Global Project Finance Guide 2023 Compressed

Ergun Publication Series: Global Legal Guides
GLOBAL
PROJECT FINANCE
GUIDE
2023
ERGUNBOOKS
Global Project Finance Guide 2023
GLOBAL
PROJECT FINANCE
GUIDE
2023
Edited by
Dr. Çağdaş Evrim Ergün

Burcu Baltacıoğlu
Pelin Ecevit
Tuğba Aksoy Bozkurt
Melis Kaim
1
Ergun Books (UK) Limited

Editors
Burcu Baltacıoğlu
Pelin Ecevit
Tuğba Aksoy Bozkurt
Melis Kaim
Published by Ergun Books (UK) Limited
284 Chase Road, A Block 2nd Floor, London
United Kingdom, N14 6HF
ISBN: 978-1-7394015-0-4 (Hardback)
ISBN: 978-1-7394015-1-1 (e-book)
© Ergun Books (UK) limited
All rights reserved. No part of this publication may be reproduced or transmitted in any
form or by any means, mechanical, photocopying, recording or otherwise, without the
prior written permission of the publisher. Due to the general nature of its contents, this
publication should not be regarded as legal advice. The Publisher, Editors and Authors
makes no representation or warranty as to, and assume no responsibility for, the accuracy
or completeness of the information contained herein.
2
Contents

FOREWORD................................................................................................................................................. 5
1. ARGENTINA ................................................................................................................................................ 7
MARVAL, O’FARRELL & MAIRAL
2. BANGLADESH...........................................................................................................................................15
DOULAH & DOULAH
3. BOSNIA AND HERZEGOVINA...............................................................................................................29
MARIĆ & CO
4. BRASIL.........................................................................................................................................................37
CESCON BARRIEU
5. CROATIA......................................................................................................................................................53
WOLF THEISS
6. DENMARK...................................................................................................................................................63
GORRISSEN FEDERSPIEL
7. FRANCE.......................................................................................................................................................75
WILLKIE FARR & GALLAGHER LLP
8. GIBRALTAR.................................................................................................................................................83
HASSANS
9. HUNGARY...................................................................................................................................................91
DENTONS
10. INDIA............................................................................................................................................................95
JSA ADVOCATES & SOLICITORS
11. IVORY COAST......................................................................................................................................... 113
GENI & KEBE
12. KAZAKHSTAN......................................................................................................................................... 127
GRATA
13. KYRGYZSTAN.......................................................................................................................................... 139
GRATA
14. LIBYA......................................................................................................................................................... 151
TUMI LAW FIRM
15. NETHERLANDS...................................................................................................................................... 155
ORANGE CLOVER
16. NIGERIA.................................................................................................................................................... 159
BLOOMFIELD LAW
3
17. QATAR....................................................................................................................................................... 167

SULTAN AL-ABDULLA & PARTNERS
18. ROMANIA................................................................................................................................................ 175
ȚUCA ZBÂRCEA & ASOCIAȚII
19. SENEGAL.................................................................................................................................................. 181
GENI & KEBE
20. TAJIKISTAN.............................................................................................................................................. 191
GRATA
21. TÜRKİYE.................................................................................................................................................... 197
ERGÜN AVUKATLIK BÜROSU
22. TURKMENISTAN.................................................................................................................................... 209
CENTIL LAW
23. UNITED ARAB EMIRATES.................................................................................................................... 215
GREENBERG TRAURIG, LLP
24. UNITED KINGDOM............................................................................................................................... 227
ASHURST LLP
25. UKRAINE.................................................................................................................................................. 239
INTEGRITES
26. UZBEKISTAN........................................................................................................................................... 255
CENTIL LAW
4
Foreword
Over the past years, there has been a significant rise in the number of players in the global
project finance markets, as lenders and sponsors from diverse regions across the globe
have entered the fray, and such trend rendered the knowledge about the global practices
of project finance more crucial than ever.
With this motivation, we are delighted to present the Global Project Finance Guide 2023,
which includes a standardized questionnaire prepared by the editors and answered by
highly experienced project finance lawyers worldwide.
The Guide aims to offer its readers a practical summary of the laws and practices governing
project finance in several jurisdictions across the globe. It provides an overview of the
legislation and international treaties governing the project finance and highlights the
security interests, incentives and restrictions related to project finance in each jurisdiction.
The Guide also addresses certain technical areas related to project finance, such as
taxation, environment and insurance, sheds light on financing Public-Private Partnership
(PPP) projects, and discusses issues related to jurisdiction, immunity waivers, trends and
projections in the field of project finance.
We extend our appreciation to all the authors of this Guide, who were chosen for their
acknowledged expertise in this field.
Ankara, May 2023
5
ARGENTINA
MARVAL, O’FARRELL & MAIRAL
Pablo Gayol Gonzalo Santamaria Juan Pablo Lentino

Partner Partner Associate
pg@marval.com gsa@marval.com jple@marval.com
A. Overview Law (Law N° 24,065), Renewable Energy

Law (Law N° 26,190) and Information
1. What is the main legislation and Technology and Communications (Law N°
international treaties governing the 27,078), among other.
project financing in your jurisdiction?
Argentina entered into more than 50
The main legal framework is the Argentine Bilateral Investment Treaties (“BIT”) and
Civil and Commercial Code (“CCC”), which signed the Convention on the Recognition
regulates, among others, the law on and Enforcement of Foreign Arbitral
property, real estate, obligations, contracts, Awards. Argentina’s BITs typically grant
trust and tort. In addition to the CCC, there foreign investors different guarantees,
are certain special laws that are relevant for including fair and equitable treatment,
structuring a project financing, such as the treatment no less favorable than that
Public-Private Partnership (Law N° 27,328), offered to nationals (national treatment),
protection against expropriation unless
Bankruptcy Law (Law N° 24,522), Capital
it is for a public purpose and with prior
Markets (Law N° 26, 831) and the Registered
compensation; most-favored-nation
Pledge Law (Decree 897/95). treatment, obligation to comply with state
In structuring the project financing it is engagements (umbrella clauses, or similar
also important to consider the specific engagements to grant the best local or BIT
regulations on the industry and sector in treatment, etc.).
which the project will be carried out. Laws 2. How mature is the project finance
regulating industries and sectors of interest market in your jurisdiction, and
for project financing includes, among what are the most significant project
others, Hydrocarbon Law (Law N° 17,319), financings closed during the last 12
Natural Gas Law (Law N° 24,076), Energy months?
7
Project finance market in Argentina was the trust, typically provide that, in case
affected by the country’s macroeconomic of default by the company carrying out
recent instability, which included a the project, the financing providers, as
restructuring of the sovereign debt. beneficiaries of the trust, will be able
However, some projects have been to instruct the Trustee to enforce the
developed and it is likely that once the agreements entered into by the defaulting
macroeconomic situation improves there party and to replace the defaulting party
would be an increase in the development for a new contractor who can complete the
of projects, especially in certain strategic project.
sectors such as mining, oil and gas,
4. Can the shares of a company be
renewables and infrastructure. The most pledged as a security to the benefit
significant project financings closed during of lenders? If so, is there a specific
the last 12 months have been related to requirement in terms of formalities
green projects and renewable energy (e.g., or procedure to be followed for
Pan American Energy green projects and establishing or perfecting a share
energy security, YPF Green bond issuance pledge?
to finance a solar park in San Juan, and 360
Energy Solar issuance of bonds to finance a The Argentine Companies Law No. 19,550,
solar power project). as amended, (the “Companies Law”)
provides that the shares of a corporation
B. Security Interest can be pledged. The rights on the shares
3. What are the most commonly used pledged continue to belong to the owner
security types in project financings in of the shares and the pledgee must allow
your jurisdiction? the exercise of the rights by the pledgor.
The pledge of the shares must be agreed
The most common security structure in in written by the owner of the shares,
project financings is the trust. The assets in as pledgor, and the secured creditor, as
the trust form an estate which is segregated pledgee. The agreement must specify the
from the assets of the trustor, the trustee secured obligation and the maximum
and the beneficiaries. Therefore, the assets amount secured by the pledge. As the
in the trust cannot be attached by the pledge is a in rem right, the delivery
creditors of the trustee or the trustor, other (traditio) of the shares to the creditor
than for fraud or fraudulent conveyance is necessary to perfect the pledge. The
actions. On the other hand, the creditors manner in which this delivery is made
of the beneficiary can subrogate on the will depend on the type of shares that the
actions of the beneficiary. This level of company has issued. In case the company
segregation isolates the assets of the has issued stock certificates, the delivery of
project financing from the risk of the the certificates to the creditor is necessary.
business of the developer, constructor and In case the company has issued book-entry
owner of the project. shares, the pledge will be perfected by the
annotation in the stock ledger.
The trust structure also allows the
creditors to take over the project in case In all cases, the pledge of the shares
of insolvency or failure to perform by the has to be notified to the company. The
developer or constructor of the project. shareholder pledging the shares must
The trust agreements and the engineering, send a notice to the company informing
procurement and construction contracts the pledge of the shares and the board
entered into by the trustee on behalf of of directors should leave on record
8
the existence of the pledge, reflecting interest, in case the borrower

such situation in the stock ledger and if becomes insolvent, is technically
the company issued stock certificates, insolvent and/or commences
a notation on the back of the share composition process?
certificate.
Generally, project financing is implemented
In case the shares are deposited with Caja using a trust structure. The trust will be
de Valores S.A. (“Caja de Valores”), as the holder of the rights and obligations
collective depository, the pledgor must related to the project and the lenders will
send a notice to Caja de Valores notifying be the beneficiaries of the trust. In case the
the pledge. borrower who is carrying out the project
becomes insolvent and/or commences a
5. Is private sale a recognized method
composition process, the trust agreement
for the enforcement share pledge?
will generally provide that the trustee will
What are the endorsement types
replace the borrower in the operation of
typically used for the share
the project and will use the proceeds of the
certificates?
project to repay the lenders. The trustee
The private sale of the pledged shares is will typically also be the beneficiary of any
an enforcement method authorized by pledge created to secure the financing and
the CCC. The CCC provides that the parties will enforce such pledges in case of default.
may agree at the time of the creation of
8. Is security trustee concept
the pledge that the sale will be carried
enforceable in your jurisdiction? If
out by a special procedure determined by
not, is an alternative mechanism,
the parties, which may include the private
such as a parallel debt, available?
sale by the creditor of the asset or its sale
in a certain market1. The share pledge The CCC regulates trusts, which includes
agreements typically provide for the private guarantee trusts. The CCC provides
sale by the creditor in case of enforcement. that if the trust is a guarantee trust, the
In the case of securities, including shares, trustee can apply to the money in the
the sale can be carried out in a stock market trust, including those amounts resulting
at market price. from the enforcement of the credits in
the trust, to the payment of the secured
6. Can security interest be established
credits. In connection with other assets in
over future assets, rights and
the trust, the trustee can dispose them in
receivables of the borrower?
accordance with the terms of the trust. In
The pledge can be created on any credit case the agreement is silent, it can sell them
which is documented and can be assigned. privately or in a court auction, applying
The pledge can be on account receivables a mechanism that secures the highest
and on future rights to the extent the possible value for the goods.
agreement from which they will arise exists
C. Incentives and Restrictions
at the time of the creation of the pledge.
The commitment to create pledges over 9. What are the main incentives and
future assets is generally valid. exemptions for project financing in
your jurisdiction?
7. What are the steps to be taken by
the lenders to enforce their security The government of Argentine offers a
1 Section 2229 of the CCC.
9
number of investment promotion programs Argentina does not have a regime for
at the federal, provincial, and municipal the authorization or licensing of foreign
levels to attract investment to specific investment other than for certain specific
economic sectors such as capital assets and investments and regulated activities (rural
infrastructure, innovation and technological and frontier lands2, media and cultural
development, and mining and energy, activities, etc.). Therefore, in general,
with no discrimination between national there is no need in this case to make any
or foreign-owned enterprises. Some of filing under a foreign investment regime.
the investment promotion programs However, under Argentine companies’
require investments within a specific law (Law 19,550 as amended), foreign
companies who participate in the share
region, industry, or economic activity. The
capital of local companies must be
incentives and exemptions offered include
registered with the Public Register. This
refunds on value-added tax (“VAT”) or other
registration is for publicity purposes
tax incentives for local production of capital
only and it is complied with at the
goods. provincial level (not the federal level).
10. Are there any incentives or It does not involve an authorization by
exemptions specifically applicable the government, nor does it involve
to foreign investors? an application for a license from the
government. Nonetheless, this registration
There are no incentives or exemptions may be burdensome and time consuming
specifically applicable to foreign investors in certain jurisdictions.
other than those that may result from BITs.
13. Is there any minimum equity
11. Are there any restrictions for requirement, under the legislation
borrowing bank loans and or in practice, for project financings
shareholder loans from abroad and/ in your jurisdiction?
or in a foreign currency?
There is no minimum equity requirement
There are no restrictions for borrowing under Argentine legislation but in certain
bank or shareholder loans from abroad or cases, thin capitalization rules may result in
in a foreign currency. However, Argentina an unfavorable tax treatment. Additionally,
has a strict foreign exchange control bidding terms and conditions for large
regime and certain requirements must projects may include minimum equity
be met in order to repay the financing requirements.
through the foreign exchange market. 14. Please explain the registration
These requirements include the obligation and filing requirements which
of entering to Argentina and selling for are applicable for project finance
domestic currency the disbursements documents to be valid and
received. Also, foreign exchange regulation enforceable in your jurisdiction.
prohibits the pre-cancelling of the debt.
The registration and filing requirements will
12. Are there any restrictions for depend on the legal structure used for the
foreign investments in your project finance, but generally trusts and
jurisdiction? liens on an asset will have to be registered.
2 According to Law 26,737 (Regime for Protection of National Domain over Ownership, Possession or Tenure of Rural Land),
a foreigner cannot own land that allows for the extension of existing bodies of water or that are located near a Border
Security Zone. Further, foreign individuals’ or companies’ ownership is limited to 1,000 hectares (2,470 acres) in the most
productive farming areas.
10
Certain trust agreements must be 17. What are the other complications,
registered with the Public Register of concerns or other issues in relation
the City of Buenos Aires in order to be to the insurance provisions
enforceable vis-a-vis third parties. For under the project financing
instance, if the trust will have title over real documentation, if any?
estate or hold a participation in a company
Currently, due to foreign exchange control
domiciled in the City of Buenos Aries, the
regulations, in case the foreign resident
trust must be registered.
collects an indemnification under an
Also, pledges will generally require that insurance policy in Pesos in Argentina,
the lien is registered. As mentioned before, it may not be able to purchase foreign
pledges on shares must be registered in currency and transfer it outside Argentina.
the corporate books of the company or E. Financing of Public-Private
with Caja de Valores. In case of a pledge Partnership (PPP) Projects
on registered assets (such as vehicles), the
pledge must be registered with the relevant 18. Is PPP a permitted method of
property register. In case of registered developing projects, and if so, have
pledges of assets which property is not any PPP projects been developed to
kept by a register, the pledge must be date in your jurisdiction?
registered with the pledge registry of the Public-Private Partnership (“PPP”) is a
place where the assets are located. The permitted method of developing projects
mortgages must also be registered in the in the following sectors: infrastructure,
real estate registry of the jurisdiction in housing, productive investment, and
which the real estate is located. research and technological innovation.
D. Insurance There have been public tenders to award
PPP contracts for highways and high-
15. Can local insurance policies be voltage transmission lines. However,
governed by a foreign law? these projects were suspended due to the
Section 2 of Law 12,988 prohibits to difficulties arising out of lack of financing.
insurance outside Argentina persons, goods 19. Are direct agreements between the
or any other insurable interest located in public authorities and the Lenders
Argentina. Therefore, the insurance of local permissible under the local law, and
risks must be contracted with an Argentine if so, commonly seen in the Project
insurance company which will issue an Finance market in your jurisdiction?
insurance policy governed under Argentine
law. In principle, there would not be legal
restrictions preventing direct agreements
16. Can insurance proceeds under the between the public authorities and lenders,
insurance and reinsurance policies but this would have to be analyzed on a
be assigned to the benefit of the case-by-case basis. Anyhow, this type of
lenders? arrangement is unusual in government
contracts.
The insurance proceeds under the
insurance and reinsurance policies can 20. Please indicate the types of host
be assigned to the benefit of the lenders. government supports (including
However, we suggest analyzing on a case- treasury guarantee, debt
by-case basis taking into consideration the assumption etc.) available in your
jurisdiction of the entities involved. jurisdiction.
11
Government supports include the treasury 24. What are the general environmental
guarantees, assignment of tax revenues, and social requirements in project
and fiscal benefits (including tax reductions financings?
and fiscal stability guarantees).
Environmental requirements are set forth
21. Are political risk events usually by federal and local (provincial) laws
under the responsibility of the and regulations. The federal regulation
public party or the private party determines the minimum standards for
under the PPP agreements? protection and the provinces issue their
own specific regulations complying with
Political risk events are usually under the such minimum standards.
responsibility of the private party. However,
this has to be analyzed on a case-by-case Generally, an Environmental Impact
basis. Assessment (“EIA”) must be conducted
before the beginning of any project or
22. Are investors and lenders usually activity that may have a negative impact
protected against a change in on the environment. As rule, the project
law passing subsequent to the cannot commence unless the EIA is
signing of the relevant concession approved by the relevant regulatory
agreement? authority through an Environmental Impact
Laws and regulations can change provided Declaration (“EID”).
they are not contrary to a contractual, Social requirements could be included
bilateral or similar binding undertakings. within the process of conducting the EIA
Investors’ legitimate expectations might and obtaining the EID. Additionally, certain
also be protected in certain circumstances. provinces have local employment regimes.
For example, foreign investors protected by F. Jurisdiction, Waiver of
a BIT could invoke that the change of the Immunity
applicable law or regulations constitutes a
breach of the fair and equitable treatment 25. Are submission to a foreign law and
guaranteed under the relevant BIT. the waiver of immunity provisions
enforceable?
However, as a rule, investors are not
shielded from subsequent changes in laws The submission to foreign law is binding
or regulations unless stability has been and enforceable. According to article 2651
expressly granted. of the CCC, the parties may choose the
governing law of the relevant contract.
23. Is force majeure specifically However, the contract will still be subject to
regulated under the local Argentine public policy laws.
legislation?
The waiver of immunity provisions is
Argentine legislation requires the PPP also binding and enforceable. However,
agreements to provide an equitable and Argentina is a party to the Vienna
efficient distribution of contributions and Convention of 1961 (approved by
risks between the parties. In particular, the Decree-Law N° 7672/63) and the Vienna
consequences arising from force majeure Convention of 1963 (approved by Law N°
events shall be borne by the parties 17,081) and to other international treaties
according to the conditions of each party that provide immunity from enforcement
to prevent, assume, or mitigate such risks in with respect to certain specific state-owned
order to minimize the cost of the project. assets which cannot be waived. Thus,
12
waiver of immunity provisions may not be The risk premium on Argentine sovereign
enforceable when the execution is aimed bonds is currently extremely high
against assets or categories of assets used (around 20% per year) and there are
or destined to be used for public purposes. strict limitations under foreign exchange
regulations on the payment of dividends,
In addition, local courts have limited the
repatriation of investment and payment
effectiveness of such waivers when the
of intercompany services. In addition, the
execution of foreign courts’ or tribunal’s
import of goods is subject to a licensing
decisions may affect local public policy
process which is burdensome, and many
principles.
cases limits the quantities a party may
26. Can financing documents provide import. Under the foreign exchange
for arbitration clauses? regulations, many imports are subject to
Financing documents can provide for out of market minimum payment terms
arbitration clauses. The arbitration clause (in some cases up to 180 calendar days
must be in writing and may be included in after clearance of customs). In addition,
the contract or in a separate agreement or generally, the foreign exchange control
regulation. regulations provide that the exporter
must enter into and sell for pesos at an
However, pursuant to sections 736 and unfavorable exchange rate the proceeds of
737 of the Federal Civil and Commercial its exporters.
Procedural Code and to section 1644 of
the CCC, matters involving public policy These factors have been restricting foreign
cannot be resolved by arbitration. Case financing in Argentina, including project
law and legal authors have traditionally financing.
held that certain governmental decisions 28. Are any significant development or
of political nature must be deemed change expected in the near future
as non-justiciable issues concerning in the project finance market?
public policy (e.g., declaration of a state
emergency and federal intervention in a Argentina has a large potential in the
province). Furthermore, section 1651 of mining, oil and gas and green energy
the CCC, establishes that the provisions industries. Therefore, it is expected
related to the arbitration clause included that once the macroeconomic hurdles
in the CCC are not applicable to disputes mentioned before are removed, Argentina
in which the national or local States are will be a very attractive place for project
parties. Therefore, it could be argued that finance investing.
arbitration clauses may not be applicable
29. What are the alternative reference
to disputes to which the national or local
interest rates which are being
governments are parties unless they are
commonly used in your jurisdiction
specifically authorized, which must be
during the LIBOR transition period?
analyzed in each particular case.
The most common interest rate used as an
G. Trends and Projections alternative to the LIBOR is the Term SOFR.
27. What are the main current trends
in project financings in your
jurisdiction?
13
BANGLADESH
DOULAH & DOULAH
A.B.M. Nasirud Doulah Amina Khatoon

