receivership and liquidators arerecognised in Taiwan.


7.1 What, if any, are the restrictions, controls, fees, taxes or othercharges on foreign currency exchange?There are foreign exchange restrictions and controls depending on theamount exchanged. For example, a legal entity may process the foreign exchange settlements against the New Taiwan dollar without further ap-proval from Taiwan’s Central Bank, provided that the foreign exchange pur-chased or sold by a local company is within the annual aggregate settlementamount not exceeding $50 million, or the foreign exchange purchased orsold by an association or an individual is within the annual aggregate settle-ment amount not exceeding $5 million. No government fee or tax is payablepurely on foreign currency exchange transactions.

7.2 What, if any, are the restrictions, controls, fees and taxes on re-mittances of investment returns or payments of principal, interest orpremiums on loans or bonds to parties in other jurisdictions?

Any remittance and repatriation of funds above a certain amount to a party inanother jurisdiction will be subject to foreign exchange control in Taiwan, if itinvolves exchange settlements against New Taiwan dollars. Acompany shouldmake a declaration to the remitting bank, and the bank should confirmwhether the said declaration is consistent with relevant contracts and letters ofapproval if any foreign exchange transaction involves an amount over $1 million.

The remittance of dividends is subject to a withholding tax at 20% or lowerif there is a tax treaty between Taiwan and that jurisdiction. However, theremittance of loan repayments is not taxable except for its interest, which isalso subject to a 20% withholding tax or a lower treaty rate.

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

7.4 May project companies establish and maintain foreign currencyaccounts in other jurisdictions and locally? A project company may open a foreign currency account, provided that itprovides all necessary documents required by the bank for opening the account. There is no restriction on companies establishing and maintainingforeign currency accounts in other jurisdictions, subject to compliance withother international sanctions.

7.5 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?The tax regulations treat foreign and local investors almost exactly the same,except that no withholding tax applies to the profits repatriated to a foreigncompany by its Taiwan branch office, and that certain interest income of aforeign company is exempt from withholding tax. Also see 2.3.


8.1 What restrictions exist on bringing in foreign workers,technicians or executives to work on a project?In Taiwan, hiring foreign workers is subject to certain restrictions under theEmployment Services Act, and the relevant application procedures and government administrative measures are provided in the said Act and therelevant regulations promulgated by the Council of Labour Affairs. In general, a permit from the competent labour authorities is required to hiretechnicians, engineers or executives, and such foreign employees must com-ply with the relevant visa requirements. In addition, there are stricter restrictions on labour from the PRC.

8.2 What restrictions exist on the importation of project equipment?Some equipment and components such as cables and wires are subject toinspection during import clearance procedures by the competent authority,the Bureau of Standards, Metrology and Inspection. In addition, under theAct for the Promotion of Private Participation in Infrastructure Projects, animport duty exemption for certain qualified equipment is available for construction contractors, and a deferred instalment payment of import dutyon operating equipment can be adopted by a project company.

Imported products are classified in accordance with the Customs’ CCC Codes,which are published on the website of the Directorate General of Customs(http://www.customs.gov.tw/Rateweb/search1.aspx), with corresponding import duty rates. To develop certain industries, the importation of someequipment and key products in such industries may enjoy zero import duty.

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About the authorJackson Shuai-Sheng Huang, partner at Formosa Transnational,specialises in cross-border litigation and international arbitration,international trade, corporate and financial regulations, M&A andantitrust laws. His most significant case in 2012 was representingSan’an Optoelectronic, China’s largest LED epitaxial wafer maker, inthe largest M&A deal in history for a Chinese company offering directinvestment in Taiwan.

Shuai-Sheng Huang was the editor of the Taiwan Bar Journal from1998 to 1999, and has been editor-in-chief of the FT Law Review since2008. He is a member of the New York State Bar Association, the TaipeiBar Association, the Chartered Institute of Arbitrators and theInternational Association of Defence Council.

Jackson Shuai-Sheng Huang Partner, Formosa Transnational

Taipei, TaiwanT: +886 2 2755 7366E: [email protected]: www.taiwanlaw.com

About the authorSimon Hsien-Wen Hsiao is a senior lawyer at Formosa Transnational,and specialises in corporate law and securities regulation, M&A,antitrust and competition law, cross-border litigation, environmentaland energy law and civil and criminal law. His most significant case in2012 was representing few independent power producers in a cartelinvestigation and their administrative appeal against a fine decision in atotal of NT$ 6.32 billion (approximately $211 million) imposed byTaiwan’s Fair Trade Commission (FTC) due to their alleged concertedaction. This amount is the highest fine in the FTC’s cartel enforcementhistory. Hsien-Wen Hsiao is on the board of directors of the Taiwan BarAssociation. He was a financial news reporter for Formosa Televisionfrom 2012 to 2011 and editor of the FT Law Review from 2008 to2009.

Simon Hsien-Wen HsiaoPartner, Formosa Transnational

Taipei, TaiwanT: +886 2 2755 7366E: [email protected]: www.taiwanlaw.com

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.


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 Licensing Regulatory Authority (BRELA) within 42 days of the date of itscreation, 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 priority of mortgages is generally determined by the date of registration atthe relevant lands registry, and the priority of security interests is generallydetermined by the date of the document, in each case provided it is regis-tered in time and there is no an agreement otherwise.

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 atBRELA, 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 enforceability and operation of such an arrangement has not to our knowl-edge been tested in the courts in Tanzania.


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 require 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 also apply regarding equity participation in Tanzanian compa-nies listed on the stock exchange where at least 40% of the offered sharesmust be reserved for Tanzanian citizens.

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 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?Tanzania has a number of bilateral investment treaties (Bits), but in ourview, such treaties would not afford relief from such restrictions since theydo not amount to either expropriation or discrimination in relation to onecompany, though the facts of each case would have to be reviewed in thecontext of the relevant Bit, which are not all identical.


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 enforceable if submission is non-exclusive. Recognition of a foreign jurisdiction may, however, be refused where a dispute relates to a matter thatis exclusively governed by Tanzanian law. Foreign judgments will be enforcedif there is a reciprocal agreement between Tanzania and the foreign jurisdiction.

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.

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Tanzania

Nicholas Zervos, Victoria Lyimo Makani and Joy Hadji Alliy, VELMA Law

www.velmalaw.com

TANZANIA


4.2 Must any of the financing or project documents be registered orfiled with any government authority or otherwise comply with legalformalities to be valid or enforceable? For instance, does collateralneed to be notarised?Loan documents from non-resident lenders need to registered with the Bankof Tanzania in order to permit remittances of principal and interest by theremitting Tanzanian bank. (Security documents need to be registered as re-ferred to in paragraph 2 above).

Generally, any other project documents do not need to be registered or filedwith any government authority.

There are no requirements for notarisation of financing or project documents unless they are executed outside of Tanzania, in which case spe-cific execution requirements must be followed.

However, a financing document may not be admissible as evidence in court,if it is deemed to be an agreement acknowledging a debt, and has not beenproperly stamped with nominal stamp duty.

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?There are a number of government agencies with general authority overprojects in the typical project sectors, including:

• general - Tanzania Investment Centre, public-private partnerships (PPP)Unit at the Ministry of Finance, Public Procurement Regulatory Author-ity (PPRA), Ministry of Lands, National Environmental ManagementCouncil (NEMC), Tanzania 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

Authority (TPA), Surface and Marine Transport Authority (SUMA-TRA), Ministry of Infrastructure Development, Tanzania Civil AviationAuthority, Tanzania Airports Authority; and,

• water - Ministry of Water, relevant basin water boards.

Generally, the nature and extent of the authority of these government agencies is to issue licences, negotiate agreements with the private sector,regulate tariffs and charges, hold public inquiries prior to issuing licencesor approving regulated tariffs, and deal with any competition issues affectingthe sector.

4.4 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 TZS70,000 ($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 TZS300,000 formaintaining the registration.


5.1 Who has title to natural resources? What rights may privateparties acquire to these resources and what obligations does theholder have? May foreign parties acquire such rights?Generally, title to natural resources rests with the Government. A foreigncompany can acquire title to certain minerals by applying for certain licencesfrom the commissioner for minerals. A foreign company can acquire titleto oil and gas, by entering into production sharing agreements (PSAs) withTPDC which will have the licence on behalf of the Government, and willpermit the company to extract and have an interest in the oil and gas.

Obligations imposed on licence holders include carrying out mining or exploration operations in accordance with good environmental practices;employing and training Tanzanian citizens, and notifying the relevant authority on the discovery of any commercially viable oil, gas or mineraldeposits.

5.2 What royalties and taxes are payable on the extraction of naturalresources, and are they revenue- or profit-based?Mining companies are required to pay royalties to the Government on thegross value of all minerals produced under the relevant licence. Oil and gascompanies are required to pay a royalty on the total petroleum obtainedfrom the development area prior to the recovery of costs.

5.3 What restrictions, fees or taxes exist on the export of naturalresources?Authorised mining companies or licensed dealers are restricted from export-ing any minerals (including samples) unless they have obtained an exportpermit from the commissioner for minerals. An application fee of $100 ispayable in respect of an export permit.

MEM has the discretion to prohibit TPDC from removing, or dealing withany oil or gas extracted from a development area, until all outstanding royalties have been paid. Other than obtaining tax clearance from the TRAprior to exporting oil or gas, there are no restrictions on exportation. Thereis, however, a domestic supply obligation under the PSA that both TPDCand the oil and gas company will need to comply with, and this will applyto their proportional share of oil or gas produced.

