Project finance requires careful analysis and structuring of a wide variety of risks. This completely updated third edition addresses these risks and their resolution. [PDF] Download [PDF] The Law Business of International Project Finance Scott L. Hoffman PreOrder ePUB download Simple Step to Read and. The Role of Legal Advisors in Project Finance Deals. 64 . scale, high-risk domestic and international business ventures. This is usually.
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The Law and Business of International Project Finance. A Resource for . PDF; Export citation CHAPTER ONE - AN INTRODUCTION TO PROJECT FINANCE. Keywords: Project Finance, International Investment, Legal Risk, Mitigation, echecs16.info 12 . Approaching Legal Issues in a Project Finance Transaction. 3. 2. Project .. He currently serves on the Board of Directors of the Columbia Business Law Review 20 pdf>.
You all took contracts as first year students, so how is the law of obligations different or the same? Lesguillons, Frustration, Force majeure, Imprevision, Wegfall der Geschaeftsgrundlage, 5 Droit et Practique du Commerce International Read Lesguillons as closer treatment of some of the changed circumstances doctrines under Civil and Common Law systems, illustrating the idea that the closer you look the more you see that the law of contract and the law of obligations are not exactly the same thing. Read in word document form entitled Contract Frustration and the Civil Law in Asia: Understanding Changed Circumstances and Financings as entailing the practical application of the above the last time projects blew up post Asian Financial Crisis. How do you answer the question regarding the above in the international project finance context where the custom is that often international financial jurisdiction common law will apply to international financing agreements, but things like operational contracts would typically be subject rather to local Civil Law versions of the law of obligations because they concern operations on the ground in country X, rather than securities sold or bank loans booked in an international financial center? What is the effect of limitations on choice of law? How would these differences find expression in things like the terms of the Mecklenburg complex of contracts listed in the offering circular annex? Can our class members with some experience in China tell us what the Unified Chinese Contract Law is based upon, and whether it makes a difference?
This is not applicable in our jurisdiction. Enforcement of Security 4. Mortgagors, in a bid to stop mortgagees from enforcing the security or auctioning the same, always institute actions against the mortgagees for a declaration that the mortgagors do not owe the mortgagees up to the amount being claimed by the latter. In a situation of this sort, the position of the law is that the action is lacking in merit and one without any reasonable cause.
Even though mortgagors who defaulted in the settlement of their mortgage debts may not be entitled by law to restrain the mortgagees from exercising their right of sale, the mortgagors, by their resort to litigation, may still succeed in delaying the enforcement of the security knowing full well that enforcement cannot be carried out when there is a pending suit. There are no restrictions except where a court makes an order to stop enforcement.
Bankruptcy and Restructuring Proceedings 5. Once a bankruptcy proceeding is initiated whether by the debtor or the creditor , the project lender has to suspend the enforcement of his right as a secured party over the security. C20, Laws of the Federation of Nigeria LFN , renders void unless the court orders otherwise the disposition of the property of a company that is under winding-up by the court.
Section of CAMA further provides that where a company is being wound up by the court, any attachment, sequestration, distress or execution put in force against the estate or effects of the company after the commencement of the winding-up shall be void. First and foremost, it is clear from section of CAMA that in the winding-up of an insolvent company registered in Nigeria the same rules prevail with regard to the respective rights of secured and unsecured creditors and to debts provable and so on as are in force for the time being under the law of bankruptcy in Nigeria with respect to estates of persons adjudged bankrupt; and all persons who, in any such case, would be entitled to prove for and receive dividends out of the assets of the company are at liberty to come in under the winding-up and make such claims against the company as they respectively are entitled to.
Section 37 of the Bankruptcy Act makes a provision for preferential claims in the case of apprenticeship, meaning that an apprentice is a preferential creditor in the winding-up of an insolvent company registered in Nigeria.
Furthermore, by section of CAMA, preference periods, drawback rights and other acts relating to the security, such as mortgage, execution and so on, which would, if done by or against an individual, be deemed in his bankruptcy a fraudulent preference, shall, if made or done by or against a company, be deemed, in the event of its being wound-up, a fraudulent preference of its creditors and be invalid accordingly.
Section of CAMA only makes provisions for preferential payments in priority to all other debts of a company in winding-up. These debts include: a. The applicable legislation is the legislation that created such entities and other legislation that may be passed by the National Assembly in relation to the entities.