Partner Partner
ndoulah@doulah.com akhatoon@doulah.com
A. Overview • The Washington Convention on the

Settlement of Investment Disputes
1. What is the main legislation and between States and Nationals of Other
international treaties governing the
States; and
• The New York Convention on the
Following are the major legislations:
Recognition and Enforcement of
• The Foreign Exchange Regulation Foreign Arbitral Awards.
Act, 1947, read with the Guideline for
Foreign Exchange Transactions, 2018, 2. How mature is the project finance
regulates the foreign exchange aspects market in your jurisdiction, and
of foreign borrowing; what are the most significant project
financings closed during the last 12
• The Transfer of Property Act regulates
security creation and enforcement months?
issues; The government of Bangladesh
• The Registration Act relates to the traditionally finances its projects through
perfection of security; and sovereign loans. However, where a
• The Contract Act in general regulates project is implemented through a special
the rights of the parties to a contract project vehicle (“SPV”), it may also utilise
non-recourse, semi-recourse or recourse
• The Stamp Act relates to the stamp duty financing, as it is allowed by regulation to
payable on all financial documents, issue sovereign guarantees to the extent
including security.
of its shareholding in the SPV. A private
Following are the relevant treaties to which finance initiative (PFI) model is adopted for
Bangladesh is a party: most government projects.
15
The government has also started to • Fixed and floating charges: Fixed
encourage project implementation charges grant control over the assets,
through the public-private partnership whereas floating charges allow the
model, whereby the government transfers charge creator to continue to deal with
significant risk to a private company, the assets until crystallisation. Floating
which must secure recourse or semi- charges may be created over a class
recourse project financing without the of assets, including future receivables,
government committing to any sovereign inventories or bank accounts.
obligation to repay the debt. In addition, • Pledge: Movable items and especially
in appropriate cases, the government also shares of the company may be pledged
finances projects through either loans by the shareholders in favour of the
issued by government institutions, viability lenders.
gap financing or transaction advisory
assistance. • Corporate guarantees from
shareholders and third parties: Approval
In the private sector, project finance takes from the central bank of Bangladesh
the form of either recourse or non-recourse is not required when these are issued
financing. However, in large projects, against foreign borrowing approved
lenders will insist on recourse financing by the Bangladesh Investment
where they seek a guarantee from the Development Authority.
sponsors.
• Bank guarantee: This requires separate
The local project finance market remains approval from the central bank.
underdeveloped. On a number of • Standby letter of credit: These are also
occasions, local banks and government issued as security in certain cases.
institutions such as the Infrastructure
Development Company Limited and the • Liens: Liens are stricti juris and are
Bangladesh Infrastructure Finance Fund governed by relevant statutes and
Limited have provided debt financing ratified conventions. A general lien
under syndication; but the amounts comprises a property of the debtor in
the possession or under the control of
provided are modest, ranging between
the service provider without the right to
$100 million and $200 million.
sell or dispose of that property.
However, several multilateral development
• Demand promissory note: This is an
banks, foreign export-import banks and
unconditional payment obligation
international commercial banks are active upon demand.
in providing project finance in Bangladesh.
• Assignment of contractual rights: This
B. Security Interest is very common with the assignment of
3. What are the most commonly used concession rights.
security types in project financings in Mortgages, charges, pledge, sponsor
your jurisdiction? guarantees and assignment of contractual
rights are common types of security in
The followings are the most commonly
project financings in Bangladesh. A second-
used security types in project financings in
ranking mortgage can be created under
Bangladesh:
Bangladesh law. The concept of a security
• Mortgages: These are most commonly trustee is recognised and is commonly
used for immovable assets such as land adopted in case of syndicated financing
and buildings. involving multiple lenders.
16
4. Can the shares of a company be Security agreements are required to be

pledged as a security to the benefit governed by Bangladesh law in order for
of lenders? If so, is there a specific such security to be eligible for self-help
requirement in terms of formalities remedies, summary judgment, possession,
or procedure to be followed for foreclosure, sale, and priority on insolvency.
establishing or perfecting a share Self-help remedies may be exercised in the
pledge? following cases:
Shares of a company may be pledged as a • The mortgagee (beneficiary) has the
security to the benefit of lenders as long as power to sell the mortgaged property
specific conditions, if any, incorporated in
where the mortgage is an English
the Articles of the Company are complied
mortgage (i.e., where the title is
with. There are no further perfection
transferred as security with a provision
requirements but it is a practice in
to buy back);
Bangladesh to obtain standby resolutions
from the target company approving the • A power of sale without court
transfer, executed and legalized share intervention is expressly conferred on
transfer instruments and sellers’ affidavits the mortgagee by the mortgage deed
along with the deposit of share transfer. and the mortgagee is the government
5. Is private sale a recognized method or a scheduled bank; or
for the enforcement share pledge? • A power of sale without court
intervention is expressly conferred on
the mortgagee by the mortgage deed
certificates?
and the mortgaged property.
Private sale is recognized as a valid method
In addition, as a contingency plan, lenders
for the enforcement of share pledge.
Generally, the share transfer instrument is obtain an irrevocable power of attorney
deposited without any endorsement but from the borrower to take possession
the pledge is recorded in the company over the secured asset on default without
statutory share books and a resolution court intervention. Some of these rights
acknowledging the pledge and future are granted to banks and thus banks are
transfer upon event of default is issued. frequently engaged as security agents to
enforce such securities. The mortgagee or
chargee may, at a time after the mortgage
money has become due, exercise a
foreclosure right to obtain from the court
Security interest can be established over a decree for foreclosure. In addition, the
future assets, rights and receivables of the mortgagee may sue the mortgagor if:
borrower by way of executing a floating
charge over such future assets of the • the mortgaged property is wholly or
borrower. partially destroyed; or
7. What are the steps to be taken by • the security is rendered insufficient

the lenders to enforce their security and the mortgagee has given the
interest, in case the borrower mortgagor a reasonable opportunity
becomes insolvent, is technically to provide further security sufficient
insolvent and/or commences to render the whole security sufficient,
composition process? and the mortgagor has failed to do so.
17
As stated above, local law governed 8. Is security trustee concept

security agreements such as mortgages, enforceable in your jurisdiction? If
assignment agreements and charges not, is an alternative mechanism,
enable the creditor to possess and such as a parallel debt, available?
foreclose the secured asset on its own
as far as those rights are granted in the Yes, the security trustee concept is
security agreements. Notwithstanding enforceable in Bangladesh and such
the foregoing, for bank lenders and local arrangement is frequently adopted.
financial institution lenders, such self-help C. Incentives and Restrictions
remedies have been expressly conferred
under the Money Loan Court Act 2003. 9. What are the main incentives and
Alternatively, a summary procedure may be exemptions for project financing in
instituted for foreclosure under the Code your jurisdiction?
of Civil Procedure and the Money Loans In addition, the Government has granted
Court Act 2003 (only applicable for local certain incentives and preferential policies
banks / financial institutes, foreign banks to industries considered to be thrust sectors
and multilaterals). The Money Loans Court in Bangladesh in form of tax holidays and
is a specialized court which deals with
tax exemptions. Tax holidays are allowed
borrowers with defaults in repaying loans
for industrial undertakings and physical
and the court provides for the summary
infrastructure facilities established between
procedure with otherwise prescribed time
frames. In the case of insolvency, secured 1 July 2019 and 30 June 2024 in the thrust
creditors would always have the first sector. The thrust sector refers to industries/
priority among creditors. industrial sub-sectors that have been able
to successfully contribute to the country’s
As long as there is a claim and such claim industrialisation. In Bangladesh, it is based
is secured, the creditor can exercise self-
on developed and underdeveloped areas
help remedies or go to courts to bring
(see below).
action under the Civil Procedure Court
and / or Money Loan Court Act to enforce Thrust industrial sectors subject to
the security. If the debtor is a company, exemption include active pharmaceuticals
it is also possible to bring a winding up ingredient, radio pharmaceuticals,
suit at the Original Company Jurisdiction automobile manufacturing, barrier
of the High Court if the debtor is unable contraceptive, rubber latex, chemicals
to settle the payment within twenty-one or dyes, basic ingredients of electronic,
days of a statutory notice issued under the bi-cycle, bio-fertilizer, biotechnology,
Companies Act 1994. boilers, brick made of automatic hybrid
Guarantees are required to be filed before Hoffmann kiln or Tunnel Kiln technology,
either the local courts or nominated arbitral compressors, computer hardware,
tribunal and thereafter the judgement / energy efficient appliances, insecticide or
award for enforcement is required to be pesticide, petrochemicals, pharmaceuticals,
filed with the District Court as the Court processing of locally produced fruits
of First Instance. The initial lawsuit allows and vegetables, radio-active application,
the attachment of assets in relevant cases textile machinery, tissue grafting and tyre
and administers suit against the guarantor manufacturing industries.
in such a way as if the guarantor is the
principal debtor. If there is any underlying Physical infrastructures subject to
dispute, such dispute must be resolved first exemption include deep sea port, elevated
as per the dispute resolution clause. expressway, export processing zone,
18
flyover, gas pipeline, Hi-tech park, ICT (“COD”) after 1 January 2023 (other than
village or software technology zone, IT coal fired IPPs) there is a:
park, large water treatment plant and
Q 100% tax exemption during the first five
supply through pipeline, LNG terminal and
years.
transmission line, mono-rail, rapid transit,
renewable energy, sea or river port, toll Q 50% exemption during the next three
road or bridge, underground rail and waste years.
treatment plant.
Q 25% exemption during the next two
Industries set up in EPZs and other IPAs years.
are also subject to certain tax holidays as
For coal fired IPPs contracting with the
follows:
government before 30 June 2020 and
For independent power plants (“IPPs”) achieving COD before 30 June 2023, there
commencing production before 2023, a is a 100% tax exemption for the first 15
tax exemption on income tax is available years. For power projects, no import duty is
for 15 years. For independent power plants charged with regard to capital machinery
achieving Commercial Operation Date and spares. Also, there is an exemption over
Year Thrust Thrust Industries Physical Industries Industries Developers Industries

Industries (Underdeveloped Infrastructure set up set up in of Economic in BEZA
(Developed Areas - Rajshahi, in EPZ EPZ (Other Zone and Hi-
Areas - Dhaka Khulna, Sylhet (Dhaka and areas) (BEZA) and Tech Park
and Chittagong and Brisal and Chittagong Hi-Tech (subject to
divisions, Rangpur divisons Division Park paragraph
excluding and Rangamati, excluding 2.2.4)
Dhaka city, Bandarban and hill districts)
Narayanganj, Khagrachari
Gazipur, districts)
Chittagong city,
Rangamati,
Bandarban and
Khagrachari
districts)
1st 90% 90% 90% 100% 100% 100% 100%
2nd 80% 90% 90% 100% 100% 100% 100%
3rd 60% 80% 80% 50% 100% 100% 100%
4th 40% 70% 70% 50% 50% 100% 80%
5th 20% 60% 60% 25% 50% 100% 70%
6th 50% 50% 50% 100% 60%
7th 40% 40% 25% 100% 50%
8th 30% 30% 100% 40%
9thh 20% 20% 100% 30%
10th 10% 10% 100% 30%
11th 70%
12th 30%
19
registration fees and stamp duty required Q Incentives to export oriented

to be paid for the perfection of any security industries. These include:
or immovable property title. Shareholders
• businesses exporting 80% or more of
are exempted from paying capital gain
goods or services qualify for duty free
tax from the divestment of their shares in
import of capital machinery and spares,
power projects.
and bonded warehousing;
Effective from July 2017 the Government
• bonded warehouse and back-to-back
has declared a tax exemption for 10 years
letter of credit facilities;
for PPP projects for the development of
National Highways or Expressways and • 90% loans against letters of credit and
related Service Roads, Flyovers, Elevated funds for export promotion;
and At-Grade Expressways, River Bridges,
• they are allowed domestic market sales
Tunnels, River port, Seaport, Airport,
of up to 20%;
Subway, Monorail, Railway, Bus Terminals,
Bus Depots, Elderly care home. For selected • cash incentives and export subsidies are
PPP projects, no import duty is charged granted on the free on-board value (this
in case of capital machinery and spares. includes inland freight, export duty and
Furthermore, all receivables by construction other expenses, but not ocean freight,
contractors, suppliers, legal service insurance and consular fees) in the form
providers and consultancy / supervisory of drawbacks and rebates on import
firms attributable to PPP projects have been and excise duties paid on direct inputs
exempted from paying any VAT. In addition and so on;
to the above such physical industry is also
• for 100% export-oriented industries,
eligible to the following tax exemptions:
no import duty is charged on raw
• Tax exemption over tax on capital gain materials.
from transfer of shares in such projects
10. Are there any incentives or
for first ten years
exemptions specifically applicable
• Tax exemption over royalties / technical to foreign investors?
assistance fees for first ten years
In general income tax over interest
• Foreign technicians are entitled to earning for foreign lenders is exempted for
get 50% income tax exemption from financing in any industrial project or public
income tax for the three years until fifth projects.
anniversary of the COD of the project.
Q Incentives to foreign investors include:
Other exemptions include the following:
• 100% foreign ownership and
Q Accelerated depreciation. Industrial repatriation of invested capital, profit,
undertakings not enjoying a tax and dividends;
holiday benefit from an accelerated
depreciation allowance. • re-investment of repatriable dividends
as a new investment;
Q Concessionary duty on imported
capital machinery. Import duty, at the • royalties and technical know-how fees
rate of 3%, is payable on the value of are tax exempted for thrust sectors (see
capital machinery and spares imported above, Tax holidays);
for initial installation in the existing • interest on foreign loans is tax
industries. exempted under certain conditions;
20
• double taxation can be avoided; for obtaining foreign loan. Pursuant to