5.4 Can private parties grant security over any such rights in naturalresources, and in the event of enforcement of that security wouldthe local granting body be bound by that security. Would change ofcontrol in the borrower (for example, upon exercise of sharesecurity) trigger a forfeit of those rights?In the mining sector:

• a private company may grant security over mining licences to banks orfinancial institutions and the commissioner for minerals would be boundby such security in the event of enforcement, subject to the restrictionsimposed under the Mining Act on the grant of mineral rights;

• a transfer of shares or change of control in the company requires theprior consent of the commissioner for minerals.

In the oil and gas sector:

• TPDC cannot create any legal or equitable interest in a licence withoutprior approval of MEM;

• a contractor is similarly restricted from assigning or transferring any ofits rights under a PSA to a non-affiliated person, firm or corporationwithout prior consent from the Ministry;

• MEM will be bound by the security in the event of enforcement, if thecontractor provides an unconditional undertaking by the assignee to assume all the obligations by the contractor under the PSA, and a deedof assignment setting out the main conditions and liabilities to be as-sumed, and payment of an assignment fee.

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6.1 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.

6.2 Are there any preference periods, clawback rights or otherpreferential creditors’ rights with respect to the collateral/security?There are clawback rights that apply in respect of security granted whichends with the onset of insolvency of the company within a certain time period. Transactions at undervalue entered into with any person connectedwith a company within the previous two years can be set aside by the administrator or liquidator of the company. A preference given to a con-nected person within a two-year period, or within a six-month period if itis given to a connected person, can also be set aside. Floating charges createdwithin 12 months of the commencement of a winding up of a company,are invalid unless it is proved the company was still solvent after its creation.

Preferential creditors on insolvency include: (i) the Government for all out-standing taxes, local rates, duties and rents which are not more than oneyear in arrears; and, (ii) employees for all wages or salaries in respect of services rendered to the company within the previous four months prior tothe insolvency of the company.

6.3 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 to seize anddispose of any property subject to such interest.

6.4 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 transfer 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.

6.5 Does the jurisdiction recognise the concepts of trustees inbankruptcy, receivership, liquidators or similar persons?The concepts of trustees in bankruptcy, receivership and liquidators arerecognised in Tanzania and are provided for in the Companies Act 2002,the Bankruptcy Act Cap 25 and the Land Act Cap 113.


7.1 What, if any, are the restrictions, controls, fees, taxes or othercharges on foreign currency exchange?Foreign currency exchange restrictions apply where any payment is madein Tanzanian shillings to or for the credit of a person resident outside Tan-zania.

7.2 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 servicing of loans requires prior notification and record keeping by remitting banks in Tanzania. Such information is forwarded to the Bank ofTanzania, together with details of any foreign loan, overdrafts or financialfacilities with terms exceeding 365 days, and a record number is obtainedfor the loan.

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.

7.3 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.

7.4 May project companies establish and maintain foreign currencyaccounts in other jurisdictions and locally?Banks and financial institutions can provide foreign currency facilities to aproject company; transfers of foreign currency are also permitted free of anyceilings, subject to delivery of appropriate documentation.

The operation of offshore foreign currency accounts by a Tanzanian residentcompany, are, however, still subject to restrictions and requires consent fromthe Bank of Tanzania.

7.5 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;• guarantee against expropriation, unless it is done with due process and

there is payment or fair, adequate and prompt compensation; and,• an initial automatic 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.

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8.1 What restrictions exist on bringing in foreign workers,technicians or executives to work on a project?Foreign workers, technicians or executives brought in to work on a projectwill be required to obtain an appropriate immigration permit from the Min-istry of Home Affairs.

Restrictions also apply to foreign contractors and subcontractors that areengaged to carry out a specific contract. They must apply to the ContractorsRegistration Board (CRB) for temporary registration. Foreign engineers aresimilarly restricted from providing services unless they are registered withthe Engineers Registration Board.

8.2 What restrictions exist on the importation of project equipment?Project equipment can be imported into Tanzania subject to payment of ap-plicable customs duties and VAT. In some cases, equipment ma be exemptfrom such duties.

About the authorNicholas Zervos is a senior commercial transactional lawyer withexpertise in international corporate matters and project and structuredfinance, particularly in East Africa, the UK and central and easternEurope.

Zervos has lived and worked as a lawyer in Dar es Salaam, Tanzaniasince November 2006. Before then he was a senior partner with a majorfirm in 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.

Zervos has a law degree from the University of Nottingham, and isadmitted to the English, Tanzanian and Hong Kong bars. He is amember of the Law Society of Tanganyika and the Law Society ofEngland and Wales.

Nicholas ZervosPartner, VELMA Law

Dar es Salaam, TanzaniaT: +255 752 66 7766E: [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.

Makani holds an LLB (Hons) from the University of Dar es Salaam(1992), and is a member of the Tanganyika Law Society, the TanzaniaWomens’ Lawyers Association, the East Africa Law Society and theCommonwealth Lawyers Association. She is fluent in English andKiswahili.

Victoria Lyimo MakaniPartner, VELMA Law


About the authorJoy Hadji Alliy is a senior associate at VELMA Law, with expertise incorporate, mining, telecommunications and mining law.

Alliy has a degree from the University of Warwick and is now living andworking in Dar es Salaam, Tanzania. She has experience advisinginvestors and banks on corporate and commercial matters, finance andsecurity documentation, aircraft financing, mining law and regulationcompliance in the telecommunications, mining and energy sectors.

Joy Hadji AlliySenior associate, VELMA Law



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

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

(ii) a pledge, which is available for security over movable property, such asshares in the pledgor’s company, instruments of investment and unregisteredmachinery.

Although not recognised by Thai law as a form of security interest per se (forexample, under bankruptcy and court-supervised reorganisation proceed-ings) the taking of contractual quasi-security by means of assignment (ab-solute or conditional) is also common in Thailand.

In project finance transactions, assignments will usually be provided withrespect to rights under the various project documents, monies in bank accounts, and insurances.


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:

(i) the Land Department, for land, buildings and installations;

(ii) the Central Machinery Registration Office of the Ministry of Industry,for machinery.

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 filings re-quired 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 be conducted 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 1% of the mortgaged amount is payable, subject to a maximum feeof bt200,000.

To register a mortgage of machinery with the Central Machinery Registra-tion Office, a mortgage registration fee of 0.1% of the mortgaged amountis 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 the security 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 a contractual 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 or com-pany) 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 FBA re-stricted 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.

3.2 Do these restrictions also apply to foreign investors or creditorsin the event of foreclosure on the project and related companies? The same restrictions apply in the event of foreclosure, and so foreclosureby a foreign lender will be limited accordingly.

THAILAND


Thailand

Maythawee Sarathai and Ben Thompson, Mayer Brown JSM

www.mayerbrown.com

THAILAND


3.3 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 restricted businesses.


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 obtainedin a foreign 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 Must any of the financing or project documents be registered orfiled with any government authority or otherwise comply with legalformalities to be valid or enforceable? For instance, does collateralneed to be notarised? Except for mortgage agreements and agreements for the sale or lease of land(which in each case must be registered with the relevant land registry), nofinancing or project document is required to be registered or filed with anygovernment authority in order to be valid or enforceable.

Pledges of shares will, however, require recording in the pledgor’s share register in order to be enforceable.

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? (a) Petroleum/Gas

The Department of Mineral Fuels under the Ministry of Energy has authority over the petroleum and gas sector. This department has the authority to issue concessions which allow parties to engage in petroleumand gas exploration and production.

(b) Mining

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

(c) Electricity

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

4.4 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 or electricity (in the case of a power plant with a capacity of 10MW or more)sectors, a project company must complete an environmental impact assess-ment (EIA), submit a report to the Office of Natural Resources and Envi-ronmental Policy and Planning (ONEP) and obtain a correspondingapproval from ONEP of the EIA.


5.1 Who has title to natural resources? What rights may privateparties acquire to these resources and what obligations does theholder have? May foreign parties acquire such rights? Title to natural recourses resides with the Government of Thailand. Con-cessions may be granted by the relevant body of the Government to privateparties in order to exploit these natural resources.

Concessions for exploitation of petroleum and gas resources may be awardedto foreign investors. Mineral concessions may also be awarded to foreign investors, but are subject to the relevant approvals being granted under theFBA.

5.2 What royalties and taxes are payable on the extraction of naturalresources, and are they revenue- or profit-based? In the petroleum and gas sector, royalties are payable quarterly and are calculated on a sliding scale of 5% to 15% of the value of petroleum andgas sold each month. The royalty may be payable either as a cash royalty ora royalty in kind payable by delivery to the Government of an amount ofpetroleum and gas equal in value to the cash royalty.

Royalties on minerals are calculated based on the volume of extracted min-eral multiplied by the price for the relevant mineral announced by the director-general from time to time.

For both the petroleum and gas and mining sectors, annual income tax at arate of 50% per annum of the concessionaire’s net profit will be payable.

5.3 What restrictions, fees or taxes exist on the export of naturalresources?Persons wishing to export petroleum and gas must be licensed by the Department of Energy Business under the Ministry of Energy.

Persons wishing to export minerals from controlled mines must be approvedby the Department of Primary Industries and Mines under the Ministry ofIndustry. Export approval must be applied for separately for each export.

Thai law also allows for the imposition of restrictions on natural resourceexports for reasons of national security.