Other applicable laws include the judgments of courts of competent jurisdiction. Even though schemes of arrangement and compromise under sections and of CAMA and sections — of the Investments and Securities Act are available to a creditor in an enforcement bid, the creditor cannot seize the assets of the project company if the latter chooses not to be bound by the scheme of arrangement or compromise agreed upon.
Seizing the assets of the project company amounts to self-help which is condemnable by law. A company is a separate legal entity distinct from its directors and the latter, generally, cannot be held liable if the company continues to trade whilst in financial difficulties. However, from section of CAMA, if the company is in the course of winding-up and it appears that any part of its business has been carried on in a reckless manner or with intent to defraud creditors for any fraudulent purpose, the court, on the application of the Official Receiver, or the liquidator or any creditor or contributory of the company, may, if it thinks proper to do so, declare that any persons, including the directors, who were knowingly parties to the carrying on of the business in the manner aforesaid shall be personally responsible, without any limitation of liability for all or any of the debts or other liabilities of the company.
Also, from section of CAMA, officers, including directors, of a company being wound up may be held guilty if, with intent to defraud or deceive any person, they destroy, mutilate, alter or falsify any books, papers or securities belonging to the company.
Foreign Investment and Ownership Restrictions 6. According to section 54 of CAMA, a foreign company intending to carry on business in Nigeria, except where granted an exemption, must take steps to obtain incorporation as a separate entity in Nigeria and until so incorporated the foreign company will not have a place of business in Nigeria for any purpose other than for the receipt of notice and other documents as matters preliminary to incorporation.
Furthermore, the Nigerian law, specifically the National Office for Technology Acquisition and Promotion Act, requires registration with the National Office for Technology Acquisition and Promotion of all contracts and agreements for the transfer of foreign technology to Nigerian partners.
The taxes payable by a foreign company include companies income tax, withholding tax, value-added tax and education tax. We are not aware of any bilateral investment treaties that provide protection from restrictions.
Are any forms of investment specially protected?
Project companies, as per section 25 2 of the Act, are only to be acquired if their acquisition is in the national interest or for a public purpose and under a law which makes provision for: a. The relevant Government agencies and departments with authority over projects in the typical projects sectors include: a. Nigerian Communications Commission: granting licences to companies to operate telecommunication services. N97, LFN Department of Petroleum Resources: granting licences to construct or operate refineries.
Section 2 of the Petroleum Act, Cap. P10, LFN NNPC: granting and issuing permits and licences for all activities connected with petroleum exploration, refinery, storage, marketing, transportation and distribution.
N, LFN Nigerian Electricity Regulatory Commission: granting licences for electricity generating, electricity transmission, system operation, electricity distribution, or trading in electricity in Nigeria.
E7, LFN Infrastructure Concession Regulatory Commission: ensuring the efficient execution of any concession agreement or contract entered into by the Government, amongst other things. I25A, LFN The Infrastructure Concession Regulatory Commission, under the Infrastructure Concession Regulatory Commission Establishment Act, is required to take custody of every concession agreement made under the Act and monitor compliance with the terms and conditions of such agreement.
Also, the National Office for Technology Acquisition and Promotion Act requires registration with the National Office for Technology Acquisition and Promotion of all contracts and agreements for the transfer of foreign technology to Nigerian partners. See questions 2. Yes, a licence is required. By section 1 of the Land Use Act , all land comprised in the territory of each State of the Federation is vested in the Governor of that State and such land is to be held in trust and administered for the use and common benefit of all Nigerians.
The Governor of each State of the Federation has the power to grant Statutory Right of Occupancy to any person who is interested in being allocated land in the urban area of the State and such Statutory Right of Occupancy is evidenced by a Certificate of Occupancy duly issued by the Governor. M12, LFN , no person is allowed to prospect or conduct mining operations without holding a licence or lease granted by the Minister. Also, the Department of Petroleum Resources is empowered to grant a licence to construct or operate a refinery section 2 of the Petroleum Act, Cap.
The NNPC is to grant and issue permits and licences for all activities connected with petroleum exploration, refinery, storage, marketing, transportation and distribution section 10 of the NNPC Act, Cap. Furthermore, many States in the Federation have laws that prescribe that written approval of the Governor must be obtained by an alien before acquiring an interest or right over land situated and lying in the State.
As to the question of whether such a licence can be held by a foreign entity, a licence can be held by a foreign entity if the foreign entity is incorporated in Nigeria.