• foreign technicians in certain industries the Foreign Private Borrowing Guidelines,
are exempted from tax for up to three industrial enterprises in the private sector
years; incorporated under the Companies Act
1994 and registered with BIDA are eligible
• private sector power generation for obtaining foreign borrowing from
companies are tax exempted for 15 recognized lenders subject to the approval
years; of Foreign Borrowing Scrutiny Committee.
• capital gains from the transfer of shares Foreign borrowings refer to commercial
of public limited companies are tax loans including financial loans, bank
exempted; loans, buyer’s credit, supplier’s credit from
institutions or individuals and debt issues in
• new investors are granted six-month
the capital market abroad, etc. The Foreign
multiple entry visas;
Private Borrowing Guidelines provide
• citizenship by investing US$500,000 that the borrowers can raise the foreign
or by transferring US$1 million (non- borrowings from internationally recognized
repatriable); sources
• permanent residency by investing 12. Are there any restrictions for
US$75,000 (non-repatriable). foreign investments in your
11. Are there any restrictions for jurisdiction?
borrowing bank loans and In general, there are no restrictions on
shareholder loans from abroad and/ foreign investors incorporating or acquiring
or in a foreign currency? the shares of a company in Bangladesh. The
All proposals for borrowing from abroad major policy related to foreign investment
by private sector industrial enterprises in Bangladesh is the Bangladesh industrial
(including the concessionaire or the policy 2016. Foreign and domestic private
project company) in Bangladesh (including entities can establish and own, operate,
supplier’s credits, financial loans from and dispose of interests in most types of
institutions or individuals and debt issues in business enterprises. Four sectors, however,
capital markets abroad) shall require prior are reserved for government investment:
authorisation of Bangladesh Investment • Arms and ammunition and other
Development Authority (“BIDA”). defense equipment and machinery;
Accordingly, if the concessionaire or project
company wishes to borrow from abroad, • Forest plantation and mechanized
the prior authorization of BIDA will be extraction within the bounds of
required. In our experience, BIDA approval reserved forests;
is always granted for major infrastructure
• Production of nuclear energy; and
projects supported by the Government and
in practice takes about two months under • Security printing.
normal circumstances.
In addition to the four sectors reserved
Applications for foreign loan should comply for government investment, there are
with the Procedure and Guidelines for 17 controlled sectors that require prior
Approval of Foreign Private Borrowing clearance/ permission from the respective
(“Foreign Private Borrowing Guidelines”) line ministries/authorities (by way of
issued by Bangladesh Bank and BIDA which public procurement or licensing or public
set out the eligibility criteria and procedure private partnership) and indirectly this is
21
being used for a few sectors to maintain industries and some discriminatory policies
Government monopoly such as power and regulations exist. For example, the
(electricity) transmission and distribution. government requires majority or more
These are: than majority local ownership of new
• Fishing in the deep sea shipping, logistics, freight forwarding,
• Bank/financial institutions in the private banking and insurance etc. companies,
sector albeit with exemptions for existing foreign-
owned firms, following a prime ministerial
• Insurance companies in the private
directive.
sector
• Generation, supply, and distribution of 13. Is there any minimum equity
power in the private sector requirement, under the legislation
or in practice, for project financings
• Exploration, extraction, and supply of
in your jurisdiction?
natural gas/oil
• Exploration, extraction, and supply of The debt-equity ratio of the borrowing
coal enterprise should reflect sufficient equity
stake of the entrepreneurs, with moderate
• Exploration, extraction, and supply of
rather than high leveraging and also that
other mineral resources
while relatively higher debt levels may be
• Large-scale infrastructure projects (e.g., warranted for long gestation infrastructure
flyover, elevated expressway, monorail,
projects, total debt including the proposed
economic zone, inland container depot/
borrowing should not breach 70:30 debt
container freight station)
equity ratio even for these projects (In
• Crude oil refinery (recycling/refining of some concession agreements it has been
lube oil used as fuel)
raised to 80:20 based on clearance from
• Medium and large industries using Bangladesh Bank).
natural gas/condensate and other
minerals as raw material 14. Please explain the registration
and filing requirements which
• Telecommunications service (mobile/
are applicable for project finance
cellular and land phone)
documents to be valid and
• Satellite channels enforceable in your jurisdiction.
• Cargo/passenger aviation In the foreign borrowing approval provided
• Sea-bound ship transport by the issuing authorities such as BIDA,
it is a precondition to file the executed
• Seaports/deep seaports
finance documents with such authorities
• VOIP/IP telephone within 30 days of execution followed by
• Industries using heavy minerals regular reporting of the disbursements and
accumulated from sea beaches repayment position to such authority and
While discrimination against foreign the central bank. In addition, below are the
investors is not widespread, the perfection requirements for the underlying
government frequently promotes local securities:
22
Security Eligible Statutory requirements Perfection

Name Assets
Mortgage Real Assets  Created under Chapter IV of the  Payment of stamp duty3
Transfer of Property Act 1882  Payment of registration fees
by way of executing a mortgage (0.1% of secured value) and
deed along with an Irrevocab- registration with Office of Sub-
le General Power of Attorney Registrar within 90 days of
(“IGPOA”). execution
 Must be governed by Bangla-  In case of company mortgagor,
desh law to be treated as security perfection as a charge with
to have the right of foreclosure Registrar of Joint Stock
and statutory priority over com- Companies and firms within 21
pany assets upon liquidation days by paying the applicable
 Self-help remedies available only registration fees4
if expressly provided in the mort-
gage deed
Hypothecation Movable  Created under Section 159 of the  Payment of stamp duty of
assets Companies Act 1994 by way of BDT300,
(present executing a deed of hypotheca-  In case of a company mortgagor,
and future) tion (can be fixed or floating, or perfection as a charge with
(including both) along with a IGPOA Registrar of Joint Stock
bank  Must be governed by Bangla- Companies and firms within 21
accounts) desh law to be treated as security days by paying registration fees5
to have the right of foreclosure
and statutory priority over com-
pany assets upon liquidation
 Self-help remedies available only
if expressly provided in the deed
Assignment Contractual  Created under Section 8 of the  Payment of stamp duty 6
Agreement rights / Transfer of Property Act 1882 by  No other perfection formalities
receivables way of executing an Assignment other than acknowledgment
Agreement with an IGPOA from the contract counterparty
 Must be governed by Bangladesh  Registration is optional but
law to be treated as security to recommended
have the right of foreclosure and
statutory priority over company
assets upon liquidation
 Self-help remedies available
only if expressly provided in the
agreement
3 Five thousand Taka for the first One crore Taka and for the remainder of the loan amount an additional duty at the rate of
0.1% of the remainder amount but not exceeding 5 (Five) crore Taka.
4 Secured Amount up to BDT5,00,000.00 registration fee is BDT250.00, additional for every BDT5,00,000.00 or part af-
ter the first BDT5,00,000.00 up to 50,00,000.00 – BDT 200.00. Additional for every BDT5,00,000.00 or part after the first
50,00,000.00 – BDT100.
5 Secured Amount up to BDT5,00,000.00 registration fee is BDT250.00, additional for every BDT5,00,000.00 or part af-
ter the first BDT5,00,000.00 up to 50,00,000.00 – BDT 200.00. Additional for every BDT5,00,000.00 or part after the first
50,00,000.00 – BDT100.
6 Five thousand Taka for the first One crore Taka and for the remainder of the loan amount an additional duty at the rate of
0.1% of the remainder amount but not exceeding 5 (Five) crore Taka.
23
Security Eligible Statutory requirements Perfection

Name Assets
Pledge Movables  Created under Section 172 of the  Payment of stamp duty
or valuables Contract Act 1872 by way of exe-  Marketable Securities (shares
(bailment of when pos- cuting a pledge agreement along / bonds / debentures etc.) –
goods can session is with an IGPOA exempted
also be done delivered  Must be governed by Bangla-  Other title deeds and movable
in form of desh law to be treated as security
lien in favour to have the right of foreclosure assets – 0.5% of secured value
of bankers, and statutory priority over com-  No other perfection formalities
lawyers and pany assets upon liquidation  Registration is optional but
so on)  Self-help remedies available only recommended
if expressly provided in the deed
Guarantee Unconditio-  Created under Chapter VIII of the  Payment of stamp duty of
nal promise Contract Act 1872 by way of exe- BDT300
to pay cuting a guarantee agreement.  No other perfection formalities
 Registration is optional but
recommended
Demand Pro- Negotiable  Created under Section 4 of the  Payment of stamp duty of BDT50
missory Note instrument Negotiable Instruments Act 1881  No other perfection formalities
(“DPN”) by way of executing a DPN.
D. Insurance Insurances must be obtained from local

insurers as long as relevant insurance
15. Can local insurance policies be products are available in Bangladesh.
governed by a foreign law? However, for public properties insurance
Local insurance policies are required to be must be obtained from state owned
governed by Bangladesh laws. insurance companies which is shared
between state owned and other group of
16. Can insurance proceeds under the local insurers 50:50 basis.
insurance and reinsurance policies
The Insurance Corporations Act, 2019
be assigned to the benefit of the
defines “public property” as:
lenders?
(a) any kind of moveable or immoveable
Insurance proceeds under the insurance
property which belongs to
and reinsurance policies may be assigned
direct control or protection of
to the benefit of the lenders as long as
the Government and the legal
such borrowing is as per the borrowing responsibility of maintenance which is
guidelines and appropriate approval, as to the Government;
relevant.
(b) property vested to the Government or
17. What are the other complications, any local authority;
concerns or other issues in relation
to the insurance provisions (c) any company, firm, institution,
under the project financing organisation, enterprise or any other
establishment which is managed or
documentation, if any?
controlled by the Government or a local
authority, or in which the Government,
24
by itself or jointly with a local authority only issues guarantee in favor of lenders
or a company, holds a financial share or in proportion to its shareholding in the
interest or any company guaranteed by project company.
the Government to finance;
21. Are political risk events usually
(d) any project operated by the foreign under the responsibility of the
loan or financial aid guaranteed by the public party or the private party
Government; or under the PPP agreements?
(e) any other property determined by the Political risk events usually under the
Government. responsibility of the public party and the
risk is shared between the public and
However, reinsurance by foreign insurers is
private parties under the PPP agreements.
allowed.
22. Are investors and lenders usually
E. Financing of Public-Private protected against a change in
Partnership (PPP) Projects law passing subsequent to the
18. Is PPP a permitted method of signing of the relevant concession
developing projects, and if so, have agreement?
any PPP projects been developed to
Yes, PPP Agreements in Bangladesh include
date in your jurisdiction?
protection against change in laws passed
Yes, PPP is a permitted method of subsequent to the signing of the relevant
developing projects in Bangladesh as per concession agreement.
the PPP Act, 2015 and a number of PPP
23. Is force majeure specifically
projects have been developed in energy,
regulated under the local
toll road, LNG terminal and port sector.
legislation?
19. Are direct agreements between the
Force majeure is not specifically regulated
public authorities and the Lenders
under the local legislation; however, it
permissible under the local law, and
is somehow covered within the terms
if so, commonly seen in the Project
related to “impossibility to perform a
Finance market in your jurisdiction?
contract” under the Contract Act, 1872.
Direct agreements between the public PPP Agreements in Bangladesh include
authorities and the Lenders are permissible protection against force majeure under
under the local law and are commonly seen relevant concession agreement.
in the project finance market in Bangladesh
24. What are the general environmental
for large scale infrastructure projects.
and social requirements in project
20. Please indicate the types of host financings?
government supports (including
There are no express general environmental
treasury guarantee, debt
assumption etc.) available in your
financings in Bangladesh. However,
jurisdiction.
industries in Bangladesh need to obtain
Unless the project company is fully or environmental clearances from Department
partially owned by the government, no of Environmental of Bangladesh. The
such government supports (including environmental laws of Bangladesh consist
treasury guarantee, debt assumption etc.) of the Environmental Policy, 1992 and the
are available in Bangladesh. Government Bangladesh Environment Conservation
25
Act, 1995 (“ECA”) read in conjunction Generally, the acquiring entity under such
with the Environment Conservation circumstances forms a Rehabilitation
Rules, 1997 (ECR). Department of Action Plan (RAP) to work with local non-
Environment (“DOE”) is empowered to governmental organizations to perform
(i) formulate the environmental quality such rehabilitation.
standards and pollutant discharge
standards of Bangladesh; and (ii) issue an
F. Jurisdiction, Waiver of
environmental clearance certificate. The
Immunity
local government authorities have been 25. Are submission to a foreign law and
empowered with the function to issue no the waiver of immunity provisions
objection certificates, based on their own enforceable?
evaluations, which are prerequisites to
obtain the final environmental clearances Bangladesh courts uphold a choice of
from the DOE. The Environmental Policy, foreign law and party autonomy as agreed
1992 sets out policies for various sectors between the parties when entering into
including the industrial sector. Under the contract. It was decided in PLD 1964
the ECA, an industrial unit or project Dacca 637, that when the intention of the
cannot be established or undertaken parties to a contract is expressed in words,
without obtaining an Environmental this express intention determines the
Clearance Certificate (“ECC”) from the proper law of the contract and overrides
DOE. Accordingly, any industrial project every presumption. A share purchase
(including power projects) must obtain agreement can provide for a foreign
an ECC from the DOE prior to the governing law if the parties agree to it. In
commencement of construction of its practice, if all the parties to the agreement
project. are Bangladeshi, Bangladesh law is adopted
as the governing law. Waiver of immunity
Acquisition & Requisition of Immovable provisions are enforceable in Bangladesh.
Property Act, 2017 (“ARIP”). ARIP requires
that compensation be paid for (i) land and 26. Can financing documents provide
assets permanently acquired (including for arbitration clauses?
standing crops, trees, houses); (ii) any other Yes, arbitration clauses are legally
damages over property or earnings caused permissible and generally included
by such acquisition, (iii) any other damages in financing documents. Bangladesh
due to partition of any property caused arbitration law permits enforcement of
by such acquisition and (iv) reasonable foreign arbitral awards in Bangladesh.
cost to move residence or business. Parties can also agree to waive certain
However, ARIP does not deal with social rights under the Arbitration Act.
and economic impacts as a consequence
of land acquisition directly. For instance, it G. Trends and Projections
does not cover project-displaced persons
without titles such as informal settlers
(squatters), occupiers, and informal tenants
jurisdiction?
and leaseholders (without registration
documents). However, ARIP without Currently, most foreign direct investment
any express mechanism, allows for the is targeted at power and infrastructure
resettlement of affected households and projects. Infrastructure development is
businesses or any assistance for restoration now at its peak as Bangladesh transitions
of livelihoods of the displaced persons. towards becoming a developing economy.
26
This means that increasing numbers recent changes or developments in project

of investment and project finance financing market. No new developments
opportunities should become available in are anticipated in the next twelve months.
the market.
The local regulatory regime is quite lender interest rates which are being
friendly and the trends show an increase in commonly used in your jurisdiction
the number and value of transactions. during the LIBOR transition period?
28. Are any significant development or The alternative reference interest rates
change expected in the near future which are being commonly used in
in the project finance market? Bangladesh during the LIBOR transition
period is SOFR.
The project financing regime in Bangladesh
seems stable and there have not been any
27
BOSNIA AND HERZEGOVINA

MARIĆ & CO
Nebojsa Maric Dzana Smailagic Ezmana Turkovic Arijana

Partner Partner Partner Hadziahmetovic-Softic
nebojsa.maric@ dzana.hromic@ ezmana.turkovic@ Attorney at Law
mariclaw.com mariclaw.com mariclaw.com arijana.hadziahmetovic
mariclaw.com
A. Overview The said laws are compatible with the

following EU directives: 77/62/EEC, 80/767/
1. What is the main legislation and EEC, 88/295/EEC, 93/36/EEC, 71/305/EEC,
international treaties governing the 89/440/EEC, 93/37/EEC, 92/50/EEC, 89/665/
project financing in your jurisdiction? EEC, 2007/66/EC, 90/531/EEC, 93/38/EEC,
98/4/EC, 2004/18/EC, 97/52/EC, 25/2014/
The main laws pertaining to the procedures
EU, 24/2014/EU
of project financing are:
2. How mature is the project finance
• The Law on Financing the Institutions of market in your jurisdiction, and
Bosnia and Herzegovina; what are the most significant project
• Public Procurement Law of Bosnia and financings closed during the last 12
Herzegovina (“BH”); months?
• The Law on the Political Aspects of The finance market is growing and it
attained a considerable degree of maturity.
Foreign Investments of BH;
Some of the more prominent projects
• The Law on Foreign Investments of include: Wind Parks Slovinj of 130 MW
Republika Srpska (“RS”); and Dzeva of 46 MW and Railway Track
Overhaul, with a joint value of almost 200
• The Law on Foreign Investments of million EUR.
Federation of Bosnia and Herzegovina
(“FBH”) B. Security Interest
3. What are the most commonly used
• Company Law RS;
security types in project financings in
• Company Law FBH; your jurisdiction?
29
There are three types of security used based on an administrative decision

by financial institutions when financing of the respective taxing authority.
a debtor: pledge, mortgage and bill of The mortgage agreement, and the
exchange. mortgage entry itself, must contain at
least these three elements: the secured
a) A pledge is valid and enforceable if party (mortgagee), the amount of the
it has been duly registered with the secured claim (at least an indicative
electronic Pledge Register of Bosnia and or maximum amount) and the legal
Herzegovina, based on a valid pledge basis of the secured claim (such as a
agreement defining the claim, and if the loan agreement). Financial institutions
pledge debtor has been duly informed usually also include the details of
of the pledge establishment by delivery the charged interest (interest rate,
of the registration certificate within calculation mechanism, etc.) as well
8 days upon the pledge registration. as the maturity date. As a general
The legal nature of the pledge is such rule, mortgages are registered by the
that it serves well as an executive title temporal order of the submission
for claim enforcement. Namely, the of their respective registration
certificate of pledge registration issued applications, meaning that multiple
by the Pledge Register is an executive mortgages may be registered on
title on its own, under the condition the same day, whereby their priority
that it is accompanied with a valid depends on the exact hour and minute
pledge agreement, and evidence of of the application having been filed.
the debtor’s default, such as a simple However, parties are entitled to dispose
statement of the creditor. Based with the mortgage ranking, whereby
on these documents, an executive two creditors may agree to swap their
proceeding can be initiated over the ranking positions. If there are other
pledged assets. creditors of lower ranking, their consent
b) Mortgage represents a classical security is required for such a swap. In any case,
instrument in rem, establishing an the consent of the debtor (mortgagor)
enforcement title over a property, is also required.
regardless of its owner. The first and c) A bill of exchange is not a formal
foremost condition for the legal validity security instrument, but merely a
of a mortgage is its due registration payment instrument, constituting a
with the locally competent land register, payment order of the issuer in favour
whereby the decision on mortgage of the holder or recipient. However,
registration is constitutive by its virtue. in practice bills of exchange are
A mortgage does not legally exist commonly used as a de facto security
before its entry into the burden section instrument, usually in the form of a
of the respective land register sheet. blank (bianco) bill of exchange. In this
Such mortgage registration is possible respect, there are two kinds of bill of
only based on a mortgage agreement, exchange which are most often used in
processed in the form of a notarial deed practice: the said blank bill of exchange
by a Bosnia notary public or a lawyer, and the common bill of exchange. Both
in local language. The sole exception types of bills of exchange are similar in
to this formal rule is the so-called legal content, because, in the end, they must
mortgage, i.e., a mortgage established have all the required elements in order
in favour of the tax authorities, securing to be legally valid as an instrument of
a tax or social contribution debt, insurance or payment.
30
The common, out-of-court collection of registration. According to the Framework