5.4 Can private parties grant security over any such rights in naturalresources, and in the event of enforcement of that security wouldthe local granting body be bound by that security. Would change ofcontrol in the borrower (for example, upon exercise of sharesecurity) trigger a forfeit of those rights? Private parties may grant security over their concession rights in natural re-sources (such as oil and gas fields and mines). In the event of enforcementof that security, while the local granting body will generally be bound bythe security, amendment to the relevant concession (and corresponding per-mits and approvals) may be required for such enforcement, with suchamendments requiring approval by the granting body. Although, as withany governmental approval, the granting body will have discretion as towhether or not to provide such approval, approvals are generally provided.

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6.1 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 against collateral 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 the reorganisation 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.

6.2 Are there any preference periods, clawback rights or otherpreferential creditors’ rights with respect to the collateral/security? Certain actions of the debtor may be subject to a three-month or a one-yearlook-back (preference) period commencing from the date on which thejudge accepts a bankruptcy or reorganisation petition. These include settlingbilateral contracts where the obligations of the bankrupt debtor exceed thoseof the counterparty, mortgaging or pledging assets, and conducting othertransactions designed to dispose of assets. These transactions may be challenged by any creditor or the court-appointed receiver or liquidator.

In a liquidation proceeding, the following categories of creditors and debtsmust be paid prior to payment of any unsecured creditors:

• expenses of the official receiver in managing the debtor’s estate;• fees incurred while calling in the assets;• fees of the petitioning creditors and counsel’s fees (as the court or the

receiver may decide);• taxes (including land taxes) which have become due for payment within

the six months prior to the order for receivership (in reorganisations, thispriority is only achieved to the extent permitted in the approved plan);

• wages of the clerks, servants, or workers of the debtor, for two monthsprior to the order for receivership of the assets; and,

• any other unsecured debts.

In a court-supervised reorganisation, distributions are made in accordancewith the plan.

6.3 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).

6.4 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 be obtained 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.

6.5 Does the jurisdiction recognise the concepts of trustees inbankruptcy, receivership, liquidators or similar persons? In a liquidation proceeding, once the receivership order is issued, an officialreceiver (who is a government official) will be appointed by the court inorder to collect and sell the debtor’s assets for debt settlement.

In a court-supervised reorganisation, upon a court’s order allowing the reorganisation, a planner will be appointed in order to collect the debtor’sassets and prepare the reorganisation plan. Once the plan is approved by acreditors’ meeting and sanctioned by the court, the plan administrator shallbe appointed to implement the plan.


7.1 What, if any, are the restrictions, controls, fees, taxes or othercharges on foreign currency exchange? Generally, remittance of investment funds and foreign loans into Thailandare freely permitted, provided they are conducted through commercial banksand, for remittances of more than $20,000, notification of the same is givento the Bank of Thailand. There are no taxes or duties or other governmentcharges applicable to foreign currency exchange transactions.

7.2 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 documentary evidence of the underlying payment obligation (such as a copy of the creditagreement) is supplied to the commercial bank.

7.3 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 an authorised bank account, or deposit them in a foreign currency accountwith an authorised bank.

7.4 May project companies establish and maintain foreign currencyaccounts in other jurisdictions and locally? Project companies may establish and maintain foreign currency accountsoffshore and in Thailand. In order for a project company to establish a foreign currency account offshore, however, approval from the Bank of Thailand will be required.

7.5 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.

THAILAND



8.1 What restrictions exist on bringing in foreign workers,technicians or executives to work on a project? Bringing in foreign workers, technicians or executives to work on a projectin Thailand is subject to obtaining the necessary work permits from theMinistry of Labour, the granting of which is discretionary. In order to obtaina work permit: (i) the minimum paid-up registered capital of a Thai com-pany employer must be at least bt2 million for each foreign worker hired;and, (ii) there must be a minimum of four Thai employees for each foreignworker hired.

However, for projects which have been granted BOI privileges, waivers ofthe above requirements will usually be provided and work permits generallygranted.

8.2 What restrictions exist on the importation of project equipment?Generally, most goods can be imported into Thailand to form the fixed assets of a project, although certain restrictions exist to protect domesticmanufacturers, the health and safety of the public and national security.

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 and 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 Sarathai Partner, Mayer Brown JSM

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

About the authorBen Thompson is a consultant in the Singapore office of Mayer BrownJSM’s global projects group. He recently joined from a magic circlefirm, and has more than 10 years’ experience in projects throughoutsoutheast Asia – six of these based in Bangkok. He has advised on thedevelopment and financing of many high profile projects in the region,including the Nam Ngiep 1, Nam Ngum 3 and Xe Pian Xe Namnoyhydropower projects in Laos PDR and the Nong Saeng and Gulf U-Thai IPP projects in Thailand. Thompson has particular expertise inrenewable small power producer projects in Thailand, and is alsoadvising on a number of power projects in Myanmar. He was named arising star in Singapore and Thailand by IFLR1000 2013 and 2014.

Ben Thompson Legal professional, Mayer Brown JSM

Singapore, Republic of SingaporeT: +65 6327 0247E: [email protected]: www.mayerbrown.com


1.1 What types of collateral/security are available? The following types of security are available:

• mortgages over land;• charges over other fixed project assets;• charges or security assignments over project accounts, cash balances,

project contracts and insurances;• charges over shares;• floating charge over remainder of project company assets; and,• while not strictly security, direct agreements over key project contracts.


2.1 How is a security interest in each type of collateral perfectedand how is its priority established? Security interests must be perfected by some or all of the following methods(depending on the nature of the asset):

• registration at the Companies Registry (for security created by a UKcompany);

• registration at the Land Registry for England and Wales (for land in Eng-land or Wales);

• registration at other specialist asset registries (such as trade mark or patentregistries);

• in relation to assignments, notice of assignment must be given to the relevant contracting third party; and,

• in relation to equitable security over shares, the delivery of share certifi-cates and undated but executed stock transfer forms.

Priority of security is a complex area under English law but as a generalguide:

• fixed charges and mortgages rank in order of creation (if properly registered);

• a legal mortgage taken bona fide for value without notice of a prior equitable charge will take priority over that equitable charge, but registration of the equitable charge at the Companies Registry gives no-tice and so will usually protect its priority;

• a fixed charge or mortgage will rank in priority to a floating charge;• priority between floating charges is governed by their time of creation

(if properly registered);• priority between two registered mortgages over registered land depends

on the date of registration at the Land Registry;• priority between assignments over choses in action (for example, debts,

contract rights) is governed by the date that notice is given to the debtoror counterparty to the assigned contract.

Secured creditors may also vary the priority of their respective debts betweenthemselves.

2.2 How can a creditor assure itself as to the absence of liens withpriority to the creditor’s lien?A creditor can undertake searches of relevant registries (for example theCompanies Registry, and asset registries like the Land Registry), to ascertainwhat security has been registered against a company or particular assets ofa company.

A creditor will also usually require the company to show in the financingdocuments that no security exists (except as disclosed or as permitted) andto undertake not to grant any other security until the secured debt has beenrepaid.

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? A fee of £13 ($21) per charge is payable to the Companies Registry for reg-istering a charge, and a fee is payable to the Land Registry for registering acharge over land. The fee for loan amounts or property values of £1,000,001or more is £250 for registered land.

Other specialist UK asset registries may charge fees to register a security butthese are typically not significant.

There are no other taxes or charges payable to perfect a 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? A corporate entity may act as trustee and hold the benefit of security ontrust for all the secured finance parties.


3.1 What restrictions, fees and taxes exist on foreign investment inor ownership of a project and related companies? No taxes are imposed in the UK specifically in respect of foreign investment(subject to 7 below).

Certain regulated industries have restrictions that may impact on ownershipchanges (foreign or otherwise), such as the water, electricity and oil and gasindustries, and industry regulators may make a merger control reference(this is compulsory in the water sector).

3.2 Do these restrictions also apply to foreign investors or creditorsin the event of foreclosure on the project and related companies? Most of the restrictions will be relevant on any change of control.

3.3 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? The UK is party to a considerable number of bilateral and multilateral investment treaties. It is also a member state of the EU. The EU is based onthe idea of a common market and economic and monetary union, whichincludes some investment protection provisions that are directly applicablein EU member state courts. However, there are no investment protectionswhich would afford relief from the restrictions referred to at 3.1 and 3.2above.

UK


UK

Martin Kavanagh, Herbert Smith Freehills


UK



4.1 Is a submission to a foreign jurisdiction and a waiver ofimmunity effective and enforceable? A submission to the exclusive jurisdiction of a foreign court in project documentation would generally be upheld by the English courts, providedthat it is a legal and valid submission in accordance with the applicable law.Exceptions include where English law confers exclusive jurisdiction on theEnglish courts in some circumstances, and where the jurisdiction agreementis incompatible with English public policy. A different analysis will applywhere the submission is to the non-exclusive jurisdiction of a foreign court.

Under the State Immunity Act 1978 (the SIA 1978), a state is not immunefrom the jurisdiction of the English courts in respect of adjudication of disputes where it has submitted to the jurisdiction of the courts of the UKin accordance with Section 2 SIA 1978. A state will be immune from enforcement unless one of the exceptions in the SIA 1978 applies. A waiverof immunity by the state will be enforceable under English law, but willneed to be dealt with in respect of both adjudication and enforcement. Specific consent to injunctive relief is also required.