Royalties are payable on the extradition or export of natural resources. Apart from the taxes listed in question 6. F34, LFN , the transactions in respect of which foreign currency is being exchanged must be an eligible transaction that is adequately supported by appropriate documentation. Investment in any enterprise with foreign currency or capital imported into Nigeria is done through an Authorised Dealer and is to be converted into Naira in the Autonomous Foreign Exchange Market pursuant to section 15 1 of the Foreign Exchange Monitoring And Miscellaneous Provisions Act.
The Authorised Dealer is by law required to issue a certificate of capital importation to the investor within 24 hours of the foreign currency or capital importation. The Authorised Dealer is also, by section 15 2 of the Act, required to make within 48 hours thereafter returns to the Central Bank of Nigeria giving such information as the Central Bank may from time to time require. As opposed to Finance researchers, Management scholars have predominantly addressed the hidden, ex-post cost of PF.
Their work has provided important explanations as to why project fail, or suffer from enormous delays and cost-overruns, despite optimal financial structuring. As such, Management scholarship provides valuable complements to financial research which has focused mostly on the benefits of a-priori structuring and less on the ex-post costs.
Among all three disciplines, IB research has appreciated the empirical benefits of PF to the least extent.
This is surprising since the cross-border nature and high risk of PF provide clear IB implications. Early works by Lyles and Steensma mostly address intercultural problems in the acquisition of projects and remain on a rather conceptual level. Much later, in , Ramamurti and Doh introduced PF as an important strategic tool to mitigate host-country risks international investments Doh and Ramamurti ; Ramamurti and Doh Focusing strongly on obsolescing bargaining between the host-country government and the investing MNCs, they make a compelling case for PF as an alternative to more prominently advocated strategies, such as local government participation or joint-ventures with local partners.
Using large-sample, quantitative analysis, this work combines agency and institutional theory to analyze a number of core IB strategies such as ownership structure, international experience and liability of foreignness. More importantly, however, their work makes a strong case for the role of capital structure in mitigating investment risk of a specific investment; a strategic instrument that had not been sufficiently considered in IB scholarship before. Building on this work, Sawant provided further empirical evidence on PF as a particularly effective entry mode in situations of high political risk and obsolescing bargaining.
Comparing corporate investments with PF investments, he established a direct link between country-level risk and the propensity to use PF. However, they fell short of a holistic framework that included other benefits of PF like contractual risk management.
Accordingly, the use of PF allows investing MNCs to more efficiently diversify host-country risk, because of higher debt capacity and risk isolation. Using tailored capital structure, firms can share risks, tailor incentives. Also, PF provides instruments to address specific sources of risk with contractual instruments e. Finally, the cooperative structure of the investment allows sponsoring MNCs to create a strong consortium that collectively mitigates political risk.
The empirical analysis illustrates that PFs use a myriad of risk-management strategies that extends beyond the traditional repertoire of IB strategies. Open image in new window Fig. The graph includes PF publications in min.
Dotted bubbles indicate Management, dark shaded bubbles IB and black bubbles Finance related publications. The horizontal axis plots annual citation scores.
Asterisks indicate that citation count was truncated to 30 to allow for better illustration.
Source: Thompson Reuters Web of Science In sum, IB research has made late advances in recognizing PF as an efficient entry mode for large investments in high risk environments. In particular, it has highlighted the possibility of addressing the obsolescing bargaining problem. Essentially, PF can be used by MNCs as a substitute for high-control entry modes that require extensive investments in the host country. As a result, they also carry substantial downside risk.
In a next step, I use this reviewed evidence to derive theoretical implications of PF for the most common theories in the fields of Finance, Management and IB.
However, the theoretical implications that result from PF have not been explicitly outlined, especially for the field of IB.
The two research streams have evolved in isolation without mutual acknowledgement of the valuable insights of the other. In the following section, I analyze the phenomenon of PF from both perspectives and derive important theoretical implications. While the focus of the analysis is on Management and IB theory, I begin the review with interdisciplinary and financial perspectives on PF.
The multi-party nature makes PF ideal research sites for multi-layered agency problems Farrell Agency costs occur on several levels: between the sponsoring firms, between the creditors of the project, between these two groups and ultimately between the project and its local stakeholders.
Finance theory has been very optimistic about the agency advantages of PF, based on the assumption that the separation of the project allows for optimization of financial incentives.
Brealey et al.