the bill of exchanges starts by submitting Law on Pledges, a pledge on shares in a
a request to the commercial bank for limited liability company occurs when the
payment with whom the issuer has a bank following conditions are met, regardless of
account. If the issuer of the bill of exchange the order in which they are met:
disposes with sufficient funds, the bank will - that there is a registration in the Pledge
perform the payment in accordance with Register that specifically refers to that
the bill of exchange, and the collection pledge
process is successfully completed. However,
if the issuer does not dispose with sufficient - that the parties have concluded a
funds, which is more common, the issuer pledge agreement
will be unable to effectuate the collection, - that the pledgor is the owner of the
and will have to submit a protest to the thing pledged for the purpose of
competent court. There is an obligation of insurance
the creditor to protest the bill of exchange - that the pledgee, or third party in
with the competent court before starting accordance with the pledge agreement,
the enforcement procedure, whereby this has given or is obliged to give credit to
must be done within two working days the pledgor
from the maturity date.
In terms of performing the registration
A protested bill of exchange represents a of a pledge, this can be performed by
direct enforcement title and the legal basis any person with access to the electronic
to initiate an enforcement proceeding Pledge Register, while the fees related to
against the issuer, over any and all of its the registration are charged immediately to
assets. the user account of the person performing
the registration based on a fixed fee tariff
of the Ministry of Justice of Bosnia and
pledged as a security to the benefit
Herzegovina. The registration itself can be
of lenders? If so, is there a specific
made for a limited period of time, such as
requirement in terms of formalities 3 or 5 years, or without time limitation. Any
or procedure to be followed for and all potential changes to the pledge
establishing or perfecting a share registration, including its erasure, can
pledge? only be performed by the person who has
A debtor may pledge its shares in a limited performed the original registration in the
liability company using the Pledge Register first place.
of Bosnia and Herzegovina, whereby it is If the pledge is being established over
recommendable to conclude such a share stocks in a joint stock company, such a
pledge agreement in the form of a notarial pledge must be duly registered with the
deed processed by a local notary public locally competent Securities Register, based
due to differing practice of Bosnian courts on a stock pledge agreement executed in
regarding the form of the share pledge the form of a notarial deed processed by a
agreement. local notary public, in local language.
The procedure for establishing a pledge 5. Is private sale a recognized method
on shares in a limited liability company for the enforcement share pledge?
is possible and it is quite simplified What are the endorsement types
considering that the Register of Pledges of typically used for the share
Bosnia and Herzegovina has enabled online certificates?
31
The share pledge does not grant the security over the bankruptcy mass of
creditor (the pledgee) the right to directly the debtor, whereby all enforcement
take over the ownership over such share. proceedings that have been ongoing at the
Also, the private sale is not possible as a moment of instituting bankruptcy shall be
method of the enforcement of the share terminated. However, registered pledgees
pledge. Instead, the sale of the pledged are entitled to request and/or continue
shares or stocks is performed through the enforcement over pledged assets,
court, in an enforcement proceeding, and which are separated from the rest of the
through either a public auction (for shares bankruptcy mass.
in an LLC) or a licensed stock market broker
(for stocks in a JSC). It is also important to note that, under
the aforementioned provisions, the court
All restrictions over disposal and the rights may suspend further enforcement even
pertaining to the shares are inscribed into over pledged assets, if the bankruptcy
the Book of Shares (for limited liability administrator “ensures the appropriate
companies) or Securities Registry (for joint protection of the pledgee’s claim”, whereby
stock companies). the appropriate protection is defined as
6. Can security interest be established “the protection recognized by the court, with
over future assets, rights and the value of the guarantee being sufficient so
receivables of the borrower? that the suspension of enforcement does not
create damage to the creditor in any way”.
In addition to movable and immovable The court practice in relation to this unclear
assets, the pledge can also be established legal provision is sometimes abusive,
on claims/receivables and rights of the preventing the pledgees from collecting
borrower. In order to acquire a pledge on their claim, while at the same time not
a receivable, the debtor must be notified having any real use for the guarantee of the
in writing of the concluded pledge pledgor, as the bankruptcy proceedings
agreement, and the pledgor is obliged usually take several years (sometimes more
to hand over to the pledgee a document than 10) to complete.
on the pledged receivable. In addition
to receivables, other rights can also be One important consequence of a
pledged, such as copyright, patent rights, bankruptcy proceeding being instituted
license rights, etc. These rights must have a over the pledgor is that all pledges
property character, must be independent established over the assets of the company
and transferable to a third party and undergoing bankruptcy during the last
therefore, personal property rights cannot 60 days (in FBH) or 90 days (in RS) prior to
be pledged. the application for bankruptcy, cease to
exist, i.e., are void. Therefore, it is always
7. What are the steps to be taken by recommendable to perform a legal and
the lenders to enforce their security
financial due diligence of the pledgor, prior
interest, in case the borrower
to entering into the pledge agreement.
becomes insolvent, is technically
insolvent and/or commences 8. Is security trustee concept
composition process? enforceable in your jurisdiction? If
Under the provisions of bankruptcy
laws, upon the instituting of bankruptcy
proceeding creditors are no longer The concept of a security trustee is not
authorized to request enforcement or regulated by the laws of Bosnia and
32
Herzegovina, however, in practice so far, we in the said sectors shall be carried out
have encountered the above-mentioned only with the consent of the competent
concept, which did not cause any legal ministries. Also, foreign investor’s share
obstacles. in the companies that produce weapons,
ammunition, explosives for military use,
military equipment and provide media
9. What are the main incentives and support must not exceed 49%. In FBH, only
exemptions for project financing in the latter restriction applies.
your jurisdiction?
Please refer to the answer to question 10. requirement, under the legislation
to foreign investors? The minimum equity requirement in a
Incentives and exemptions are provided general sense is not prescribed (in laws or
for in the context of foreign investments. bylaws), but minimal financial requirements
The main incentives for foreign investors may be set on a case-by-case basis.
relate to tax exemptions. Therefore, foreign 14. Please explain the registration
investment will be exempted from paying and filing requirements which
import taxes. Foreign investment also are applicable for project finance
may be exempted from other tax dues in documents to be valid and
line with the principle of equal treatment enforceable in your jurisdiction.
of domestic and foreign investors and of
stimulating foreign investments. Registration and filing for finance
documents follow the same procedure
11. Are there any restrictions for as all other types of documentation. The
borrowing bank loans and exact finance documents that ought to be
shareholder loans from abroad and/ submitted will be prescribed on a case-by-
or in a foreign currency? case basis.
The general restriction is that only local D. Insurance
currency (BAM) can be used in internal
payment transactions. Under B&H financial 15. Can local insurance policies be
regulation, foreign currency shareholder governed by a foreign law?
loans are defined as credit agreements. Yes, under certain terms and conditions
Crediting in foreign currency is allowed in stipulated by the local insurance laws. The
the B&H, but under the condition that the applicable law applicable to insurance
both payment and collection transactions
contracts covering risks located in B&H
are being made in local currency.
is determined in accordance with the
12. Are there any restrictions for following legal provisions:
foreign investments in your
a. when the domicile or seat of the
jurisdiction?
insured is in Bosnia and Herzegovina,
There are certain sectors where foreign the applicable law for insurance
investments are restricted. In RS, those contracts is the law of Bosnia and
sectors include ammunition, weapons, Herzegovina. Exceptionally, when this
explosives for military use and military law allows it, the parties will be able to
equipment and media. Investments choose the law of another country;
33
b. when the insured does not have a place In the case of concluding an insurance
of residence or registered office in B&H, contract for compulsory insurance provided
the parties to the insurance contract for by B&H law, that contract is always
may choose to apply the law of the subject to B&H law.
country where the insured has a place
16. Can insurance proceeds under the
of residence or registered office;
c. when the insured is engaged in a be assigned to the benefit of the
commercial or industrial activity lenders?
or performs a professional activity
independently and when the contract Yes. When approving long-term loans,
covers two or more risks related to it can be used as collateral and binding
those activities and located in B&H of an insurance policy, i.e., automatically
and other countries, the freedom to concluding an insurance contract with
choose the law governing the contract the loan agreement, where the borrower
extends to the rights of those countries, pays the insurance together with the loan
depending on where the insured has instalment. This way of approving the loan
his residence or headquarters; has the result that the lender (e.g., bank),
when concluding the loan agreement,
d. the fact that in the above-mentioned ensures that the loan will be properly
cases, the contracting parties have repaid even in the event of an unplanned
chosen a law that is not the law of B&H, adverse event.
does not exclude the application of the
mandatory legal regulations of B&H The binding of the insurance policy is
or its entities when all other factors the assignment of the right to pay the
relevant to the situation at the time of insurance amount to the lender (e.g., bank),
choosing the applicable law are related in the event of damage, that is, the insured
to them; event. This means that, if the insured event
occurs, the insurance company will pay the
e. the choice of applicable law must be insurance amount to the lender instead
expressed or shown with certainty of the insured or policyholder. Binding of
in the terms of the contract or the the insurance policy is done in the case
circumstances of the case. If this is when the insurance policy is an insurance
not the case or if no choice is made, instrument for loan collection.
the contract is applied by Bosnia and
Herzegovina or the country with which 17. What are the other complications,
the contract is most closely related, concerns or other issues in relation
taking into account the above rules. to the insurance provisions
Exceptionally, the law of that country under the project financing
can exceptionally be applied to a documentation, if any?
special part of the contract that is more
It is difficult to determine any
closely related to another country.
complications, concerns or other issues
There is a rebuttable presumption that
in relation to the insurance provisions
the contract is most closely related to
since they depend on the concrete project
the country in which the risk is located.
financing documentation. Since project
The choice of applicable law cannot limit financing documentation can be very
the application in any way mandatory complex, it is recommendable to review
provisions of B&H law, regardless of the law it prior to determination of the potential
applicable to the contract. specific issues, if any.
34
E. Financing of Public-Private Public guaranties for Lenders should be

Partnership (PPP) Projects negotiated and contracted with the public
authorities in the best interest of the
18. Is PPP a permitted method of Lenders and the signing of such contract
developing projects, and if so, have by the public authority is legally binding for
any PPP projects been developed to repaying the loan.
Yes, we have adopted Law on PPP on under the responsibility of the
different administrative levels in Bosnia & public party or the private party
Herzegovina. On entity level, Law on PPP is under the PPP agreements?
adopted in RS. In FBH, which is comprised
of 10 cantons as separate administrative Strictly by the letter of the law, this should
units, law on PPP is adopted separately on not concern private party, but in practice,
cantonal level. Lastly, there is a PPP Law for this could arise as an issue.
Brčko District, as a separate administrative 22. Are investors and lenders usually
unit from two entities in BH. protected against a change in
law passing subsequent to the
There are more than a few projects in
signing of the relevant concession
the pipeline for realisation, but to our
agreement?
knowledge, there are no finished PPP
projects in BH. Yes, retroactive application of the law is
prohibited in Bosnia and Herzegovina
public authorities and the Lenders 23. Is force majeure specifically
permissible under the local law, and regulated under the local
if so, commonly seen in the Project legislation?
Finance market in your jurisdiction? Force majeure is regulated by the Law on
It is not forbidden by the law and could be Obligations in BH.
a valuable possibility for financing public 24. What are the general environmental
authorities. and social requirements in project
20. Please indicate the types of host financings?
government supports (including Environmental and social requirements
treasury guarantee, debt cannot be generalised, and will primarily
assumption etc.) available in your depend on the location of the project, as
jurisdiction. requirements are differently regulated
Two type of contracts under PPP in B&H by different administrative authority’s
legislation are: provisions.
− Contract on PPP which is based on F. Jurisdiction, Waiver of

financing private company from public Immunity
funds, and 25. Are submission to a foreign law and
the waiver of immunity provisions
− Contract on PPP with the element
enforceable?
of concession is based on financing
private company from the final users A submission to a foreign material law is
by operating and managing the project enforceable, however, as a rule, a Bosnian
after it’s finished. court will always be using domestic
35
procedural law. However, there are The fastest growing investment trend in
mandatory principles of the local law Bosnia and Herzegovina is investment in
which will apply even if another legal renewable energy. Foreign investors are
system has been (effectively) agreed increasingly more interested in vast energy
between the parties (e.g., inscription in the potential of B&H. This especially applies for
Land Registry, enforcement proceedings wind and solar projects as investments in
on assets in Bosnia and Herzegovina, hydro projects are increasingly disillusioned
bankruptcy and liquidation proceedings by ecological concerns. Taking into
etc.). consideration the energy crisis triggered by
the war in Ukraine and the already existing
Judicial immunity is mentioned in the
trend in B&H of exporting electricity, this
Article 25 of the Law on civil procedure
trend is likely to grow even further.
and it is defined as the right or privilege
of certain foreigners, foreign states and 28. Are any significant development or
international organizations to be exempted change expected in the near future
so that civil proceedings cannot be in the project finance market?
conducted against them before a domestic
The post-covid economy is expanding,
court. Heads of diplomatic missions and
recovering, and growing to surpass the
other representatives of diplomatic status
2019 figures. However, there are no new
also have immunity, except in cases
legal reforms or amending procedures that
provided by the Vienna Convention on
could further benefit the project finance
Diplomatic Relations. Immunity does not
market.
apply if the authorized representative
waives it. Such waiver is irrevocable and 29. What are the alternative reference
enforceable. interest rates which are being
26. Can financing documents provide
for arbitration clauses?
EURIBOR benchmark rates are already the
The disputes will be resolved in a form
most commonly used basis or reference
of arbitration if the parties agreed to the
rate in B&H. Some variable rate loans can
jurisdiction in form of a written agreement
use the official consumers’ price index.
/contract, in respect of a dispute, or in
respect of future disputes that may arise
from a contract concluded among them.
The contract shall be deemed concluded
also through an exchange of letters,
telegrams and faxes, as well as when the
arbitral jurisdiction clause is contained
in the general conditions of the contract
which are an integral part of the contract.
Therefore, financing documents can
provide for arbitration clauses, if all legally
set conditions have been met.
G. Trends and Projections
jurisdiction?
36
BRASIL
CESCON BARRIEU
Maurício Teixeira dos Rafael Baleroni

Santos Partner
Partner rafael.baleroni@
mauricio.santos@ cesconbarrieu.com.br
cesconbarrieu.com.br
A. Overview and securities laws (like the Brazilian

Corporations Law (Law 6,404/1976), the
1. What is the main legislation and Brazilian Securities Act (Law 6,385/1976)
international treaties governing the and regulations from the Brazilian
project financing in your jurisdiction? Securities and Exchange Commission
There are no specific rules or international (Comissão de Valores Mobiliários), such as
treaties on project financing in Brazil. the recent Resolution 160/2022 on public
offerings. Local infrastructure project bonds
Transactions rely on general rules affecting
and green bonds or green securitization
either project documents (construction,
transactions enjoying tax benefits are
offtake, operation and maintenance,
governed by Law 12,431/2011 and related
charter, etc.) or financing documents
regulations, including specific rules from
(security interests, loans, capital markets
each applicable Ministry on considering
instruments and securities, etc.), either certain projects a matter of public priority
in the domestic or cross-border context for enjoying tax benefits.
(when private international law rules and
principles become relevant). Cross-border transactions take into account
conflicts of laws rules (such as Decree
Mostly, contracts, financial instruments 4,657/1942 and international procedural
and security interests will be governed by aspects in the Civil Procedure Code), as
private law in general (like the Brazilian well as laws governing foreign direct
Civil Code – Law 10,406/2002 – or specific investment, registration of cross-border
laws on certain types of security interests financing transactions, foreign exchange
– such as Law 4,728/1965 for fiduciary transactions and the ability to have USD-
transfer), while debt capital markets denominated contracts (especially Law
instruments will be governed by corporate 14,286/2021). Question 25 discusses
37
the ability to use non-Brazilian law in – ANA), etc. Environmental licensing and
contracts. In the public international law regulations are a critical element in project
context, Brazil has signed various bilateral development, governed by the National
investment treaties (BITs) and its own Environmental Policy Law (Law 6,938/1981)
model of Agreements for Cooperation and and regulations from the environmental
Facilitation of Investments (ACFIs) but has authorities (the most important being the
not ratified most of them7, this typically federal licensing authority IBAMA –Instituto
not being a relevant aspect for project Brasileiro do Meio Ambiente e dos Recursos
financing in Brazil. Brazil is not a party to Naturais Renováveis).
the treaty on ICSID – International Centre
for Settlement of Investment Disputes,
market in your jurisdiction, and
despite having signed and ratified all other
what are the most significant project
World Bank treaties (IFC, MIGA, AID and
IBRD). financings closed during the last 12
months?
Finally, a substantial portion of
infrastructure projects financed through Project finance is consolidated in Brazil. This
project financing structures are subject type of transaction has been used since
to governmental authorizations and/or the mid-1990s to finance investments in
involve public entities. Laws governing Brazilian infrastructure. Many infrastructure
concessions (Law 8,987/1995), public- projects in place were only made possible
private partnerships – PPPs (Law by project finance structures, including oil
11,079/2004), public works and bids (Law and gas fields, energy power plants, energy
14,133/2021) and state-owned enterprises transmission lines, toll road projects, ports,
(Law 13,303/2016) are relevant in such airports, etc.
contexts. Also, such projects need to
Significant recent examples in Brazil
consider the specific laws for the applicable
sector and need to comply with regulations include:
from the applicable agency, for example, • Toll Road – Eixo SP. A 1,273 km road
National Telecommunications Agency concession in the states of São Paulo
(Agência Nacional de Telecomunicações – and Mato Grosso do Sul, financed
ANATEL), National Electricity Regulatory during the Covid-19 pandemic. The
Agency (Agência Nacional de Energia Elétrica financial structure involved a R$ 2.65
– ANEEL), National Agency of Petroleum, billion loan from federal development
Natural Gas and Biofuels (Agência Nacional bank BNDES (Banco Nacional de
do Petróleo, Gás Natural e Biocombustíveis do Desenvolvimento Econômico e Social)
Brasil – ANP), National Land Transportation and a R$ 350 million local project bonds
Agency (Agência Nacional de Transportes (infrastructure debentures) issuance.
Terrestres – ANTT), National Waterway
Transportation Agency (Agência Nacional • Public Lighting in the Rio de Janeiro city
de Transportes Aquaviários – ANTAQ), – Smart Luz. A 20-year public-private
National Civil Aviation Agency (Agência partnership for public lighting, was also
Nacional de Aviação Civil – ANAC), National granted during the Covid-19 pandemic.
Water and Basic Sanitation Agency (Agência The project was based on a R$ 925
Nacional de Águas e Saneamento Básico million issuance of local project bonds.
7 The list can be seen at UNCTAD: https://investmentpolicy.unctad.org/international-investment-agreements/countries/27/