4.2 Must any of the financing or project documents be registered orfiled with any government authority or otherwise comply with legalformalities to be valid or enforceable? For instance, does collateralneed to be notarised? There is no requirement for financing documents to be registered or filedwith any government authority to be valid or enforceable, and there is norequirement for security documents to be notarised.

Some types of document must be executed as a deed to be enforceable.

See also the registration requirements applicable to security referred to at 2above.

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? Key government departments include the Department of Energy and Climate Change (electricity, oil and gas); the Department for Environment,Food and Rural Affairs (environment, water and sewerage), the Departmentfor Transport and the Department for Communities and Local Government(planning). These departments, or the relevant sector authority or regulator(such as the Office of Gas and Electricity Markets – Ofgem – for electricityand downstream gas, and the Coal Authority for coal), issue licences andpermits, and have enforcement powers, for the various activities within theirsectors.

4.4 What government approvals are required in relation toenvironmental concerns for typical project finance transactions?What fees and other charges apply? Most activities regulated by environmental law may only be carried out inaccordance with an environmental permit held by the operator. In Englandand Wales, there is an integrated permitting regime, meaning that a partic-ular site or installation may be covered by a single permit. Permit applica-tions (together with supporting studies and documentation) for complex,high-risk installations can take a long time (more than six months) and becostly. Application and annual permitting fees will usually be payable, al-though these are unlikely to be material in the context of the wider project.


5.1 Who has title to natural resources? What rights may privateparties acquire to these resources and what obligations does theholder have? May foreign parties acquire such rights?The principal extractive industries in the UK are oil, gas and coal. TheCrown owns the rights to all onshore and offshore oil and gas (including

shale oil and gas), gold and silver. Almost all coal is owned by the Coal Authority. Other minerals are privately owned.

Private parties can apply for licences to explore for and extract oil and gas.These are acquired through licencing rounds or by acquiring an interest ina licence from an existing licence holder (the approval of the Departmentof Energy and Climate Change is sought in order to protect against the riskof a licence revocation on a change of control). New entrants to the industryare subject to additional requirements regarding their corporate structureand the nature of their business, and a residency requirement in the UK.The Coal Authority issues licences or agreements to private parties for mining or exploration for coal, and sets out the requirements for participation in the industry.

5.2 What royalties and taxes are payable on the extraction of naturalresources, and are they revenue- or profit-based? Generally, all taxation in respect of the extraction of natural resources isprofit based, although special and higher rates can apply in the context ofoil and gas where detailed special tax rules modify the general rules applicable to corporation tax.

5.3 What restrictions, fees or taxes exist on the export of naturalresources? There are no taxes on the export of natural resources.

5.4 Can private parties grant security over any such rights in naturalresources, and in the event of enforcement of that security wouldthe local granting body be bound by that security. Would change ofcontrol in the borrower (for example, upon exercise of sharesecurity) trigger a forfeit of those rights? Private parties can grant security over their oil and gas licence interests andtheir interest in key field agreements (not petroleum in the ground). How-ever, enforcement is likely to require the approval or other involvement ofthe Department of Energy and Climate Change to avoid the risk of revoca-tion of the licence interest, including on a change of control of the borrowerin the case of security over shares.


6.1 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? If the project company enters administration (a court supervised processaimed at rescuing the company) a statutory moratorium arises (except in afew specific cases). This means that, without the consent of the administra-tor or permission of the court, no step may be taken to enforce security overthe company’s property, and no legal process may be instituted or continuedagainst the company or its property. It also prevents other kinds of insolvency procedures being started.

However, if the project lender has the benefit of a floating charge, it may beable to appoint an administrative receiver, an office largely abolished by theEnterprise Act 2002, but in respect of which exceptions to the abolitionapply (see sections 72B to G of the Insolvency Act 1986 – IA 1986). Theexceptions include appointments in pursuance of public private partnershipprojects, utility projects and larger project financings, provided the projectlender has step-in rights. The administrative receiver will collect in the company’s assets, run its business and dispose of its assets, their principalduty being to realise the debt owed to the secured creditor who appointedthem.

If the project company goes into liquidation, there is no freeze on enforcement of security.

UK


6.2 Are there any preference periods, clawback rights or otherpreferential creditors’ rights with respect to the collateral/security? Money realised from an insolvent company’s assets is applied to meet creditors’ claims in the following order of priority:

• fixed charges;• expenses of the insolvent estate;• preferential creditors;• the prescribed part for distribution to unsecured creditors (see (ii) below);• floating charges;• unsecured creditors; and,• shareholders.

(i) Preference periods and clawback rightsCertain transactions, including granting security, can be held void or setaside if the company is or becomes insolvent within a certain period fromthe date of the transaction, for example:

• a floating charge is invalid except to the extent that the company has re-ceived valuable consideration for it (section 245 IA 1986);

• a transaction at an undervalue (one in which a company received eitherno consideration or significantly less consideration than it provided) maybe set aside (section 238 IA 1986) (although creation of security has beenheld by the court to be incapable of being a transaction at an under-value);

• a preference whereby a creditor is put in a better position than it wouldotherwise have been, including granting security for pre-existing debt,may be set aside (section 239 IA 1986);

• a transaction defrauding creditors (one entered into at an undervalue,the purpose of which was to put assets beyond the reach of otherclaimants against the company, or to otherwise prejudice a person’s in-terests in a claim) may be set aside (section 423 IA 1986); and,

• an extortionate credit transaction (one whose terms require the companyto make grossly exorbitant payments or otherwise contravene ordinaryprinciples of fair trading) may be set aside or varied by the court (section244 IA 1986).

The at risk periods for these voidable transactions vary from between sixmonths and three years.

Also, where insolvency proceedings within the meaning of Council Regu-lation (EC) 1346/2000 on insolvency proceedings are opened against anEnglish company in another EU member state, the EC Regulation providesthat the law of the member state in which those proceedings are openedshall determine whether legal acts detrimental to all creditors are void, void-able or unenforceable, including potential challenges to security. Subject topublic policy exceptions, a judgment by the court of an EU member statein this respect must be recognised and enforced by the English courts.

(ii) Preferential creditors’ rightsCertain preferential debts and unsecured creditors entitled to share in theprescribed part rank ahead of floating charge claims. Where a company hasgranted a floating charge, an administrator, liquidator or receiver must setaside a prescribed part of the floating charge realisations, up to a maximumof £600,000, to be applied towards satisfying unsecured debts.

The categories of preferential debts include employee remuneration, con-tributions to occupational pension schemes and levies on coal and steel production (see schedule 6 of the Insolvency Act 1986 – IA 1986). Someof the claims are limited in value, for example, the limit for remunerationis £800 per employee.

6.3 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? Receivership is available under English law. A secured creditor may be able

to appoint a fixed charge or ordinary receiver under powers contained inthe security document or under the Law of Property Act 1925. Broadly, thetask of a receiver is to take possession or control of the secured assets andrealise them at their best possible value to satisfy the debt owed to the cred-itor who appointed them. Any surplus must be paid to the person next entitled (see 6.2 above).

The holder of a floating charge over the whole or substantially the whole ofthe company’s property created before 15 September 2003 or the holder ofa qualifying floating charge (QFC) to which a statutory exception applies,can appoint an administrative receiver (see 6.1 above). A QFC is one thatstates that paragraph 14 of schedule B1 of the IA 1986 applies to it, or onethat enables the holder to appoint an administrator, an administrative re-ceiver or receiver. The holder must also hold security that together relatesto the whole or substantially the whole of the company’s property, at leastone of which must be a QFC. The charge must also be enforceable.

A QFC holder can appoint an administrator without the need for a courthearing.

A secured creditor may be able to enforce its security by taking possessionof the secured assets and selling them, and then applying the proceeds tosatisfy the debt.

A secured creditor holding a legal mortgage, or, in certain circumstances,an equitable mortgage, may exercise a right of foreclosure once the securedliabilities have become repayable. Foreclosure involves the mortgagor’s rightsin the secured asset being extinguished, and the asset becoming vested inthe mortgagee. The mortgagee is usually required to apply to court for anorder for foreclosure.

In relation to security over financial collateral (cash, security and creditclaims), a secured creditor may be able to enforce directly by appropriatingthe financial collateral (under the Financial Collateral Arrangements (Num-ber 2) Regulations 2003).

6.4 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 should ensure that it has taken all appropriate steps to per-fect its security (for example, registration and giving notice to third partieswhere applicable) and that all the documentation necessary to facilitate enforcement of its security without any further action being required fromthe project company is obtained at the outset (for example, in relation toshare security, requiring original share certificates and blank executed stocktransfer forms).

A project lender should also ensure that it has appropriate step-in rightsunder a direct agreement, which will entitle it to step into the shoes of theproject company upon a default in order to complete the project, or sell itsrights to a third party.

6.5 Does the jurisdiction recognise the concepts of trustees inbankruptcy, receivership, liquidators or similar persons? Trustees in bankruptcy, receivers and liquidators are all recognised conceptsunder English law.


7.1 What, if any, are the restrictions, controls, fees, taxes or othercharges on foreign currency exchange? In the UK, there are no exchange controls or currency regulations.

Different rules apply to individuals and corporations for gains or losses aris-ing from foreign currency exchange. Broadly, for corporations, gains or lossesarising from foreign currency exchange are taxable or relievable in accor-dance with the tax rules that apply to the income, expenditure, asset or

UK


liability on which those differences arise. In general terms, the tax treatmentof the gains or losses follows the accounting treatment of those gains orlosses. For individuals (other than traders), foreign currency is treated as anasset for capital gains tax purposes, so a capital gain or an allowable loss mayarise when non-sterling currency is acquired and sold by a UK resident.