brazil
38
Besides the LED bulbs, the concession is The loan included R$3.31 billion in
composed of a smart city control center non-recourse bank guarantees from 10
connected with 5,000 Wi-Fi access banks, that partially covered the risk
points, 6,000 traffic controllers, 10,000 BNDES takes during construction.
cameras and 4,000 storm drains. B. Security Interest
• Buzios Field Acquisition Financing. US$
1.45 billion acquisition financing,
structured as a project-based loan, security types in project financings in
of a portion of the Pre-Salt Búzios your jurisdiction?
Field, by the local subsidiary of There are two main types of security
the Chinese oil company CNODC. interests available. On one hand, pledges
Buzios is an area originally under the (moveable assets) and mortgages (real
onerous assignment regime (Cessão estate, vessels and aircraft), in which title to
Onerosa) and subject to equalization the asset remains with the debtor and the
arrangements under a Co-Participation creditor has an in rem lien over the asset. On
Agreement (CPA) with Brazilian oil
the other hand, fiduciary transfers (fiduciary
company Petrobras.
assignment in the case of rights, fiduciary
• Mataripe Refinery (RLAM) Acquisition property in the case of goods), in which title
Financing. Acquisition financing, to the asset is transferred to the creditor
structured as project finance, of while the debtor remains in possession of
the Mataripe Refinery, acquired the asset for as long as a default has not
by Mubadala from Petrobras, with occurred.
senior and mezzanine tranches, using
both bank finance and foreign notes The main differences between these
issuances as sources of debt. types of interest regard priority/rights
in insolvency and remedies outside
• Anemus wind farm. A wind farm
an insolvency scenario. Pledges and
with installed capacity of 138.6 MW,
developed by local power company 2W, mortgages are fully subject to the stay
backed by a R$ 475 million local project in restructuring filings and enjoy priority
bonds issuance. It is the first power as secured creditors in bankruptcy
generation project in Brazil exclusively liquidations. As fiduciary transfers remove
for the free market (i.e., not backed by ownership rights from the debtor, these
regulated long-term PPAs obtained interests are only limitedly subject to the
in energy auctions organized by the restructuring stay (they cannot be removed
Brazilian Government) with a revolving for a certain period of time if necessary for
portfolio of offtakers that are medium the continuation of the business/recovery
and small size consumers with short- of the company) and are not part of the
term PPAs. bankrupt state, enjoying a de facto super-
• Line 6 of the São Paulo Subway. A R$6.9 priority ability to seize the assets and use
billion sustainable financing from proceeds from the sale to repay the loan.
BNDES to Acciona and other sponsors As such creditors are not subject to the
to develop the largest public-private restructuring plan/bankruptcy liquidation
infrastructure project in Latin America, priority rules they do not participate in the
to be followed by a R$500 million approval process of a restructuring plan.
second tranche and R$ 7.85 billion Outside of an insolvency scenario, fiduciary
contributions from the State of São transfers enjoy quicker procedural remedies
Paulo during the construction period. to repossess the relevant asset.
39
In certain cases, there are concerns that from third parties; (iv) bank accounts
holding the fiduciary title to a certain and its investments; (v) equipment and
asset might result in liabilities that would other physical goods, including the assets
otherwise not affect a secured creditor, produced in an extractive project (such as
chiefly, environmental liabilities. Although oil, gas, minerals); (vi) real estate in which a
there are no statutory safe havens for project is developed, etc.
secured creditors in this regard, there are
no precedents of such types of secured 4. Can the shares of a company be
creditors being held liable for debtors’ pledged as a security to the benefit
liabilities while they held a secured creditor of lenders? If so, is there a specific
role. Once seizure of the asset occurs, requirement in terms of formalities
regardless of the type of security interest, or procedure to be followed for
then creditors must ensure compliance establishing or perfecting a share
with applicable legal requirements to one pledge?
holding the possession. Yes, equity interests can be granted as
In the context of concessions of security to the benefit of lenders. Certain
public services, usually developed by perfection requirements apply. The
concessionaires that are specific purpose security document shall provide for: (i) the
vehicles, the Brazilian Concession Law estimated or maximum credit value; (ii) the
(Law 8,987/1995) and the PPP Law (Law maturity date; (iii) the interest rate, if any;
11,079/2004) provide for step-in-rights, and (iv) the description and specifications
which allows lenders to take temporary of the equity interest. The lien must be
control over the concessionaire in case of annotated in the corporate share registry
non-payment, towards making its financial book (in the case of corporations). In the
restructuring and ensuring the continuity case of limited liability companies, it is
of services. In this case, lenders are common practice to amend the company’s
exempted from demonstrating technical articles of association in order to annotate
and financial qualification requirements the lien. In the case of limited liability
that would apply in an ordinary change of companies, the security document must
control. The Concession Law grants a safe be registered with the competent Registry
haven for lenders in this scenario, explicitly of Titles and Documents for perfection
protecting them from liabilities that could purposes. In the case of corporations, it
apply regarding taxes, penalties, and is common that the lien encompasses
obligations with third parties (including the not only shares but also other rights and,
government and employees). thus, that it also must be registered with
Security interests can be established over the competent Registry of Titles and
a variety of debtor’s rights or assets, and Documents as a consequence.
common collateral includes: (i) concession 5. Is private sale a recognized method
interests, covering not only receivables but for the enforcement share pledge?
also allowing lenders to forcefully assign What are the endorsement types
the concession (contractual position) to typically used for the share
a third party, provided that the necessary certificates?
regulatory approvals are obtained;
(ii) equity interests (shares or quotas, Yes, a share pledge may be enforced by
depending on the type of corporate entity), means of a private sale (out-of-court sale),
which may also include temporary step-in provided that (i) the agreement allows the
rights as detailed above; (iii) receivables private sale or (ii) the creditor obtains the
40
debtor’s express consent. The sale must Foreclosure of security interests (other than
not be made at a price less than 50% of the real estate mortgages) may be judicial or
asset’s evaluation (preço vil). It is advisable extrajudicial (also known as out-of-court
that out-of-court enforcement processes or private), provided that the debtor
adopt certain minimum publicity and/ has authorized extrajudicial foreclosure.
or sales effort procedures, to prevent any Security interests over real properties
potential creditor’s negligence claim from are enforced by means of judicial public
a debtor. The security contract may be auctions.
drafted to address some of those concerns Foreclosure procedures vary by the type of
beforehand. Pactum commissorium is collateral and security interest. In general,
not allowed in Brazil and, thus, except in secured creditors may privately dispose
exceptional circumstances mentioned of the assets if the debtor defaults on
in question 7, sale of the collateral is the secured obligation and the contract
mandatory after enforcement. provides for that. It is advisable that
out-of-court enforcement processes
Transfer of shares title is done by
adopt certain minimum publicity and/
annotating the new owner in the
or sales effort procedures, to prevent any
company’s corporate books. Should the
potential creditor’s negligence claim from
company resist, a court order may be
a debtor. The security contract may be
obtained for this purpose. drafted to address some of those concerns
Share certificates are unusual in Brazil, and beforehand. The sale proceeds must be
typically only used in the context of units applied against the secured obligation and
and depositary receipts markets. Brazilian excess proceeds returned to the debtor
companies cannot issue bearer shares. – pactum commissorium is not allowed in
Brazil. There are limited circumstances,
A lien over shares may also establish however, in which the lender may keep the
restrictions on voting rights. collateral as payment, in particular: (i) when,
6. Can security interest be established after the default, debtor and creditor agree
on the delivery of the asset as payment-in-
kind of the debt, for the value of the asset;
and (ii) in an executory proceeding, if no
A security interest can be established bids are placed at the auctions, in which the
over future assets, rights and receivables, value of the asset will be applied against
provided that these can be described – for the outstanding balance.
instance, future receivables to arise from If a debtor seeks insolvency protection by
a contract. Brazilian Law No. 10,931/2004 means of a restructuring filing, ongoing
(article 31) explicitly allows a lien over lawsuits against the debtor are suspended
future assets to secure a Bank Credit Bill (automatic stay). Creditors may not initiate
(Cédula de Crédito Bancário – CCB), which new claims and may not continue pending
is a common financing instrument used by lawsuits. If successful, the restructuring
local financing institutions. will result in a plan establishing new
7. What are the steps to be taken by terms of payment, novating the previous
the lenders to enforce their security obligations. Security interests cannot be
voided, as a result of a restructuring plan,
without the secured creditor’s consent.
insolvent and/or commences Should a bankruptcy liquidation occur,
composition process? only the trustee (no longer the debtor’s
41
officers) may represent the debtor’s estate. a party to seek another person’s right
The trustee may not negotiate with the in court, unless expressly provided by
creditors to reduce outstanding debt or the law – such as in the case of local bonds
order of payments. (debentures) trustees. The current Code
of Civil Procedure (in force since March
Bankruptcy is undertaken to: (i) establish
2016) has a broader language; most
the general list of creditors; and (ii) liquidate
scholars understand that private contracts
the assets of the debtor in order to pay the
can now provide for an agent to act as
creditors. Once the general list of creditors
representative of a group of lenders before
is established and the assets are sold, the
courts. In restructurings and bankruptcies,
creditors are paid in accordance with their
it is not uncommon to have secured
classes.
creditors groups listed by reference to a
Secured claims up to the value of the collateral agent.
collateral are third in priority, after (i) super-
Brazilian law contracts must provide
priority or extra-bankruptcy claims (such
specifically for such rights so that a
as court costs and amounts owed to the
collateral agent may pursue the secured
bankruptcy trustee), and (ii) labor claims
creditors’ rights. However, in a foreign-law
up to 150 times the Brazilian minimum
contract, if the applicable law allows the
monthly wage (currently R$196,800 or
trustee or agent to foreclose or otherwise
approximately US$ 38,000) per creditor.
take measures on behalf of the lenders,
They have priority over, among others, tax
such power would be acceptable to
claims, unsecured claims, labor and secured
Brazilian courts. Security agreements
claims in excess of the limits mentioned
may empower the trustee to, acting in
before and subordinated claims.
the name of the lenders, appoint legal
The super-priority class also includes counsel to represent the lenders in court
creditors secured by assets transferred procedures as well as to hold, receive and
to them on a fiduciary basis and financial manage collateral and to carry out off-
institutions that have entered into certain court procedures, such as the extrajudicial
forward foreign exchange transactions enforcement of the collateral.
related to exports. Fiduciary creditors are
not subject to the automatic stay during If a parallel debt structure is valid under the
the restructuring, being able to repossess laws governing the credit arrangements,
and sell the asset (save limited exceptions it would, in principle, be acceptable to
in which the assets are necessary for the Brazilian courts.
continuation of the business). C. Incentives and Restrictions
8. Is security trustee concept 9. What are the main incentives and
enforceable in your jurisdiction? If exemptions for project financing in
not, is an alternative mechanism, your jurisdiction?
Brazil has various tax incentives for
Brazil does not have a clear equivalent to investments in the infrastructure sector
the Anglo-Saxon trust model, using some commonly financed by project finance,
other mechanisms to provide for separation including, among others:
of property in certain cases and/or
• REIDI, a special tax regime for
protection of rights from groups of secured
infrastructure development. It benefits
creditors.
transportation, ports, energy, basic
Traditionally, Brazilian law did not allow sanitation and irrigation projects. It
42
suspends and eliminates certain federal Other incentives may be available

taxes levied on the importation and depending on the type and location of the
local purchase of fixed assets for such project.
projects.
11. Are there any restrictions for
• REPORTO, a special tax regime borrowing bank loans and
applicable to investments in the shareholder loans from abroad and/
modernization of ports. It suspends and or in a foreign currency?
eliminates certain federal taxes levied
on the importation of fixed assets used Cross-border financial transactions (both in
in port activities, which will remain valid local and foreign currency) are allowed in
until December 31, 2023. Brazil. Such transactions must be registered
with the Central Bank, in accordance with
• REPETRO-SPED, a special customs
Law No 14,286 of December 29, 2021
regime applicable to the import of
and Central Bank Resolution No. 278 of
goods used in the oil and gas activities.
It suspends all federal taxes and December 31, 2022. Registration ensures
social contributions related to the the ability to remit principal and interests
importation of such equipment and pursuant to the underlying contract.
allows reduction of state taxes due in Based on the new regulatory framework,
the import. not all cross-border financial transactions
10. Are there any incentives or are subject to registration with the Central
exemptions specifically applicable Bank. Reporting is only mandatory if the
to foreign investors? transactions meet any of the following
Focusing on foreign investors/financiers, we thresholds: (i) US$1,000,000 (or more), or
highlight two relevant tax provisions: the equivalent in other currencies, for cross-
border credit transactions, anticipated
• Brazilian Project Bonds Law (Law receipt of exports and foreign financial
12,431/2011) provides that foreign leasing with payment terms exceeding 360
investors holding such bonds benefit days; or (ii) US$500,000 (or more), or the
from 0% withholding tax. Such equivalent in other currencies, for financing
tax-exempt bonds are a common transactions for the import of goods or
mechanism in Brazil to use debt capital
services with payment terms exceeding 180
markets to finance infrastructure
days.
investments. Among other
requirements, the bonds must have Cross-border financial transactions
a weighted average duration of more subject to registration are registered in
than 4 years and the proceeds thereof the currency elected by the Parties under
must be used in certain investment the agreement (either Brazilian Reais or
projects. any given foreign currency). The funds
• Brazilian Law No. 9,481/1997 provides remitted to Brazil are always converted into
that international charter payments are Brazilian Reais when received by the local
subject to a 0% withholding tax rate debtor unless funds are already parked on
(except if the beneficiary is located in a non-resident account in Brazil owned by
a tax haven jurisdiction). Most offshore the borrower (in which case they would
oil assets and ship financing structures already be denominated in Brazilian Reais).
are designed to benefit from this Remittance of principal and interests also
advantage, coupled with REPETRO- takes into account the amount registered
SPED. in the currency elected by the Parties under
43
the agreement. Loans are registered in their Companies may enter into any foreign
currency of origin, even though converted exchange transactions that are legal,
into Brazilian Reais when received by based on economic reasons, supported by
the local debtor. Remittance of principal documented obligations and in accordance
and interests also takes into account the with the regulatory requirements
amount registered in the currency of origin. applicable to the transaction. The entity
This registration is (a) is carried out by responsible for the remittance of funds
the debtor by means of the Central must classify foreign exchange transactions
Bank’s electronic systems and is usually according to their legal nature/code and
obtained automatically, (b) is of a provide such classification to the local bank
declaratory nature (meaning that the or financial institution engaged to settle the
debtor is liable for any incorrect or false foreign exchange transaction.
information provided to the Central Bank), Foreign exchange transactions are subject
and (c) is aimed at (c.1) providing the to the Tax on Financial Operations (“IOF
Central Bank with information regarding Tax”), levied in accordance with the type
exchange movements of foreign capital,
of underlying transaction. Nonetheless,
(c.2) gathering statistics on total foreign
currently IOF Tax applies at a zero percent
assets and liabilities of the Brazilian
on any cross-border loan, irrespective of
economy, in order to evaluate the degree
their maturity. Interests on loans are subject
of internationalization of the Brazilian
to withholding taxes (typically at a 15%
economy, and (c.3) giving foreign investors
the right to repatriate capital remitted to rate, when non-tax heaven jurisdictions are
Brazil. involved, and 25% in such cases).
Interest payments in shareholder loans are 12. Are there any restrictions for
subject to thin capitalization rules (Law foreign investments in your
12,249/2010, regulated by Federal Revenue jurisdiction?
Normative Instruction 1,154/2011). If not Foreign direct investments (“FDI”) and
complied, such interests are not deductible returns on them are allowed in Brazil.
in the calculation of the local entity’s
corporate income taxes, but this does not Based on Law No 14,286 of December
affect the ability to remit principal and 29, 2021 and Central Bank Resolution
interests. As a rule, the debt equity ratio is No. 278 of December 31, 2022, not all
of 2:1, which means that the indebtedness transactions associated with FDI are
cannot exceed two times the equity held subject to registration with the Central
by such shareholder. Any interest payable Bank. Reporting is only mandatory for
to abroad should also observe Brazilian each individual FDI event/transaction (e.g.,
transfer pricing rules. capitalization, payment of dividends, etc.)
if they exceed, in each case, US$100,000 (or
The funds remitted in foreign currency more), or the equivalent in other currencies.
to Brazil must be converted into Brazilian
Reais by way of foreign exchange contracts. Regardless of the waiver for event-driven
These exchange contracts must be made FDI registrations, the local entity receiving
with local banks and financial institutions the FDI must report its total FDI to the
authorized by the Central Bank to operate Central Bank (i) on a quarterly basis, for
in the foreign exchange market. The entities with FDI exceeding BRL300,000,000;
exchange rate is freely negotiated between (ii) on an annual basis, for entities with FDI
the parties to the foreign exchange exceeding BRL100,000,000 (but lower than
contract. BRL300,000,000); or (iii) every five years,
44
for entities with FDI exceeding BRL100,000 financing structures. However, in

(but lower than BRL100,000,000). infrastructure sectors (e.g., energy, oil
and gas, transportation), regulators will
FDI subject to registration (both for event-
typically require minimum equity and/
driven registrations and for ongoing reports
or financial robustness from shareholders
to the Central Bank, as the case may be)
as a condition to grant a concession. For
must be electronically registered with the
financial and business reasons, banks will
Central Bank (on a declaratory basis) by the
local entity receiving the FDI. No minimum typically require a minimum sponsor equity
stay period for foreign investments is commitment when structuring project
required. Foreign investors may, at any financing transactions.
time, dispose of their equity in Brazilian 14. Please explain the registration
companies and repatriate the invested and filing requirements which
capital, provided that it is supported by are applicable for project finance
documentation of the transaction and that documents to be valid and
the remittance has economic grounds. enforceable in your jurisdiction.
Repatriation of FDI may be subject to
capital gains tax. Dividend payments are Brazilian collateral documents must be
not subject to taxation. Brazilian companies registered to be perfected. Thus, once
may pay interest on their equity. Those executed, the security agreement must
payments to foreign shareholders are be registered with the competent public
subject to withholding tax. registry, depending on the type of
collateral and its location (e.g., Real Estate
There are restrictions to the participation of Registry for real property and pledge over
foreign capital in certain economic sectors. equipment and machinery, Registry of
These restrictions involve a state monopoly Titles and Deeds for security interests over
over certain activities, prohibitions with most moveable goods, Maritime Court
respect to ownership or control by non- for Brazilian ships). Security agreements
Brazilians of certain Brazilian assets, or related to certain assets (e.g., real property
the limitation of FDI in certain types of and ships) require public form – i.e., the
businesses not to exceed a specific amount. parties’ representatives shall be present
Sectors include: development of activities
before a public official who will write
involving nuclear energy operations,
down the agreement as a public deed.
hospitals and healthcare services, mail and
Security interest over credit rights requires
telegraphs, aerospace industry (but not the
notification or, if required by the underlying
production or sale of satellites, aircraft, its
agreements, consent of the debtor.
equipment), acquisition of rural properties
Notarization of signatures is possible but
and land on areas of international
not mandatory (and its use has reduced
frontiers, financial institutions, public
after the adoption of certified electronic
air transportation services, mass media
signatures).
companies (newspapers, magazines, radio
and TV broadcasting). As a general rule, foreign documents do
not require specific measures to be valid
and enforceable in Brazil. However: (i) the
requirement, under the legislation
presentation to courts of documents in a
language other than Portuguese requires
that the documents be translated by a
There are no specific minimum equity sworn translator registered as such in Brazil;
requirements due to the use of project (ii) foreign documents must be registered
45
with the Registry of Titles and Deeds to are authorized to hire P&I – protection and
be presented as evidence before Brazilian indemnity and H&M – hull and machinery
authorities; however, in practical terms, insurance coverage internationally.
Brazilian courts will typically only require
the sworn translation; (iii) notarization
of foreign documents and/or of their
signatures is not mandatory, but foreign
lenders?
notarizations and foreign public documents
must be legalized, either pursuant the Yes. Local and foreign secured creditors
Hague Apostille Convention of 5 October can be made third-party beneficiaries or
1961 (Brazil is a party thereto and it shall co-insured parties under the insurance
apply if the country of origin is also) or and reinsurance policies, and/or create a
by authentication by a consular official of security interest over the relevant policy.
Brazil in the relevant jurisdiction.
17. What are the other complications,
In terms of local fees, fee values are set concerns or other issues in relation
at state level. Notarization is charged per to the insurance provisions
signature certified and immaterial (about under the project financing
US$ 2.00 per signature). Registration fees documentation, if any?
are generally charged based on: (i) the
The Brazilian Civil Code provides that the
number of pages and other quantitative
insurance company has the subrogation
aspects of the document; or (ii) the
right against the party that caused the
transaction amount, but subject to a cap
damage, its representatives and successors,
(typically around US$ 12,000 in Registries
which may require a waiver of subrogation
of Titles and Deeds, but higher amounts in
rights.
Real Estate and Maritime Registries). Fees
related to public deeds (due to the notary The inclusion of a third party in an
office preparing the deed) are charged insurance policy requires an insurance
based on the underlying asset value and endorsement, and parties should liaise in
also subject to caps, and vary state-by-state. advance with the insurance company.
There are no stamp duties in Brazil, i.e., The use of third-party beneficiaries or co-
mandatory taxes that are owed to ascertain insured parties clauses is more frequent
the validity of the underlying transaction. than the creation of security interests over
policies. Although typically more effective
D. Insurance towards insurance companies, these
15. Can local insurance policies be alternatives do not create in rem rights,
governed by a foreign law? which would provide protection from third
parties trying to attach on such receivables.
No, local insurance policies must be
governed by Brazilian law. In addition, E. Financing of Public-Private
Brazilian entities cannot hire foreign Partnership (PPP) Projects
insurance except in limited situations,
18. Is PPP a permitted method of
in particular: (i) coverage of risks for
developing projects, and if so, have
which there is no insurance available in
Brazil or in specific situations where the
local prices are not compatible with the
international market; and (ii) coverage of Yes, the PPP is a permitted method of
risks overseas. Brazilian shipping companies developing projects in Brazil. The PPP
46
Law (Law 11,079/2004) defines them In financings of offshore oil assets and
as a relationship established between other vessels chartered by Petrobras (which
public authorities and private partners to are not PPP or concession arrangements),
develop infrastructure projects. PPPs are contract consent documents and mortgage
distinguished from ordinary concessions to letters of quiet enjoyment partially fulfil the
the extent that concessions do not enjoy role of a direct agreement between lenders
and Petrobras (as offtaker).
public funding but only payments made by
the users of the services. 20. Please indicate the types of host
There are two different types of PPPs in treasury guarantee, debt
Brazil: (i) Administrative PPP, in which the assumption etc.) available in your
public authority will pay the private partner jurisdiction.
to implement and execute the services
The PPP Law (Law 11,079/2004) provides
inherent to the activity; and (ii) Sponsored for a federal PPP Guarantee Fund, in the
PPP, in which the public authority will pay value up to R$ 6 billion with the aim of
up to 70% of the provision of services (a guaranteeing the debts assumed by the
payment higher than 70% requires specific public partner in the PPP. Nevertheless,
legislative approval) and the remaining will such Guarantee Fund has never been used
be obtained by payments made by users and, more recently, in 2014, a new fund,
of the services (i.e., public funding coexists named Fundo Garantidor de Infraestrutura
with user payments) – FGIE, was established. FGIE is managed
by Agência Brasileira Gestora de Fundos
PPPs were implemented by Brazilian states Garantidores e Garantias S/A – ABGF,
and municipalities in several sectors, such a company controlled by the federal
as water and sewage treatment, highways, government, and, among other purposes,
subway transport systems, sports stadiums, FGIE can grant guarantees in favor of
hospitals, urban mobility projects, concessionaires of PPP projects in Brazil.
public hospitals, schools, and prisons. There are ongoing discussions on how to
Municipalities are currently implementing improve the federal support to states and
various public lighting PPPs. municipalities PPPs.
19. Are direct agreements between the States and municipalities have also
created their own PPP guarantee funds
(without much success as most of the
time they are not isolated from the State
if so, commonly seen in the Project general funds), in addition to other tools,
Finance market in your jurisdiction? in order to provide guarantees under PPP
They are possible but uncommon. As an agreements. Finally, PPP arrangements
example, the State of São Paulo used them sometimes provide specific guarantees. For
in concessions for toll roads: São Paulo instance: (i) the State of Minas Gerais used
a creditworthy separate public company
Midwest Roads; Calçados Road; Rodoanel
(CODEMIG) as guarantor in the toll road
Norte; and Piraciaba-Panorama Road. They
MG-050, (ii) the State of Bahia used tax
are referred to as “Triparty Agreements”, receivables mandatorily transferred from
whereby the concessionaire, the creditors, the Federal Union to the State as collateral
and the public administration will be to its PPPs, (iii) municipalities often use
parties and adjust its rights and obligations public lighting taxes, collected by local
regarding an event of default. The direct energy distribution companies, as collateral
agreement was, however, optional. in public lighting PPPs.
47
21. Are political risk events usually principis affects the economic balance of a
under the responsibility of the contract with the public administration, the
public party or the private party private party is allowed to claim contractual
under the PPP agreements? changes to reestablish the original contract
balance (except if the relevant agreement
The allocation of risks must be verified
expressly allocates such risk to the private
in each PPP agreement, as specific risk
party).
matrixes are prepared for each project
and risk sharing is an essential element in 23. Is force majeure specifically
PPPs. “Political risk” is a vague concept, but regulated under the local
typically seems to encompass electoral legislation?
aspects, social demonstrations, socio- Yes, force majeure is regulated by Brazilian
political stability, payments from the public Civil Code as “the necessary fact, whose
partner and the ability to have cross-border effects could not be avoided or prevented”.
payments. Scholars and court precedents further
Depending on how these risks are interpret this definition to require that
manifested, their allocation may be to some requisites are present so that a force
the public or private party. For instance, majeure event may be characterized: (i)
payment default from the public partner the event must have been inevitable and
would be a breach of contract, subject to unavoidable for the party to be released
court remedies. Reduction of income due from his obligations; (ii) the event must
to a reduction in the use of the service be out of the ordinary course of business
following social demonstrations may have and prevent the party from performing
been allocated to the private or public its obligations; (iii) there must be a direct
partner. Risks that materialize due to a connection between the event and the
change in law and affect the economic inability to perform; and (iv) the party shall
balance of the contract would allow for a not have contributed to the occurrence of
rearrangement of the economic-financial the event. The characterization of an event
balance of the contract. of force majeure is determined on a case-
by-case analysis.
protected against a change in Notwithstanding the legal definition,
law passing subsequent to the parties are free to adjust in their contracts
signing of the relevant concession whether certain events will or not be
agreement? characterized as force majeure, as well as to
decide on their risk allocation.
While provisions “freezing” the laws to
the moment of signing are not valid, 24. What are the general environmental
investors and lenders are protected from and social requirements in project
financings?
certain changes in law both as a result of
the constitutional protection to vested Environmental licensing is required
rights and of the economic-financial for infrastructure projects in Brazil.
balance clause in contracts with the public Entrepreneurs are required to present an
administration (public works, concessions environmental impact assessment (EIA) to
or PPPs). In addition, the Concessions Law start the licensing process, which comprises
establishes that, with exception of income three licenses: (i) previous license – states
taxes, a change in tax laws gives cause to that the project is environmentally possible
the rebalance of agreements. If factum and establishes preliminary compensations
48
and limitations for the project; (ii) Assets that may be necessary for the
installation license – authorizes the continuation of the provision of public
construction of the project and establishes services or that are reversible (i.e., they are
compensations and limitations for its transferred to the government at the end
construction; and (iii) operation license – of the concession period) are immune from
authorizes the operation of the project and attachment and seizure, whoever owns
establishes compensations and limitations them.
for its operation. Certain regulated sectors
have additional licensing requirements,
such as projects that require deforestation,
seismic and drilling activities. Depending Yes, financing documents may provide for
on the type of activity to be performed by arbitration clauses. In domestic arbitrations,
the project company, health and safety the Arbitration Law (Law 9,307/1996)
laws will apply. applies. In international arbitrations, Brazil
is a party to the New York Convention
F. Jurisdiction, Waiver of and to the MERCOSUL International
Immunity Commercial Arbitration Agreement. Foreign
25. Are submission to a foreign law and arbitral decisions must be confirmed by
the waiver of immunity provisions the Brazilian Superior Court of Justice, in
enforceable? accordance with requisites set forth in the
New York Convention.
Although not explicit in the Brazilian
conflicts of law rules and without Arbitration clauses in loan agreements are
court precedents confirming it, most uncommon in Brazil, as the disputes will
international financing practitioners agree typically involve a straightforward payment
that the Brazilian law allows the choice of default in which creditors can quickly seek
law in cross-border agreements involving to collect money and attach assets through
contractual obligations of private parties courts, given that arbitrators lack police
(including mixed capital companies, power (i.e., the ability to order seizure of
such as Petrobras). This consensus was assets).
reinforced after the Economic Freedom G. Trends and Projections
Act (Law 13,874/2019). Submission to
foreign courts is also valid between private 27. What are the main current trends
companies, except in situations in which in project financings in your
Brazilian courts have exclusive jurisdiction jurisdiction?
(for example, lawsuits regarding real estate In terms of financing, three main trends can
located in Brazil). Security agreements over be noticed:
assets located in Brazil (i.e., the creation of
(1) Acquisition financing of operating
in rem rights) and concession agreements
assets via project finance structures,
are mandatorily governed by Brazilian laws.
with bidders/purchasers levering
Except in connection with acts of their acquisition prices on the assets
commercial nature, public entities require and revenues of the target company/
prior legislative approval to submit project. Examples are very much
themselves to foreign jurisdiction or to present in the Petrobras divestments
waive immunity provisions. Mixed capital of refineries and oil fields and in the
companies do not have immunity based acquisition of certain operating power
solely on their subjective characteristics. plants.
49
(2) Green and sustainability-linked sector expected to use project finance for
financings. “Green” financing had its development is the sanitation sector,
a push from 2020 onwards when in which large investments are expected
Decree 10,387 regulated Law 12,431 (for instance, R$ 30 billion in Rio de Janeiro
to allow tax benefits to local project alone). In the short term, toll roads and
bonds that provide relevant social other transportation projects are expected
or environmental benefits. Various as well – for example, the Nova Dutra
issuances were certified green due Road (BR-116/RJ/SP), a 625,8 km road that
to benefits such as reduced carbon connects Rio de Janeiro and São Paulo, two
emissions (mostly in the energy of main cities of Brazil, has R$14,8 billion in
sector), advantages to urban mobility projected investments in connection with
and reduction in the use of private its new concession.
automobiles (such as subway and
tram companies) and public health 28. Are any significant development or
gains (water and sanitation projects). change expected in the near future
Sustainable finance in Brazil began in the project finance market?
with cross-border corporate financings The Brazilian project finance market is
and local corporate bonds issuances, in constant development. Even during
and is currently expanding to local the Covid-19 pandemic, several projects
project bond issuances, with provisions remained under development. Brazilian
for reduced interest rates in case of new Public Works and Bidding Law (Law
operational improvements (such as 14,133 of 2021) updated several rules
reduced water usage) or meeting of and reduced bureaucracy in this regard.
diversity and inclusion targets (such as Law 14,286, which came into force on
percentage of women in managerial December 31, 2022, simplified rules on
roles). foreign exchange, foreign direct investment
(3) New structures in financings in which registration and expanded the situations in
multilateral institutions participate. In which contracts can be USD-pegged.
order to further their role of financing In fact, as a result of the new foreign
infrastructure with positive social and exchange law authorizing USD-pegged
economic externalities, multilaterals power purchase contracts when the
are not only providing direct financings offtaker is an exporter, it is expected that
but also other forms of credit support, the energy sector will benefit from an influx
such as via equity funds, mezzanine of foreign financing – the fact that revenues
positions in securitization funds, credit were BRL-denominated created foreign
guarantees in bonds issuances and co- exchange risks that shunned away foreign
financing with local institutions and/or financiers.
capital markets instruments. Particularly
the latter often results in complex There is currently uncertainty on the role
collateral sharing arrangements, as that BNDES will take after the current
the underlying credit instruments are federal administration took office in 2023.
typically not fully aligned. Market expectation is that BNDES will go
back to its past role of being the main
In terms of economic sectors, energy and financier of infrastructure in the country,
oil and gas are, historically, sectors with moving away from the stance (of the past
high volumes of funding with project six years) of structuring projects to be
financing structures. Currently, the main developed and financed by private parties.
50
29. What are the alternative reference While the Brazilian Federal Revenue does
interest rates which are being not regulate the topic, banks are using the
commonly used in your jurisdiction following rates: (i) Overnight Financing Rate
during the LIBOR Libor (London (SOFR), of the United States of America; (ii)
Interbank Offered Rate) transition Sterling Overnight Index Average (Sonia),
period? of the United Kingdom; (iii) Euro Short-Term
Rate (EST), of the European Union; and (iv)
Until the moment the Brazilian Federal Tokyo Overnight Average Rate (TONAR), of
Revenue (Receita Federal Brasileira) did Japan.
not publish an official pronouncement
regarding LIBOR (London Interbank Offered
Rate) transition. Whereas there is not a
consensus regarding of a standard rate,
several banks are calculating their own
rates based on the Risk-Free Rate (RFR).
51
CROATIA
WOLF THEISS
Sasa Jovicic Marija Lalin Lucia Mocibob

Partner Senior Associate Senior Associate
sasa.jovicic@ marija.lalin@ lucia.mocibob@
wolftheiss.com wolftheiss.com wolftheiss.com
A. Overview 2. How mature is the project finance

1. What is the main legislation and what are the most significant project
international treaties governing the financings closed during the last 12
project financing in your jurisdiction? months?
Project financing as such is not regulated The project finance market in Croatia
in Croatia. Croatia does however regulate started in the mid-1990s and early 2000s
areas closely related to project financing when the first major public private
such as public private relationships and partnership projects for the construction of
concessions. The main relevant regulations Croatian motorways began. These included
include: the construction of the motorway in the
north-west of Croatia connecting Pula with
- the Public Private Partnership Act, Rijeka and the Slovenian border (the so-
called “Istrian Y” highway - the construction
- the Concessions Act,
of which continues today) and the highway
- the Act on Strategic Investment Projects connecting Zagreb and Macelj. Both these
of the Republic of Croatia, and projects were based on the establishment
of concessions rights over the constructed
- the Investment Promotion Act. highways.
Additionally, sector-specific areas in which The first Croatian Public Partnership Act
project financing typically takes place such was enacted in 2008, and it was followed by
as energy, real estate and infrastructure are an update of the legislation in 2012 which
also all mostly regulated in Croatia. is still in force today.
53
All major project finance-based Project financing projects in Croatian

investments in Croatia (except for the typically involved limited liability
Zagreb Airport which was developed in companies, and for the pledge of their
the period from 2012 to 2017) date from shares, it is specifically required that (i) a
the period before the economic crisis share pledge agreement is executed before
that started in 2008. This negative trend a Croatian public notary in the form of a
continued, and there have been no new Croatian notarial deed, and (ii) the pledge
major project financing arrangements is registered with the book of shares of
closed in the last 12 months. Of note the company and the Croatian Registry of
however, is the continuing construction of Judicial and Notarial Security (in Croatian:
the “Istrian Y” highway with a project value Upisnik sudskih i javnobilježničkih osiguranja)
of EUR 191 million. Completion is expected held with the Croatian Financial Agency (in
in 2024. Croatian: Financijska agencija).
B. Security Interest The establishment of a pledge over the

shares (stocks) of a joint stock company
3. What are the most commonly used only slightly differs from the process of
security types in project financings in establishment of a pledge over the shares
your jurisdiction? of a limited liability company. A pledge
The most commonly used security types in agreement aiming to create a pledge over
project financing in Croatia are: stocks of a joint stock company generally
does not need to be executed in the form
- pledge over shares, movables, bank of a notarial deed. However, as a standard
accounts, rights or receivables, Croatian market practice also pledge
- mortgage over real estate, agreements creating pledges over stocks
are regularly concluded in form of notarial
- floating charge over movables, and deeds as such form allows the creditor to
- guarantees. pursue direct enforcement of the pledge
through enforcement proceedings based
Another Croatia-specific security on the pledge agreement only (without the
instrument used in project financing is a need to go through judicial proceedings
debenture note (in Croatian: zadužnica). first for obtaining an enforceable
A debenture note allows for a direct document). In terms of perfection, the
collection of funds from the security pledge over stocks needs to be registered
provider’s bank accounts. with the Croatian Central Clearing and
4. Can the shares of a company be Depositary Company (in Croatian: Središnje
pledged as a security to the benefit klirinško i depozitarno društvo).
of lenders? If so, is there a specific 5. Is private sale a recognized method
requirement in terms of formalities for the enforcement share pledge?
or procedure to be followed for What are the endorsement types
establishing or perfecting a share typically used for the share
pledge? certificates?
Yes, company shares can be pledged as Private sale is recognized as a method of
security in favor of lenders. In order to enforcement of the share pledge in Croatia.
establish a valid security over shares, a title The private sale option is regularly provided
instrument and an act of perfection are for in share pledge agreements, but the
required. option is very rarely exercised in practice.
54
The reason for that is that the regulation of - the lender must obtain an enforcement
enforcement via the private sale of shares confirmation on the relevant security
is very vague, and the option is rarely used agreement from the public notary.
in practice. As a result, the regulation and The conditions for obtaining an
practice in relation to it are extremely enforcement confirmation are set by
scarce, leaving room for uncertainties, the security agreement, and typically
which thus generally discourages creditors only a statement of the lender
from pursuing such an option. confirming that a claim became due is
6. Can security interest be established considered as sufficient,
over future assets, rights and - an enforcement request must be
receivables of the borrower? filed by the creditor with the court
Security interest in Croatia may not be requesting enforcement over the
established over the future property of the relevant security based on the security
borrower, but rather any object of a security agreement with the enforcement
interest must be owned by the borrower confirmation,
at the moment of establishment of the - the enforcement proceedings take
security interest. place before the court and, unless
With regards to the creation of security successfully challenged by the
over receivables specifically, there is a well- borrower, the enforcement should end
established market practice that future by the sale of the relevant collateral by
(undue) receivables may be pledged under the court and distribution of the sale
the condition that at least the creditor, proceeds to the lender.
debtor and legal basis from which such
In case official insolvency proceedings are
receivables will be arising are determined
opened against the debtor, generally any
at the moment of establishment of the
enforcement proceedings initiated against
pledge.
the debtor before the opening of the
7. What are the steps to be taken by insolvency proceedings will be suspended
the lenders to enforce their security and the enforcement will continue as part
interest, in case the borrower of the insolvency proceedings.
insolvent and/or commences In case a lender should not have initiated
composition process? enforcement proceedings before official
insolvency proceedings have been opened,
In case the borrower becomes insolvent all of the claims of the lender against the
(while official insolvency proceedings debtor would be considered due as of the
have not yet been opened against the moment of the opening of the insolvency
debtor), a lender may formally initiate proceedings, and the lender will be entitled
regular enforcement proceedings against to pursue its claim within insolvency.
the borrower under the condition that
the lender’s claim became due. In case In terms of enforcement of security
a security agreement has been entered within insolvency proceedings (whether
into in the form of a notarial deed, the enforcement has been initiated before the
lender will be entitled to initiate direct opening of the insolvency proceedings
enforcement proceedings based on such or not), a secured lender that has security
security agreement. The direct enforcement over the debtor’s assets will be entitled to
proceedings involve the following steps: a separate settlement. Enforcement within
55
insolvency is generally processed as regular C. Incentives and Restrictions