7.2 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? Remittances on investment returns will commonly be in the form of dividends or interest payments.

(a) Dividends: very broadly, a UK company will normally be exempt fromany tax on the receipt of a dividend from a UK as well as a non-UK company, but certain conditions must be satisfied.

Generally, UK withholding taxes do not apply to dividends paid to share-holders. However, by way of exception from the general rule, the dividendspaid by a real estate investment trust are subject to withholding tax at 20%.

(b) Interest: interest payments received by a UK company are charged corporation tax. Interest payments made by UK companies are generallydeductible for corporation tax purposes, though this is subject to a numberof exceptions including the transfer pricing and thin capitalisation rules. Awithholding tax of 20% applies to interest payments made to creditors whoare not within the charge of UK corporation tax, unless a reduction in rateor relief can be obtained under a double tax treaty. There is also an exemp-tion for withholding tax if the interest is payable on an interest-bearing security that is issued by a company and is listed on a recognised stock exchange (the quoted Eurobond exemption).

The UK’s transfer pricing and thin capitalisation rules may apply to receiptsor payments of interest where parties are under common control, or wherethere are finance arrangements in place. The rules require the receipts orpayments of interest to be recomputed for tax purposes as though they arosefrom transactions effected on arm’s length terms. The UK’s debt cap regimemay also apply to restrict the deductibility of UK interest expenses wherethe UK net debt of the group exceeds 75% of the worldwide gross debt ofthe worldwide group.

The UK’s controlled foreign company (CFC) legislation may also, subjectto certain exemptions, apply. This legislation will, in certain circumstances(see 7.3 below), charge UK tax income profits (including interest or premiums on loans or bonds) arising to non-UK group companies that areoperating in low-tax jurisdictions and are controlled by a UK company,whether or not the relevant profits are repatriated to the UK.

7.3 Must project companies repatriate foreign earnings? If so, mustthey be converted to local currency and what further restrictionsexist over their use? There is no requirement to repatriate foreign earnings, although see aboveat 7.2 for comments on the CFC legislation. Recent changes to the UKCFC legislation mean that the legislation is unlikely to apply other thanwhere there is an attempt to artificially divert profits away from the UK.

7.4 May project companies establish and maintain foreign currencyaccounts in other jurisdictions and locally? There are no restrictions on establishment of foreign currency accounts locally or elsewhere.

7.5 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? There are no UK tax incentives specifically targeted at foreign investors. Forindividuals, the UK operates a system known as the remittance basis: indi-viduals resident but not domiciled in the UK are not generally subject toUK tax in respect of income and capital gains arising from a non-UK source,unless and until such income or gains are remitted to the UK. The UK remittance basis rules are perceived as attractive by high net-worth individuals.


8.1 What restrictions exist on bringing in foreign workers,technicians or executives to work on a project? There are no general restrictions or limitations on the use of foreign workers,technicians or executives. However, all foreign employees from outside theEuropean Economic Area (EEA) and Switzerland must comply with the im-migration and visa requirements imposed by the UK Border Agency. Atiered points-based system established in 2008-9 applies to people comingto work or setting themselves up in business in the UK. Under this system,migrants must pass a points assessment before they can get permission toenter or remain in the UK. The points requirements vary depending onwhich of the five tiers the migrant comes under and can reflect the migrant’sability, experience and age.

There are also a number of powerful trade unions in the UK, and companiesmay face scrutiny and criticism if they use foreign workers when UK labouris available.

8.2 What restrictions exist on the importation of project equipment?The UK tax system does not impose restrictions as such on the importationof project equipment. The importation of project equipment may have taxconsequences, the main one being that VAT will be chargeable.

About the authorMartin Kavanagh is a partner in Herbert Smith Freehills' London office.He specialises in energy and infrastructure finance and energy projectdevelopment, and has significant experience acting for corporates, lenders,borrowers, governments and export credit and multilateral agencies,particularly in Africa and other emerging markets.

He has extensive experience in the project finance and projectdevelopment fields, including the full oil and gas value chain, power,transport, hydroelectric and renewable power and mining sectors.

Martin KavanaghPartner, Herbert Smith Freehills

London, UKT: +44 20 7466 2062E: [email protected]: www.herbertsmithfreehills.com


1.1 What types of collateral/security are available?It is customary in a project financing of a project or portfolio of projects locatedwithin the US (a US project financing) that, on the date of financial closing,secured parties receive security interests in substantially all personal and realproperty of the owner of the financed project or portfolio of projects and itssubsidiaries (including, for instance, accounts, equipment, inventory, intellec-tual property, contracts, capital stock and cash), as well as security interests inall of the equity interests in such owner and subsidiaries. Note, however, thatthere are frequently limited exclusions from the collateral (such as, contractsand permits that are not assignable by law and assets for which security interestperfection is unduly cumbersome or expensive relative to asset value).


2.1 How is a security interest in each type of collateral perfectedand how is its priority established?Perfection and priority of security interests in US project financings are primarily governed by, in the case of personal property, the Uniform Com-mercial Code (UCC) in effect in the relevant US state and, in the case ofreal property, the law of the jurisdiction where the real property is located.

For personal property, Article 9 of the UCC permits several methods of per-fection depending on the type of property, such as:

• filing of UCC financing statements is available as a method of perfectionfor all personal property collateral that is subject to Article 9 of the UCC,other than deposit accounts, letter of credit rights and money. For mostdomestic debtors, financing statements are filed in the debtor’s state oforganisation and, for most non-US debtors, Washington, D.C.;

• possession is available as a method of perfection for certificated securities,instruments and tangible chattel paper (and also for goods and money,though uncommon) and is effected by the secured party taking physicalpossession of the collateral;

• control is the only permitted method of perfection for deposit accountsand letter of credit rights and the stronger method of perfection for securities accounts, commodity contracts, uncertificated securities andelectronic chattel paper. It is typically effected by entering into an agree-ment that provides the secured party with control (for UCC purposes)over the collateral.

Perfection of security interests in certain types of personal property (for ex-ample, insurance) is not addressed in the UCC, and other personal property(such as goods covered by certificates of title or intellectual property) mayrequire compliance with other laws.

Security interests in real property are perfected by recording a mortgage ordeed of trust in proper form in the jurisdiction where the real property islocated.

Absent a contractual inter-creditor arrangement to the contrary, the first toproperly perfect a security interest generally has priority, with the caveat thatcertain security interests have priority by law irrespective of whether andwhen perfected (for instance, mechanics’ liens). Note also that, for propertyfor which there are multiple perfection options, a security interest perfectedby possession or control generally has priority over a security interest perfected 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?For personal property, parties in US project financings frequently engage aservice company to search the UCC filings and tax and judgment liens forall relevant entities within all relevant jurisdictions (commonly referred toas a lien search). Lien searches are usually performed shortly before financialclosing of a transaction and allow secured parties to identify, and direct thedebtor to extinguish, intervening security interests on personal property asnecessary.

For real property, parties frequently engage a title insurer to perform titlesearches that show all encumbrances on the relevant real property and issuea title insurance policy (insuring good title to the relevant real property, subject to agreed exceptions) for the benefit of the secured parties.

For intellectual property, parties frequently engage a service company tosearch the registries at the US Patent and Trademark Office and the USCopyright Office.

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

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 taxes and fees payable to perfect a security interest vary depending onthe type and location of collateral. Fees are commonly payable upon the filing or recording of security documentation, and such fees are usually nominal.

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 be the granteeof security interests in collateral and, if necessary, hold physical collateral.In this case, remedies and other actions taken against the collateral are exercised by this agent or trustee (or its designee) at the direction of securedparties holding a specified portion of the voting interests.


3.1 What restrictions, fees and taxes exist on foreign investment inor ownership of a project and related companies?The Exon-Florio Amendment to the Defense Production Act of 1950, asamended by the Foreign Investment and National Security Act of 2007,gives the Committee on Foreign Investment in the United States (Cfius), aUS federal interagency group, jurisdiction over transactions in which a foreign investor acquires control over a US business. More specifically, Cfiusreviews such transactions for their impact on US national security and canrecommend that the President of the US block or suspend any transactionthat impairs US national security (or negotiate mitigation conditions withthe parties to avoid that result).

Foreign investment in a US business may trigger a federal agency reviewbased on the particular industry in which the target US business operates.For example, the US Department of Defense has established procedures toreview and mitigate potential foreign ownership, control, and influence overUS businesses that hold security clearances issued by the US government.

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Kelley Michael Gale, Amy Maloney and Victoria Salem, Latham & Watkins

www.lw.com

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Similarly, the Communications Act of 1934, as amended, limits foreignownership of certain Federal Communications Commission licensees andallows such commission to review whether foreign ownership of a particularlicensee would serve the public interest.

As noted in 5.1, there are restrictions on foreign persons’ ability to acquirerights in certain types of natural resources.

3.2 Do these restrictions also apply to foreign investors or creditorsin the event of foreclosure on the project and related companies?In many cases, yes. Cfius and other industry-specific federal and state agencies may review any transaction through which a foreign person has orcould obtain control of a US business, including through foreclosure.