enforcement, meaning that the asset
subject to security will be sold and the sale 9. What are the main incentives and
proceeds will be directed to the secured exemptions for project financing in
lender for the satisfaction of its claim (and your jurisdiction?
only if there should be any proceeds left Incentive measures for investment projects
after the lender’s claim has been satisfied in Croatia are regulated by the Croatian
in full, this will be distributed among other Investment Promotion Act and pertain to
creditors). investment projects in manufacturing and
The enforcement process is different in processing activities, development and
case a security agreement is not concluded innovation activities, business support
in the form of a notarial deed. In such a activities and high-added value services.
case, the enforcement process must start The main incentives relate to either tax
with a lawsuit that must be filed by the refunds or cash grants for enterprises
creditor against the borrower. As a result registered in Croatia, as follows:
of such proceedings, the creditor’s claim - tax refunds and tax advantages,
should be established by way of a court
decision with which the lender may then - cash grants for costs of new jobs
proceed to enforcement proceedings. In and/or employee trainings linked to
case official insolvency proceedings are investment projects,
started, the secured creditor will also be - aid for development and innovation
generally entitled to a separate settlement, activities, business support and high
but the debtor, the other creditors and value-added services,
the insolvency trustee will be allowed
to challenge its claim, and in such case, - cash grants for capital costs of
the lender will again need to prove investment projects and labor-intensive
the existence of its claim through civil investment projects,
proceedings. For all of these reasons, it is
- incentives for investments which utilize
recommended, and it is standard market
inactive government-owned property,
practice for lenders to have the security
and
agreements concluded in form of a notarial
deed. - incentives to modernize business
processes through automation and
digitalization of production and
manufacturing processes.
such as a parallel debt, available? Substantial tax cuts on profits (minimum
50% and up to 100% reduction) are also
Croatian law does not recognize the
available depending on the size of the
concept of a security trustee. This is
investment and the number of new jobs
typically solved through a parallel debt
created as well as profit tax reductions
structure, whereby the parties to an
for investments modernizing the
agreement agree that the security agent
manufacturing industry.
shall be the joint and several creditors of
each and every obligation of the borrower 10. Are there any incentives or
towards each finance party (other than the exemptions specifically applicable
security agent). to foreign investors?
56
There are no special incentives and restriction is often circumvented by the

exemptions which apply to foreign establishment of a company in Croatia
investors. which, as a domestic legal entity, may
acquire agricultural property without any
restrictions.
borrowing bank loans and
shareholder loans from abroad and/ 13. Is there any minimum equity
or in a foreign currency? requirement, under the legislation
There are no restrictions for borrowing
bank loans and shareholder loans from in your jurisdiction?
abroad and/or in a foreign currency. The No, provisions of Croatian law do not
Constitution of the Republic of Croatia sets prescribe an equity requirement specifically
out that all rights acquired by investing for project financing in Croatia. However,
capital will not be limited by law or other the minimum share capital for the
legal act and that foreign investors are establishment of a limited liability company
guaranteed free transfer and repatriation of in Croatia amounts to EUR 2,500 and for a
profits and invested capital. joint stock company EUR 25,000.
12. Are there any restrictions for 14. Please explain the registration
foreign investments in your and filing requirements which
jurisdiction? are applicable for project finance
There are no specific laws aimed at foreign documents to be valid and
investment; both foreign and domestic enforceable in your jurisdiction.
market participants in Croatia are protected
There are no special registration and filing
under the same legislation. Pursuant to
requirements generally applicable to
the Croatian companies’ law, domestic and
project finance documents in Croatia, apart
foreign companies operate under equal
from security documents which need to
conditions in Croatia. A foreign investor
be registered with the relevant authorities
may establish or participate in establishing
for the sake of perfection. Also, project
a company and may acquire rights and/or
obligations under the same conditions as financing involving public authorities
any domestic investor. Specific restrictions (such as concessions and PPP) needs to
may apply in areas related to Croatia’s go through regulated procedures which,
national security, defense and areas of its among others, in certain steps may require
strategic interest. the filing of project financing documents.
In terms of real estate investment in D. Insurance

Croatia, foreign investors may acquire 15. Can local insurance policies be
Croatian properties under the condition of governed by a foreign law?
reciprocity; however, this restriction does
not apply to citizens and legal entities from In terms of choice of law, European Union
the member states of the European Union. law directly applicable in Croatia makes a
European Union citizens and legal entities distinction between insurance contracts
can acquire properties in Croatia under covering large risks, whether or not the risk
the same conditions as Croatian citizens covered is situated in a member state of the
and legal entities except for agricultural European Union, and all other insurance
land and protected areas according to contracts covering risks situated inside the
special legal provisions. Nonetheless, this territory of the Member States.
57
Large risks are specifically defined and 16. Can insurance proceeds under the
listed in European Union’s Solvency II insurance and reinsurance policies
Directive and include risks such as risks be assigned to the benefit of the
in relation to aircrafts and ships. In case lenders?
of insurance contracts covering large
Insurance proceeds may generally be
risks, the parties have full freedom of
assigned to the benefit of the lenders,
choice regarding the governing law of except for proceeds from insurance
the insurance policy. There is however a policies which by their nature do not allow
limitation for cases where the parties have assignment (such as insurance proceeds
chosen the law of a foreign country when from policies securing damages to third
all other elements relevant to the situation parties).
are located in a different country. In that
case, the choice of the parties shall not 17. What are the other complications,
prejudice the application of provisions of concerns or other issues in relation
the law of that other country which cannot to the insurance provisions
be derogated from by agreement. under the project financing
For insurance policies securing risks other
than large risks, the parties’ choice of In terms of the assignment of insurance
foreign law is limited only to: policies in favor of the lenders, Croatian
law requires that the insurers are notified
- the law of any member state of the
of such an assignment for the sake of
European Union where the risk is the full perfection of the assignment.
situated at the time of conclusion of the In case of insurance of high amounts
contract, where there are several insurers and/or
- the law of the country where the reinsurance takes place, the delivery of
policyholder has its habitual residence, the notices of assignment and particularly
providing evidence of such delivery may be
- in the case of life insurance, the law
challenging. On the lender side however,
of the member state of the European
it is a common expectation that evidence
Union of which the policyholder is a
of delivery of the notice of assignment
national,
will take place as a condition precedent
- for insurance contracts covering risks to any funding which may delay closings
limited to events occurring in one or require for waivers of conditions
member state of the European Union precedents.
other than the member state where the
risk is situated, the law of that member
E. Financing of Public-Private
state, and
Partnership (PPP) Projects
- where the policyholder pursues a 18. Is PPP a permitted method of
commercial or industrial activity or a developing projects, and if so, have
liberal profession and the insurance any PPP projects been developed to
contract covers two or more risks
which relate to those activities and are Public-private partnership is a permitted
situated in different member states of method of developing projects in Croatia.
the European Union, the law of any To date, contracts for 17 public-private
of the member states concerned or partnership projects have been concluded
the law of the country of the habitual in Croatia with an estimated capital value
residence of the policyholder. of EUR 338 million. The public-private
58
partnerships were mostly established Croatian government support may be

for the construction of public service found in public-private partnership
accommodations (such as school buildings, agreements mostly in the form of
entertainment or sports facilities and tax exemptions, tax deductions and
government buildings) and transport establishing a building right without
infrastructure (such as highways, airports consideration payment or assistance in
and bus terminals). obtaining necessary permits and approvals
The most dynamic period for public-private in the initial phases of the public-private
partnership in Croatia was between 2006 partnership project. Occasionally, the
and 2008 with building projects of new government will provide private partners
sport facilities in Split and Varaždin, the with state guarantees, equity financing or
construction of the bus terminal in Osijek some form of additional financial support.
and the reconstruction of the Varaždin The level of government support varies and
County palace. Further, nine contracted is determined on a case-by-case basis.
projects were related to the educational
system with the purpose of construction,
under the responsibility of the
upgrading and maintenance of schools and
public party or the private party
school buildings. In 2013, a contract for the
under the PPP agreements?
construction of a new passenger terminal
at Zagreb Airport was signed for EUR 188 Generally, the political risk under public-
million, thereby becoming the public- private partnership agreements is assumed
private partnership project with the highest by the public party. Political risk usually
capital value in Croatia. means the probability of changes in certain
19. Are direct agreements between the legal regulations that can significantly
public authorities and the Lenders affect the cash flows of the public-private
permissible under the local law, and partnership project (such as tax rates
if so, commonly seen in the Project changes) or prevent further business
Finance market in your jurisdiction? development (for instance property
expropriation). Therefore, public-private
Direct agreements between public partnership agreements regularly contain
authorities and lenders are not prohibited a provision by which the private party is
by Croatian law; however, they are not entitled to monetary compensation, if
common in the Croatian market. Generally, during the implementation of the public-
public authorities enter into public-private private partnership project, statutory
partnership agreements with private regulations are changed due to political
companies incorporated for a specific reasons.
purpose, i.e., for the implementation
of a specific public-private partnership 22. Are investors and lenders usually
project. The lenders then enter into loan protected against a change in
agreements with the “specific purpose” law passing subsequent to the
private company in order to finance the signing of the relevant concession
project. agreement?
20. Please indicate the types of host When it comes to concession agreements,
government supports (including investors and lenders are usually not
treasury guarantee, debt protected against the risk of legislative
assumption, etc.) available in your changes. Namely, granting a concession
jurisdiction. for works or services includes the transfer
59
of operational risk to the private partner business conduct. Labor laws are strictly
which also includes the transfer of the implemented and not waived to retain or
demand and/or supply risk. For example, a attract investment. Collective bargaining
legislative change regarding the increase is a common tool, mostly implemented by
of the value added tax rate can cause an unions, which overwhelmingly represent
increase in the selling price of certain work workers associated with government
or services and therefore, the demand by spending and state-owned enterprises.
the end user for specific work or a service
Various laws related to forest and
may significantly decrease. This means that
water management, concessions and
the materialization of the legislative change
environmental protection maintain a
risk can induce a whole range of other
high level of environmental and human
risks which may be borne by investors and
rights standards. For instance, provisions
lenders.
of the Croatian Concession Act prescribe
23. Is force majeure specifically that the impact on the environment must
regulated under the local be taken into account and form part of
legislation? the justification study when granting a
Force majeure is generally regulated by concession to a private entity.
the provisions of Croatian obligations law Finally, ever-growing environmental, social
which regulates the basics of contractual and governance (ESG) legislation became
and non-contractual mandatory relations a significant part of Croatia’s corporate
between parties. In general, the concept environment in recent years. With demand
of force majeure is defined as an external, for transparent and sustainable business
unpredictable and extraordinary event practices at an all-time high, companies
that could not be prevented, eliminated have had to set up environmental, social
or avoided. The Croatian Public Private and governance strategies and reporting
Partnership Act specifically regulates that
standards for environmental, social and
every PPP agreement must contain a force
governance factors to meet investor,
majeure clause in order to be binding.
customer, employee and regulator
24. What are the general environmental expectations. Since 2021, an increasing
and social requirements in project number of Croatian companies have
financings? started implementing sustainable business
practices which are environmentally
In project financing, companies must
comply with applicable statutory responsible, protect employee well-
obligations in the field of environmental, being and ensure transparent company
social and labor law. There is a general operations.
awareness of societal expectations F. Jurisdiction, Waiver of
regarding responsible business conduct Immunity
which is regulated by law. The government
effectively implements domestic laws 25. Are submission to a foreign law and
in order to maintain consumer and the waiver of immunity provisions
environmental protections and avoid the enforceable?
infringement of human and labor rights.
Yes, submission to foreign law and waiver
Croatia has also implemented and of immunity provisions are generally
continues to implement all the European enforceable in Croatia. In terms of choice
Union legislation which requires a due of law, enforcement thereof may be
diligence approach to responsible limited to the extent that the application
60
of foreign law may be found contrary to 28. Are any significant development or
Croatian public policy (order public) and/or change expected in the near future
mandatory provisions of Croatian law. in the project finance market?
26. Can financing documents provide The lending industry in Croatia is generally
for arbitration clauses? expecting a positive outlook following
Yes, arbitration clauses may be included in Croatia’s entrance into the Eurozone in
financing documents. Arbitration awards 2023. The loss of the exchange rate risk with
may be generally enforced in Croatia respect to the Euro should lower financing
without examination of the merits of the costs and foster foreign financing and
case, subject to applicable recognition and investment. Project financing is expected to
enforcement treaties and regulations of benefit from this forecast as well.
general application.
Though the need for the development of
G. Trends and Projections a legal framework for project financing
27. What are the main current trends in Croatia is generally recognized among
in project financings in your stakeholders in the financing industry in
jurisdiction? Croatia, there are still no official initiatives
in that respect.
In Croatia, project financing is currently
often used in energy-related projects, 29. What are the alternative reference
especially in developing private energy interest rates which are being
production facilities. These are mostly commonly used in your jurisdiction
private projects, and there is little project during the LIBOR transition period?
financing active in the public sector in LIBOR has not been widely applied in
Croatia at the moment. Currently in Croatia, Croatia. In the small amount of transactions
there is a stagnation in the number of where LIBOR was used, the interest rate was
concluded public-private partnerships. This mainly turned into SOFR or STR during the
is largely due to the funds made available transition period.
through Croatia’s membership in the
European Union, where most of the largest
infrastructure projects in Croatia in the past
five-year period were co-financed by the
European Union, and this trend is expected
to continue in the coming years.
61
DENMARK
GORRISSEN FEDERSPIEL
Mikkel Fritsch Julius Michaelsen

Partner Assistant Attorney
MFR@ Jmi@
gorrissenfederspiel.com gorrissenfederspiel.com
A. Overview The most significant project financings