3.3 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?The US has concluded a number of bilateral and multilateral treaties, including agreements for the promotion and protection of investments andfree trade agreements, which protect foreign investors and their investmentsin the US; for example, the North Atlantic Free Trade Agreement coversCanada, Mexico and the US, and the Dominican Republic-Central AmericaFree Trade Agreement covers Costa Rica, Dominican Republic, El Salvador,Guatemala, Honduras, Nicaragua and the US. These treaties contain specificstandards on the admission and treatment of foreign investors and their investments, including non-discrimination, fair and equitable treatment,protection from expropriation without compensation and the right to arbi-trate disputes with the host state of the investment.

Investment activities in the US do not generally require registration with agovernment authority to benefit under investment treaties.


4.1 Is a submission to a foreign jurisdiction and a waiver ofimmunity effective and enforceable?US federal and state courts generally consider the parties’ agreement to submit a dispute to a foreign jurisdiction as the exclusive forum effectiveand enforceable, unless it is the result of overreaching or unfair use of un-equal bargaining power, or if the foreign jurisdiction would be extremelyinconvenient. Under the Foreign Sovereign Immunities Act, a waiver of sovereign immunity is generally effective and enforceable in the context ofgovernment project development contracts of a commercial nature.

4.2 Must any of the financing or project documents be registered orfiled with any government authority or otherwise comply with legalformalities to be valid or enforceable? For instance, does collateralneed to be notarised?See, the discussion in 2.1 for example.

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?There is no overarching governmental body with authority over US projectfinancings. Different industries are subject to varying levels of regulation bygovernmental bodies at the federal, state and local levels. For example, thedevelopment of a liquefied natural gas export facility in the US requires ap-provals from, inter alia, federal, state and local bodies with authority: (i) toapprove facilities related to the interstate or foreign import, export or trans-mission of gas, oil and power; (ii) to approve exports of gas to foreign coun-tries; (iii) over environmental, health and safety matters; and (iv) overbuilding and zoning permits.

4.4 What government approvals are required in relation toenvironmental concerns for typical project finance transactions?What fees and other charges apply?A typical US project financing requires environmental permits at the federal,state and local levels. For certain projects, the National Environmental PolicyAct requires the preparation of an environmental impact statement. Stateand local jurisdictions may have similar requirements for detailed environ-mental analysis as a condition to the issuance of permits.

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.


5.1 Who has title to natural resources? What rights may privateparties acquire to these resources and what obligations does theholder have? May foreign parties acquire such rights?In the US, title to oil, gas and minerals may be held by federal or state governments or directly by private parties. Surface and mineral estate titlemust be carefully reviewed, as mineral estate title may be separated fromsurface estate title.

There are limitations on the ability of foreign persons to acquire rights innatural resources depending on the type and location of the resource. Forexample, federal law prohibits direct foreign ownership of federal mineralleases.

5.2 What royalties and taxes are payable on the extraction of naturalresources, and are they revenue- or profit-based?Federal leases of natural resources impose a fixed royalty on the resource extracted from each lease, which differs depending on resource type and lo-cation. State and private leases are generally more varied.

There are no broadly imposed federal taxes for the extraction of natural resources. However, specific taxes may exist for certain resources, such ascoal. Natural resource operations are subject to applicable state and federaltaxes (for example, taxes on business profits), in addition to severance taxesassessed by the applicable state for certain types of land.

5.3 What restrictions, fees or taxes exist on the export of naturalresources?Generally, US exports of natural resources require prior approval from therelevant government agencies. For example, exports of natural gas requireapproval from the Department of Energy, and such approval processes varydepending on the importing country’s trade status.

5.4 Can private parties grant security over any such rights in naturalresources, and in the event of enforcement of that security wouldthe local granting body be bound by that security. Would change ofcontrol in the borrower (for example, upon exercise of sharesecurity) trigger a forfeit of those rights?Private parties with direct rights to, or permits or leases to obtain, naturalresources, may grant security interests therein. Perfection of a security interest in direct rights to natural resources is effected by filing an as-ex-tracted collateral financing statement with the jurisdiction in which a mort-gage or deed of trust would be filed. A permit or lease may includerestrictions on direct transfers by, or upstream changes of control of, thepermit or lease holder without the consent of the relevant issuing authorityor lessor.

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6.1 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? Chapters 7 and 11 of the US Bankruptcy Code (the Bankruptcy Code) gov-ern liquidation and reorganisation proceedings, respectively. Immediatelyupon the commencement of a bankruptcy proceeding by a project company,the automatic stay goes into effect, which prevents creditors and other parties in interest from taking most contractual enforcement, collection andforeclosure actions against a debtor or its property.

Creditors are able to protect their interests in a debtor project companythrough the US bankruptcy process. A creditor may request relief from theautomatic stay to take limited specific action against a debtor or its propertyduring bankruptcy, subject to court approval. The Bankruptcy Code alsoprovides for a right of secured creditors to obtain adequate protection fromdiminution in value of collateral due to the conduct of a debtor, deprecia-tion, dissipation or otherwise.

Secured creditors should be aware that the Bankruptcy Code also permits adebtor, under certain circumstances, to grant a security interest that has priority over pre-bankruptcy secured creditors to lenders that provide fi-nancing to the debtor during bankruptcy.

Receivership is discussed in 6.5.

6.2 Are there any preference periods, clawback rights or otherpreferential creditors’ rights with respect to the collateral/security? The Bankruptcy Code allows the invalidation of any transfer under applicable non-bankruptcy law that is avoidable, to any creditor who, onthe date of the filing, could have: (i) extended credit or obtained a securityinterest; or, (ii) been a bona fide purchaser for value of real property.

A debtor may avoid preferences, which are payments made on account ofclaims or the perfection of security interests with respect to previously un-secured claims that are made within 90 days (or up to one year, if to an in-sider) of the bankruptcy, while the debtor was insolvent and that enabledthe creditor to receive more than it would have received if the creditor’s solerecovery had been a distribution in a Chapter 7 bankruptcy.

A debtor may also avoid fraudulent transfers, which are transfers madewithin two years of the bankruptcy filing that are made with the actual intent to hinder, delay or defraud creditors, or where a debtor receives lessthan reasonably equivalent value for the transfer and the debtor is insolvent.

6.3 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?See 6.1 above.

6.4 Outside the context of a bankruptcy proceeding, what stepsshould a project lender take to enforce its rights as a secured partyover the collateral/security? Security documents in US project financings commonly provide that, uponthe occurrence of an event (often an event of default under the financingdocuments), the secured parties (or their agent or trustee) may exercise remedies specified therein (for example, direct application of cash in ac-counts and foreclose on and sell collateral) and remedies available in law orin equity and under the UCC (coupled with the right to terminate out-standing financing commitments and accelerate outstanding indebtedness).

6.5 Does the jurisdiction recognise the concepts of trustees inbankruptcy, receivership, liquidators or similar persons?The US bankruptcy system recognises trustees in bankruptcy, liquidators,receivership and other similar roles. A party in interest may request, or a

bankruptcy court may direct, the appointment of a third party trustee tomanage the debtor’s bankruptcy proceedings, businesses and estate. Receivership is more common for US banks, which cannot file for Chapter7 or Chapter 11 bankruptcy protection.


7.1 What, if any, are the restrictions, controls, fees, taxes or othercharges on foreign currency exchange?The US government generally levies no restrictions or taxes on foreign currency exchange.

7.2 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? A foreign investor may be subject to US federal withholding tax at a rate of30% on dividends and interest, unless a lower income tax treaty rate applies.In the case of interest payments, the portfolio interest exemption may pro-vide a complete exemption from US federal withholding tax on such interestpayments to the foreign investor, provided that, inter alia, the foreign investor is not a bank making a loan in its ordinary course of business.

In addition, certain provisions of the US Internal Revenue Code of 1986,as amended (commonly known as Fatca) may impose a US federal with-holding tax of 30% on withholdable payments to certain foreign financialinstitutions and non-financial foreign entities unless certain conditions aresatisfied or exemptions are applicable. Under the US Department of theTreasury regulations and recent US Internal Revenue Service guidance, with-holding under Fatca generally applies to: (i) payments of US-source interestand dividend income made on or after 1 July 2014; and (ii) gross proceedsfrom the disposition of assets producing US-source interest or dividend in-come on or after 1 January 2017. However, under grandfathering rules,withholding under Fatca generally will not apply to any payment under, orto gross proceeds from the disposition of, a debt obligation outstanding on1 July 2014.

Other restrictions are discussed in 8.2.

7.3 Must project companies repatriate foreign earnings? If so, mustthey be converted to local currency and what further restrictionsexist over their use? The decision to repatriate foreign earnings is specific to each situation, suchas the need for cash to service debt, withholding taxes and potential residualtax upon receipt of a repatriating dividend. US-based multinationals typically do not repatriate unless they can do so without residual US tax(which is dependent upon foreign tax credit calculations).

There is no requirement to convert repatriated funds to US dollars.

7.4 May project companies establish and maintain foreign currencyaccounts in other jurisdictions and locally? While there is no prohibition on a US person’s ability to hold foreign currency accounts locally or in other jurisdictions, where such accounts arelocated outside the US, such persons may be subject to the Internal RevenueService requirement to file a Report of Foreign Bank and Financial Accounts. US persons, residents and entities with signing authority or otherfinancial interests in foreign financial accounts holding more than a threshold amount must declare such accounts by 30 June each year.

7.5 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?Generally, there are no tax incentives provided preferentially to foreign investors. States may impose taxes on the filing or recording of security documentation.

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8.1 What restrictions exist on bringing in foreign workers,technicians or executives to work on a project?US employers are required by the Immigration Reform and Control Act toverify and properly document each new employee’s identity and legal rightto work in a specific position and for that employer, regardless of such em-ployee’s immigration status. Employers are required to obtain, and thereaftermaintain for a specified period of time, a valid form I-9 (establishing theemployee’s right to work in the US) for each new employee. Establishing aforeign national’s legal right to work may include, inter alia, obtaining visasto cover his/her employment in the US. States and municipalities may alsoimpose additional requirements on employers operating in those jurisdictions.

8.2 What restrictions exist on the importation of project equipment?While there is no general licence requirement for US imports, all equipmentand products entering the US must be declared to US Customs and BorderProtection (CBP) and may be subject to customs duties and import fees.Certain categories of imported goods (such as certain defence articles) maybe restricted or subject to additional duties or reporting requirements. Inaddition, the US Department of the Treasury’s Office of Foreign Assets Con-trol maintains a list of countries and entities for which there are importationrestrictions (for instance, Cuba, Iran, Sudan and North Korea), known asthe List of Specially Designated Nationals and Blocked Persons (availableat http://sdnsearch.ofac.treas.gov/).

About the authorKelley Michael Gale is a partner in the San Diego office of Latham &Watkins, and serves as global chair of the firm’s project finance practiceand co-chair for the firm’s air quality and climate change practice. Hispractice centres on the representation of both private and public sectorclients in the development, regulation and financing of renewableenergy projects and capital-intensive infrastructure projects.

Gale also has extensive expertise in the development, redevelopmentand financing of capital-intensive real estate projects.

Kelley Michael GalePartner, Latham & Watkins

San Diego, UST: +1 619 238 2825E: [email protected]: www.lw.com

About the authorAmy Maloney is a partner in the New York office of Latham &Watkins, where she is a member of the project development and financepractice in the finance department.

Maloney represents commercial and investment banks, insurancecompanies, investment firms and other financial institutions, andsponsors and developers in connection with the development,construction, operation and financing of domestic and cross-borderenergy and infrastructure projects.

Amy MaloneyPartner, Latham & Watkins

New York, UST: +1 212 906 2994E: [email protected]: www.lw.com

About the authorVictoria Salem is an associate in the London office of Latham &Watkins and a member of the firm’s finance department.

Salem’s practice focuses on the representation of sponsors, developersand borrowers, and commercial and investment banks, investment firmsand other financial institutions in connection with the development,construction and financing of mining and metals and energy projects,and M&A involving mining and metals and energy assets.

Victoria SalemAssociate, Latham & Watkins

London, UKT: +44 20 7710 1050E: [email protected]: www.lw.com

This communication is from Euromoney Trading, a company registered in England and Wales under company number 954730 with registered offi ce at Nestor House, Playhouse Yard, London EC4V 5EX, UK.

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VIETNAM



1.1 What types of collateral/security are available? (a) Movable property: including offshore and onshore bank accounts, receivables, contractual rights, and equipment, machinery, and inventory.

(b) Immovable property:Land use rights and assets attached to land may only be mortgaged to Vietnamese credit institutions. Authorities have consistently interpreted this asa prohibition of foreign lenders taking security interests over immovable property.

A Vietnamese branch of a foreign bank is treated as a Vietnamese credit insti-tution. In the context of major infrastructure projects, such as thermal powerplants, the project company will typically mortgage land use rights and assetsattached to land to a Vietnamese branch of a foreign bank within the syndicateon behalf of the lenders. Lenders will obtain comfort on this structure througha special approval of the office of the Prime Minister supported by a legal opin-ion issued by the Ministry of Justice (MOJ). The government is reluctant togrant 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 such ascharges and collateral assignments do not exist in Vietnam, though these areused in financings to grant security over contractual rights governed by foreignlaw. The two most prevalent types of security interests used with respect to financings in Vietnam are the pledge and the mortgage.


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

While registration is recommended to put third parties on notice, registrationof security interests over movable property with the National Registry of Secured Transactions (NRAST), an agency under the MOJ, is generally notmandatory. Registration is required when a single asset is used to secure multiple obligations.

Priority between creditors is generally established under a first in line principle.One important exception is when a deferred sales contract is registered withthe NRAST within 15 days of execution. In this case, the vendor will have afirst priority security interest in the assets subject to the sales contract, regardlessof whether another creditor has previously filed a registration statement cover-ing 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 to

ensure that there are no existing security interests against the same collateral.

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

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? Fees associated with registering mortgages over immovable and movable property 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?Vietnamese law does not generally recognise agency structures where a Vietnamese bank holds security over immovable property on behalf of foreignlenders. The security interest extends up to the amount of the onshore lendingtranche advanced by the secured party of record, and the surplus of enforcement proceeds is payable to the borrower.

The structure may offer some benefits to foreign lenders, as it provides a legalbasis to foreclose on the property. Other security structures, such as equity andaccount mortgages in favour of the foreign lender, would still need to complement the security arrangements.


3.1 What restrictions, fees and taxes exist on foreign investment in orownership of a project and related companies?A foreign investor is required to apply for an investment certificate from the licensing authority to identify the equity holders in the project company, itscapital structure, and key information about the project, which is usually theDepartment of Planning and Investment (DPI) of the province where the project is located The licensing authority may also be the Ministry of Planningand Investment, and for most investments in the oil and gas sector, the licensingauthority is the Ministry of Industry and Trade (MOIT). Project sponsors mayneed to fulfil one or more of the requirements below:

• in-principle approval of the National Assembly. Certain projects of nationalimportance require approval of the National Assembly, such as projects val-ued at VND35 trillion ($1.7 billion) or more of which the state capital isVND11 trillion or more;

• in-principle approval by the Prime Minister. This approval is required forprojects in key sectors, including airports, national ports, and oil and gasexploration and production;

• conditional sectors, including banking and mining, must meet sector-spe-cific conditions, for foreign investors; and,

• appraised projects - projects of over VND300 billion must be appraised bythe relevant licensing authority. Criteria may include the requirement for afeasibility study and environmental impact assessment (EIA) report.

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

Nathan Dodd, David Harrison and Quynh-Anh Lam, Mayer Brown JSM

www.mayerbrown.com

VIETNAM


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

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

3.2 Do these restrictions also apply to foreign investors or creditors inthe event of foreclosure on the project and related companies?If foreign creditors enforce security over equity interests by taking ownershipof equity, or if they sell equity to another foreign investor, the regulatory andappraisal requirements described in 3.1 apply.

The build-operate-transfer (BOT) regulations allow for step-in rights by lendersin BOT projects.

3.3 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 relief fromthe regulatory requirements on approving projects and equity transfers.


4.1 Is a submission to a foreign jurisdiction and a waiver of immunityeffective and enforceable?For disputes between a government authority and foreign investors or the proj-ect company, the parties may provide in the concession agreement and projectdocuments that such disputes may be referred to international arbitration.

Vietnamese courts will only consider recognition of judgments issued by courtsof countries that have entered into judicial agreements with Vietnam, generallywith former or current communist states, or on a reciprocal basis. In practice,very few judgments issued by foreign courts have been recognised and enforcedin Vietnam.

Vietnam acceded to the 1958 New York Convention on the Recognition andEnforcement of Foreign Arbitral Awards (the NY Convention) with the reser-vation that Vietnam will apply the NY Convention only to disputes arisingfrom legal relationships considered commercial under Vietnamese law. In practice, few foreign arbitral awards have been enforced in Vietnam.

A state and its assets benefit from immunity which may be restricted , or absolute.

Vietnamese law does not define the limits of sovereign immunity. When foreigninvestors enter into contracts with a government authority or a state-ownedenterprise (SOE), that government authority or SOE should acknowledge thatthe arrangement is a commercial one and waive its right to sovereign immunity.However, the enforceability of these waivers is unclear.

4.2 Must any of the financing or project documents be registered orfiled with any government authority or otherwise comply with legalformalities to be valid or enforceable? For instance, does collateralneed to be notarised?See Sections 2 and 7. Security documentation over immovable property requires notarisation.

As discussed in Section 7, loans provided by foreign lenders with tenors exceeding 12 months must be registered with the State Bank of Vietnam (SBV).

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 projects ofnational importance. See 3.1.

MOIT is responsible for power, oil and gas, energy, and other important infrastructure projects, and the Ministry of Transportation (MOT) is respon-sible for roads, airports and other transportation projects. The Ministry of Nat-ural Resources and Environment (MONRE) is in charge of land, water, mineralresources, other natural resources, and environmental matters. MONRE oftenacts through the local Department of Natural Resources and Environment(DONRE).

Local people’s committees and other government authorities have the authorityto issue the investment certificate (and amendments) for most projects, includ-ing those which have been approved by the Prime Minister. The boards ofmanagement of industrial zones and export processing zones are responsiblefor issuing investment certificates and amendments to projects located in anindustrial zone or an export processing zone.

4.4 What government approvals are required in relation toenvironmental concerns for typical project finance transactions? Whatfees and other charges apply?In a typical project finance transaction, the investors must prepare an EIA report and obtain the approval of MONRE (or the relevant DONRE). A feeis payable to MONRE or the relevant DONRE for review of the EIA. Thesefees range from VND6 million to VND96 million, depending on the projecttype and size.


5.1 Who has title to natural resources? What rights may privateparties acquire to these resources and what obligations does theholder have? May foreign parties acquire such rights?Natural resources belong to the people. Private parties may acquire the rightto use the same and pay relevant use fees or taxes to the government, unless anexemption applies.

Foreign-invested companies will enter into a land lease agreement with the relevant government authority. Certain projects, such as those developed underthe BOT or build-transfer-own (BTO) frameworks, are exempt from landrental for the entire duration of the project.

Foreign investors may obtain the right to explore or extract minerals by apply-ing to the government authority for a licence. A licence to explore mineral resources may be granted for up to 48 months over a specific land area, subjectto extension for another 48 months, this does not guarantee the holder willobtain a mineral extracting licence.

Foreign investors may apply for a mineral extracting licence, which may be fora duration of up to 30 years, renewable for up to another 20 years. Foreign investors may obtain the right to explore or produce oil and gas by enteringinto a production sharing contract (PSC) with the government. This can lastup to 25 years if the exploration and production area is in an area with normaleconomic and social conditions, or 30 years for a project in an area where investment is encouraged. The exploration phase is five or seven years, respec-tively, and is inclusive in the PSC duration. The exploration phase could beextended for two years, or longer with Prime Ministerial approval.

5.2 What royalties and taxes are payable on the extraction of naturalresources, and are they revenue- or profit-based?Royalty tax is revenue-based, and varies from one industry to another. For example, petroleum extraction applies rates of 7% to 29%; minerals extractionrange from 10% to 15%.

Environmental protection fees are payable by companies that extract naturalresources. For crude oil and gas extraction the fee is VND100,000 per tonneor VND50,000 per cubic metre. Fees for mineral extraction vary. In additionto the above-mentioned fees, investors in the oil and gas sector are required toestablish and pay a deposit into a reserve fund to address prospective costs re-lated to abandonment. The deposit amount is calculated based on the total es-timated cost for abandonment, and is payable annually.

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Similarly, investors in the mining sector are required to pay a deposit into a reserve fund for environmental rehabilitation upon closure of the mine.

5.3 What restrictions, fees or taxes exist on the export of naturalresources?The export of unprocessed ores for many types of minerals (except for crudeoil) is prohibited.

The export of natural resources is also subject to an export tax. The export taxrate differs from one type of mineral to another, and the rates may change fromtime to time.

5.4 Can private parties grant security over any such rights in naturalresources, and in the event of enforcement of that security would thelocal granting body be bound by that security. Would change ofcontrol in the borrower (for example, upon exercise of share security)trigger a forfeit of those rights?Private parties may grant security over their mining rights. See Section 3.Prospective creditors should address this issue in a direct agreement with thegovernment authority.


6.1 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 a court’s acceptance of an insolvency petition, a secured creditor’s abilityto enforce its rights is subject to a stay. Only the bankruptcy judge may permitenforcement against the security while the stay is in effect. The stay is lifted bythe court upon entry of a liquidation order.

6.2 Are there any preference periods, clawback rights or otherpreferential creditors’ rights with respect to the collateral/security? Vietnam is considering a new draft bankruptcy law that would amend thebankruptcy process in several key respects.

Certain actions of the debtor may be subject to a three-month preference periodfrom the date on which the judge accepts a bankruptcy petition, including:settling a bilateral contract where the obligations of the bankrupt debtor exceedthose of the counterparty; mortgaging or pledging assets; or conducting othertransactions designed to dispose of assets. These transactions may be challengedby an unsecured creditor or the liquidation committee (see 6.5).

Before unsecured creditors may be paid in a liquidation, other categories ofcreditors and debts must be paid first, namely the state (if it has financially supported the debtor’s failed reorganisation attempts), bankruptcy fees payableto the court, unpaid wages and severance payable to employees, and social insurance payments to the government.

6.3 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 proceed-ings. The party holding collateral is first required to deliver the collateral to thesecured party upon prior reasonable advance notice. If it fails to do so beforethe expiry of the time set out in the notice, the secured party may seize theasset or may refer the matter to the courts. In practice, it is difficult for foreignlenders to enforce security without a court order.

6.4 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 a noticeof enforcement with the NRAST. This notice sets out information such as theassets to be enforced against, the reason for enforcement, and the method ofenforcement. With respect to both movable and immovable property, the prop-erty must be disposed of through an auction, unless otherwise agreed by theparties. Security agreements should clearly set forth various options underwhich lenders can enforce the security.

6.5 Does the jurisdiction recognise the concepts of trustees inbankruptcy, receivership, liquidators or similar persons? A court-established liquidation committee plays a key role in the proceedings.This committee’s powers include supervising the debtor’s use of assets duringthe proceedings, proposing emergency measures to the judge to preserve suchassets, and identifying transactions that violate the preference period.

Under the existing version of the draft bankruptcy law, the functions exercisedby the bankruptcy committee would be carried out by the judge, a judicial enforcement officer and an executor.


7.1 What, if any, are the restrictions, controls, fees, taxes or othercharges on foreign currency exchange? Vietnam dong is not a freely convertible currency. Its export is strictly regulatedby the SBV. Loans extended onshore to Vietnamese enterprises from foreignlenders must be registered with the SBV prior to drawdown. While the SBV isrequired to register a foreign loan within 15 business days, in practice, it maytake up to a month. There are no government taxes on currency conversion,though banks will impose customary charges.

7.2 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? In order to issue offshore bonds, an entity is required to have been in existencefor three years. As project companies are unlikely to fulfil this requirement,bonds are unlikely to be a source of international financing for projects underthe existing legal framework.

Investment returns may be remitted offshore either through the sale of equityor through dividends.

See 7.1.

7.3 Must project companies repatriate foreign earnings? If so, mustthey be converted to local currency and what further restrictions existover their use? A project company in Vietnam will likely not have earnings in foreign currency.

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

Major infrastructure projects may benefit from a government guarantee of avail-ability of foreign currency. Historically, thermal power projects developed underthe BOT model have benefitted from such provisions. Under Official Letter1604 of the Prime Minister, 12 September 2011 (OC 1604), the guarantee offoreign currency availability is limited to 30% of the project company’s turnover.

7.4 May project companies establish and maintain foreign currencyaccounts in other jurisdictions and locally? A project company is permitted to open foreign currency accounts onshoreprovided that the funds are used for legal purposes under Vietnamese law, suchas payment for imported goods, services, or equipment, and salary for foreignemployees. Vietnamese legal entities need permission from the SBV to openoffshore accounts, such as a debt service reserve account.

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Generally, the flow of funds of major project financings will be more complexthan a strict reading of Vietnamese law permits. Consequently, lenders may require the project company to seek additional legal comfort on the enforce-ability of these structures in the form of a government guarantee or a legal opin-ion from the MOJ.

7.5 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, and exemptions or discounts on land use fees (see Section 5.3).

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 again depreciation.Thermal BOT projects are entitled to specific provisions of government, guar-antees which historically have been difficult to negotiate, such as foreign currency availability and performance guarantees of SOEs that are 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 BTO projects to those that operate accordingto a public private partnership model.


8.1 What restrictions exist on bringing in foreign workers, techniciansor executives to work on a project?Vietnamese entities must fill at least 20% of management positions throughlocal hires, provided that foreign-invested companies may have at least threeforeigners in management positions.

Foreigners must obtain a work permit to work in Vietnam, unless they qualifyfor an exemption, such as intra-corporate secondees. Each work permit is validfor two years, and may be renewed multiple times.

Only foreign executives and technicians may qualify for a work permit.

8.2 What restrictions exist on the importation of project equipment?Most goods may be imported into Vietnam to form the fixed assets of a project,with the exception of prohibited goods such as weapons, certain types of second-hand consumer goods, right-hand-drive motor vehicles, and productscontaining asbestos and certain toxic chemicals.

About the authorNathan Dodd is head of Mayer Brown JSM’s global projects group insoutheast Asia. Dodd is a highly experienced projects and infrastructurelawyer with more than 14 years’ experience in the development andfinance side of projects in Asia. Based in Singapore since 1999, Doddhas extensive experience in energy, natural resources, infrastructuredevelopment and joint ventures. He was named a leading lawyer inproject finance in IFLR1000 2014. “Nathan Dodd is noted for his“exemplary legal service”. One client says he would not consider anyother foreign counsel” (Asialaw).

Nathan Dodd Partner, Mayer Brown JSM

Singapore, Republic of SingaporeT: +65 6327 0235E: [email protected]: www.mayerbrown.com

About the authorDavid Harrison is a consultant and a member of the firm’s globalprojects group. He was named a rising star lawyer in Vietnam inIFLR1000 2014. Harrison has practised in both New York andVietnam, and has advised multilateral and commercial lenders andagents on a broad range of project financings, innovative structuredfinancings (including establishing collateralised loan and debtobligations), secured and subordinated credit facilities extended tobanks and corporations in Vietnam and emerging markets such asCambodia, Philippines, Mongolia and Sri Lanka. He speaksVietnamese, Spanish, and French.

David HarrisonLegal professional, Mayer Brown JSM

Ho Chi Minh City, VietnamT: +84 8 3513 0310E: [email protected]: www.mayerbrown.com

About the authorQuynh-Anh Lam is a consultant and a member of the firm’s globalprojects group. Lam is a US-qualified lawyer, and has substantialexperience advising foreign investors, project developers andinternational financers. Her core expertise is in energy and naturalresources related projects, infrastructure and M&A work. Herexperience spans domestic projects as well as cross-border transactions,in both Europe and Asia.

Quynh-Anh Lam Legal professional, Mayer Brown JSM

Ho Chi Minh City, VietnamT: +84 8 3513 0315E: [email protected]: www.mayerbrown.com

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