closed in Denmark in recent years have
1. What is the main legislation and
been in the renewable energy sector. Two
international treaties governing the examples of such transactions are the
project financing in your jurisdiction? following:
There is no specific legal framework • Obton transaction: Platform project
governing project financings in Denmark. financing of Obton which is one
Project finance is governed by general of Denmark’s largest and longest-
principles of law. However, there are some established developers of solar PV
acts specific acts regulating lending in projects, having developed projects
general, guarantees etc. across Europe, North America and in
2. How mature is the project finance Far East Asia for more than 10 years.
market in your jurisdiction, and Projects are being developed as green
field projects and it is the intention
of Obton to develop the project to a
“ready-to-build stage”.
months?
• Anaergia transaction: Financing
Denmark has a well-developed project of Anaergia Inc. investment in and
finance market, supported by a stable development of a large scale biogas
political and economic environment, a facility in Southern Denmark.
skilled workforce, and a strong renewable
energy sector. The country is known for its B. Security Interest
ambitious renewable energy targets and 3. What are the most commonly used
has been a pioneer in the development of security types in project financings in
offshore wind farms. your jurisdiction?
63
The following security types are the ones Market standard Danish law share pledge
most commonly used in project financings agreements provide for an option to
in Denmark: enforce the share pledge by private sale
upon the occurrence of certain triggering
• Mortgage over real property (including
events, typically an event of default under
land)
the facilities agreement pursuant to which
• Assignment and subrogation the security is provided.
agreement relating to the construction
Any enforcement by way of taking over the
agreement and other project
shares after valuation or a private sale of
agreements
the shares may only be initiated after the
• Assignment of project insurances pledgor has been given a one week’s prior
• Pledge over bank accounts written notice (calculated from the delivery
of the notice) by registered mail unless an
• Pledge over shares in special purpose immediate sale is required in order to avoid
vehicle company or limit losses. This is a mandatory rule set
• Assignment of intercompany loans (if out in the Danish Administration of Justice
any) Act that may not be deviated from by
agreement.
• Guarantees
requirement in terms of formalities Future assets
or procedure to be followed for
Future assets can only be pledged if it is
establishing or perfecting a share
clearly described in the pledge document,
pledge?
i.e., the assets need to be identified
The shares in a company incorporated in accurately. As fixed mortgages over assets
Denmark can be pledged as security for the (such as machinery and chattel) cannot
benefit of lenders. cover collections of uniform assets, each
asset must be identified in the pledge
A security interest over shares is protected
agreement.
against competing rights by providing
notice of the pledge to the issuing In most cases (depending on the assets to
company and having the pledge registered be pledged), perfection cannot be achieved
in the company’s share register. prior to the pledgor receiving title to the
relevant asset. This applies to pledges over
real property and chattel.
What are the endorsement types In cases where the pledgor becomes
typically used for the share subject to bankruptcy proceedings within
certificates? a period of three months after proper
perfection of the security (and in some
Private sale
instances two years), such security would
In Denmark, private sale is a recognized be subject to avoidance.
method for the enforcement of a share
Future Rights and Receivables
pledge, however, a private sale of the
shares is only available if agreed between It is possible under Danish law to assign
parties in the share pledge agreement future rights and receivables. However,
64
any assignment of such rights and for debt incurred after it should have been
receivables will normally not be valid vis- clear to the directors that the company
á-vis the creditors of the Seller (including would not be able to survive.
its bankruptcy estate) until such time as
During bankruptcy, it is in principle
the future rights and receivables are clearly
possible for a pledgee to enforce a pledge
identified.
of shares, a pledge of bank accounts and
Bulk sales would most likely not create assignments of contractual rights and
an enforceable right for the pledgor, as receivables. The enforcement proceedings
each receivable that is to be assigned must not be made in cooperation with
must be clearly identified at the time of the bankruptcy estate, and can be made
the assignment in order to eliminate any without the consent of the administrator
uncertainty as to the nature and scope of of the bankruptcy estate. However, the
the future receivables. administrator can require that a valuation
of the pledged assets be carried out. If
However, any assignment of future rights such a valuation is not made, the pledgee
and receivables will only be valid vis-á- will have to ensure – and will ultimately
vis the creditors of the Seller (including be held liable for – having completed the
its bankruptcy estate) if the perfection realisation of the relevant assets at a fair
requirements, including satisfaction of the market value.
notice to the debtor, clearly identifying
the rights/receivables assigned (the The enforcement of security over real estate
“Identification Prong”). As there is very will be impacted by the commencement
of bankruptcy proceedings. Such security
limited Danish case law on the subject, it
interests may only be enforced by the
is difficult to establish precise guidelines
bankruptcy administrator, and the creditors
detailing what would be required to
cannot demand enforcement of such
satisfy the Identification Prong. Generally,
security interests until six months after
however, the Identification Prong will likely
the declaration of bankruptcy. Prudent
be satisfied provided that the contractual
bankruptcy administrators will, however,
relationship between the Seller and the
cooperate closely with a mortgagee so
debtor, which gives rise to relevant future
as to arrange for the best sale of the real
receivables, can be described in detail.
estate which is often by way of a private
7. What are the steps to be taken by sale. Where the outstanding loan secured
the lenders to enforce their security under a mortgage exceeds the value of the
interest, in case the borrower real estate, the bankruptcy administrator
becomes insolvent, is technically will generally take instructions from the
insolvent and/or commences mortgagee in respect of the conduct of the
composition process? sale.
Both the debtor and any creditor may Generally, the bankruptcy administrator
initiate bankruptcy proceedings in respect will have to account to the secured
of the debtor where the debtor is insolvent creditors (and the non-secured creditors
where “insolvent” for such purpose means as well) for any significant step taken by
inability to pay its debts as they fall due. the administrator in respect of the assets
In general, when it becomes likely that of the bankruptcy estate. For assets over
the company will not make it through which mortgages are registered, such as
the distress, the directors should file for real estate, the bankruptcy administrator
bankruptcy. If not, they may incur liability would not be able to sell below the loan
65
secured by the mortgage(s) by way of lov om kapitalmarkeder). In such case, the

a private sale. However, the bankruptcy security agent may enforce the security on
administrator may initiate a forced auction behalf of all other finance parties.
sale and it is generally acknowledged that
a sale on a forced action cannot qualify
as an undervalue sale whatever the sales 9. What are the main incentives and
price and whether or not the secured exemptions for project financing in
loan is fully discharged. Costs incurred by your jurisdiction?
the bankruptcy estate in respect of the Denmark has a well-developed project
secured assets, e.g., in respect of insurance, financing market, and there are various
maintenance, operational costs, sales costs incentives and exemptions available for
(including sales fee to the bankruptcy project financing in the country. Some
administrator), etc., rank ahead of the of the main incentives and exemptions
secured debt. If the mortgage over the include:
asset in question also includes earnings 1. Public funding: The Danish government
from the asset (e.g., rental), such earnings does in some instances provide public
will cover the said costs first and then the funding to support project financing,
secured debt. including loans, and guarantees.
These funding programs are designed
A ‘straight forward’ bankruptcy would
to encourage investment in specific
normally be able to be concluded within
sectors, such as renewable energy,
6-18 months, but may – and many will -
infrastructure and research and
obviously be delayed by many factors, such development.
as litigation, sale of assets, claims against
other bankruptcy estates, the complexity of 2. Green bonds: Denmark is a leader in
the debtor group, etc. the issuance of green bonds, which are
debt securities that are specifically used
8. Is security trustee concept to finance environmentally-friendly
enforceable in your jurisdiction? If projects.
3. Supportive regulatory environment:
Denmark has a supportive regulatory
Denmark does not recognise the concept environment for project financing,
of trust and is not a party to the Hague with clear and transparent laws and
Convention on Trusts 1986. However, regulations that promote investment
the concept of security agents/trustees and protect the rights of investors.
administering security on behalf of the 4. Strong project pipeline: Denmark
secured parties, i.e., by way of the security has a strong pipeline of projects that
trustee acting as an agent on behalf of are suitable for project financing,
the secured parties is recognised under particularly in the areas of renewable
Danish law. Moreover, it is possible to grant energy, infrastructure, and real estate.
the relevant security for the benefit of the This provides investors with a diverse
security trustee on behalf of each of the range of investment opportunities and
secured parties by appointing the security reduces their risk exposure.
agent/trustee as an agent in accordance Overall, the main incentives and
with Section 18(1) cf. Section 1(2) of the exemptions for project financing in
Danish Act on Capital Markets (in Danish: Denmark are designed to promote
66
investment in sustainable and socially security or public order). Investments,

responsible projects, while also providing where control is acquired indirectly, may
investors with attractive returns and also trigger a screening requirement e.g.,
reducing their risk exposure. in case of a sale of a foreign parent with a
Danish subsidiary.
exemptions specifically applicable The sensitive sectors for which the
to foreign investors? mandatory screening requirement applies
are (i) defence, (ii) IT security or processing
There are no tax or other incentives
of classified information, (iii) companies
provided preferentially to foreign investors
producing dual-use goods, (iv) other critical
or creditors.
technology, or (v) companies within critical
11. Are there any restrictions for infrastructure.
Investors covered by the screening
shareholder loans from abroad and/
requirements
- Foreign citizens.
There are no restrictions in Denmark in
regards to borrowing bank loans and/ - Companies not domiciled in Denmark
or shareholder loans from abroad or in a even though they have a permanent
foreign currency. establishment in Denmark.
12. Are there any restrictions for - Companies domiciled in Denmark if the
foreign investments in your company is a subsidiary or a branch of a
jurisdiction? company not domiciled in Denmark.
On 1 July 2021, the act on screening - Companies domiciled in Denmark if
of certain foreign investments etc. in a foreign person or undertaking has
Denmark entered into force pursuant to control of or significant influence over
which foreign investors in some cases the company.
are obliged to obtain approval from the
Danish authority that controls and
Danish Business Authority (“DBA”) prior
monitors foreign investments
to executing the transaction. The rules
are quite broad and will be described in The DBA controls and monitors foreign
general below. direct investments and receives and
processes filings related to the screening
Transactions that will trigger screening
mechanisms.
requirements
Consequences of not filing
The act introduces (i) a mandatory
screening mechanism for certain foreign The Danish authorities can issue an order
investments in sensitive sectors if the to roll-back a planned or completed
foreign investor obtains at least 10 % investment if an investor fails to file. If the
ownership or voting rights, or equivalent order is not complied with, the DBA may,
control by other means, and (ii) a voluntary for instance, annul the foreign investor‘s
cross-sectoral notification mechanism for voting rights.
certain foreign investors who obtain at
Legislation that impact investments in
least 25 % ownership or voting rights, or
Danish companies
equivalent control by other means (relevant
for investments in non-sensitive sectors Foreign investors seeking to invest in
which may nevertheless threaten national Danish companies must at an early stage
67
factor-in that the investment may need a cushion against potential losses. This
to be approved by the DBA prior to the evaluation will typically include a review
investment being concluded. This also of the project sponsors’ financial strength,
applies even if the intended investment their experience in the relevant industry,
does not concern a company that operates and their commitment to the project.
in or is otherwise active within any of the
14. Please explain the registration
sensitive sectors set out in the act.
13. Is there any minimum equity are applicable for project finance
requirement, under the legislation documents to be valid and
or in practice, for project financings enforceable in your jurisdiction.
in your jurisdiction? In general, project finance documents are
There is no specific minimum equity not subject to any registration and filing
requirement for project financing in requirements.
Denmark under the legislation. However, However, if security has been taken
the amount of equity required for a project over the property in the form of a non-
finance transaction in practice will depend possessory pledge (i.e., legal mortgage)
on a variety of factors, including the type the perfection requirement is registration
and size of the project, the perceived risk with the Danish Land Registry (in Danish:
of the project, and the requirements of the Tingbogen). Registrations are publicly
lenders. available and serve as protection against
both contracting parties and other
In general, project finance transactions in creditors of the mortgagor.
Denmark are typically structured with a mix
Security over real estate is established by
of equity and debt financing. The equity
way of a mortgage. There are three types of
component of the financing is typically
mortgages available:
provided by the project sponsors, who are
responsible for providing a portion of the (i) the ordinary mortgage, which is usually
project’s capital in the form of equity. applied by mortgage-credit institutions
(in Danish: realkreditinstitutter);
The amount of equity required for a project
finance transaction in Denmark will vary (ii) the indemnity mortgage (in Danish:
depending on the specific project and the skadesløsbrev); and
risk profile of the project. In some cases, (iii) the owner’s mortgage (in Danish:
lenders may require a minimum equity ejerpantebrev).
contribution from the project sponsors to
Registration of mortgages with the Danish
ensure that they have a sufficient stake in Land Registry is subject to a registration
the project and are incentivized to ensure fee of 1.5 per cent of the face value of the
its success. secured amount, together with a handling
It is important to note that while there is fee of DKK 1,660.
no specific minimum equity requirement Further, it is common in project financings
for project financing in Denmark under the that a negative pledge is registered over
legislation, lenders will carefully evaluate the property in the Danish Land Registry.
the equity component of a project finance The consequence of registering such
transaction to ensure that it is sufficient a negative pledge is that it will not be
to support the project and to provide possible to register new mortgages in
68
favour of third parties without the consent 17. What are the other complications,
of the pledgee. If negative pledges are to concerns or other issues in relation
be registered with the Danish Land Register to the insurance provisions
of the real estates, such registration should under the project financing
be made a condition subsequent to documentation, if any?
completion. Otherwise, it can negatively There are no other general complications,
impact the timing of the registration concerns or issues in relation to the
process of the mortgages required to be insurance provisions under project
registered for the purpose of completion. financing documentation.
The registration of a negative pledge with E. Financing of Public-Private
the Danish Land Registry is subject to a Partnership (PPP) Projects
handling fee of DKK 1,660.
D. Insurance developing projects, and if so, have
15. Can local insurance policies be any PPP projects been developed to
governed by a foreign law? date in your jurisdiction?
It is possible for local insurance policies in PPP is a permitted and often used method
Denmark to be governed by a foreign law. for developing projects in Denmark.
Under Danish law, parties to an insurance Below are a few examples of PPP projects
contract are generally free to choose the that have been developed in Denmark:
law that will govern their contract, as Hobro tinglysningsret project in Denmark
long as the choice of law is not contrary is a public-private partnership (“PPP”)
to Danish mandatory rules. This means project that involved the construction
that parties may choose to have a foreign of a new building to house the Danish
law govern their insurance contract, as Registration Court. The project was
long as the choice of law does not violate a joint venture between the Danish
mandatory provisions of Danish law, such government and a private company, which
as those concerning consumer protection is responsible for designing, building, and
or public policy. financing the facility. It has been seen as a
If a foreign law is chosen to govern an model for future PPP projects in Denmark
insurance policy, the policy must still and elsewhere to have a positive impact
comply with Danish mandatory provisions, on the local economy, creating jobs and
such as those related to claims handling, attracting new businesses to the area as
dispute resolution, and consumer it demonstrates the potential benefits of
protection. public-private partnerships in delivering
public services more efficiently and
effectively.
be assigned to the benefit of the Kliplev-Sønderborg Motorvejen: Kliplev-
lenders? Sønderborg Motorvejen is a highway
project in Denmark that was developed
It is market practice in Danish project
through a PPP model.
finance transactions that the company’s
rights under insurance policies are assigned Under the PPP agreement, a private
in favor of the lenders/security agent. consortium was responsible for financing,
69
designing, constructing, and operating operating and maintaining the facilities

the motorway for a period of 30 years. The over a period of time. The public sector
consortium included several construction partner provides a long-term contract and
and engineering firms, as well as a financial payment stream to the private partner in
partner. exchange for the delivery and operation of
the infrastructure.
The motorway project included the
construction of approximately 30 19. Are direct agreements between the
kilometers of new four-lane motorway, public authorities and the Lenders
as well as the widening and upgrading permissible under the local law, and
of approximately 13 kilometers of the if so, commonly seen in the Project
existing motorway. The project also Finance market in your jurisdiction?
included the construction of several Direct agreements between the public
bridges, interchanges, and other associated authorities and the Lenders are permissible
infrastructure. under Danish law and are often seen in
The PPP agreement between the private regards to infrastructure projects.
consortium and the Danish government 20. Please indicate the types of host
included a number of key provisions. For government supports (including
example, the private consortium was treasury guarantee, debt
responsible for financing the project assumption etc.) available in your
through a combination of equity and debt jurisdiction.
financing. The consortium also assumed the
The Danish government can provide a
risk of construction delays, cost overruns,
treasury guarantee to lenders on behalf of
and other potential risks associated with
the borrower. This guarantee is issued by
the project.
the Danish Ministry of Finance and covers
In exchange for assuming these risks and both principal and interest payments. The
delivering the motorway project, the guarantee reduces the risk for lenders
private consortium was granted a long- and may result in lower interest rates for
term concession to operate and maintain borrowers.
the motorway for a period of 30 years. The 21. Are political risk events usually
government agreed to make payments to under the responsibility of the
the consortium over this period, based on public party or the private party
the consortium’s performance in meeting under the PPP agreements?
certain key performance indicators, such as
traffic volumes and maintenance standards. In Denmark, as in most other countries,
the allocation of responsibility for political
Overall, the Kliplev-Sønderborg Motorvejen risk events in Public-Private Partnership
project is an example of how PPP models agreements depends on the specific terms
can be used to finance and deliver large- and conditions of the agreement.
scale infrastructure projects while sharing
PPP agreements usually contain provisions
risks and responsibilities between the
that allocate the risk of political events
public and private sectors.
between the public and private parties.
In all of these projects, the private sector These provisions may vary depending on
partners are responsible for financing the the specific project and the preferences of
construction of the infrastructure, and for the parties involved.
70
22. Are investors and lenders usually cases, investors and lenders may need
protected against a change in to rely on the protections offered by the
law passing subsequent to the concession agreement or seek recourse
signing of the relevant concession through the courts or arbitration process.
agreement?
In general, investors and lenders in project regulated under the local
financings may not be fully protected legislation?
against a change in law passing subsequent
Force majeure is not specifically regulated
to the signing of the relevant concession
under Danish legislation in regards to
agreement in Denmark. However, the
project financing. Under the Danish
specific provisions and protections offered
Contracts Act, force majeure is referred to
in the concession agreement, as well as the
as “force majeure og lignende tilfælde” (force
relevant laws and regulations in Denmark,
majeure and similar cases). According to
may provide some level of protection to
Section 24 of the Danish Contracts Act, a
investors and lenders.
party to a contract may be released from its
In Denmark, concession agreements obligations if it can be demonstrated that
are typically negotiated between the the failure to perform was due to a force
project sponsor and the public authority majeure event. The party claiming force
responsible for the infrastructure project. majeure must show that the event was
These agreements outline the terms beyond its control and could not have been
and conditions of the project, including foreseen at the time of entering into the
the rights and obligations of the parties contract. The party must also show that the
involved. Concession agreements are event has made it impossible to fulfill its
typically governed by Danish law and obligations under the contract.
subject to the jurisdiction of Danish courts.
It is important to note that force majeure
In terms of protection against changes clauses are not implied in contracts in
in law, the concession agreement may Denmark, which means that parties must
include provisions that address this issue. specifically include a force majeure clause
For example, the agreement may include in their contract if they wish to rely on it.
a force majeure clause that provides The clause must specify what events will
for relief in the event of unforeseeable constitute a force majeure event and the
circumstances beyond the control of consequences of such an event, such as
the parties, including changes in law. whether the party will be released from its
Additionally, the agreement may specify a obligations or whether the contract will be
dispute resolution process that can be used terminated.
to resolve disputes arising from changes in
law.
However, the level of protection provided financings?
by the concession agreement will depend
There are several Danish acts dealing with
on the specific terms and conditions
the issue of environmental contamination
negotiated by the parties. Furthermore,
and clean-up orders, which are generally
the Danish legal system provides for the
supervised by the regions.
possibility of legislative changes that
may impact the terms of the concession Any Danish property is to some extent
agreement or the project itself. In such surveyed in order to establish an overview
71
of contaminated or possibly contaminated in a foreign jurisdiction may not be

properties, to minimise the risk of immediately enforceable in Denmark.
groundwater pollution, prevent pollution
Furthermore, a waiver of immunity will
expanding and to ensure that public health
generally be effective. However, assets
is not put at risk. If a property is mapped
which are necessary for the proper
as contaminated or possibly contaminated,
functioning of the Kingdom of Denmark
certain restrictions to the property apply.
will be protected against post-judgment
A contamination registration does not
measures of constraint such as attachment,
restrict the actual use of the property, but
arrest or execution in Denmark.
any change of the use to sensitive use or
construction on the mapped property 26. Can financing documents provide
requires a permit from the authorities. for arbitration clauses?
The “polluter pays” principle is well- Financing documents may provide for
established in Denmark. Clean-up orders arbitration clauses. Denmark is a party
can be issued to polluters even though they to the New York Convention on the
do not own the polluted property. In such Recognition and Enforcement of Foreign
case, the owner can be ordered to tolerate Arbitral Awards, which means that
the clean-up. arbitration agreements and awards made in
other countries that are signatories to the
The environmental liabilities under Danish
convention are recognized and enforceable
public law are supplemented by the in Denmark, subject to certain limited
general law of torts, which generally bases exceptions.
liability on negligence but under some
circumstances applies a strict liability. Furthermore, the Danish Arbitration Act
allows parties to agree to submit their
Rules on health and safety in the work disputes to arbitration, and the Act applies
place, including working hours and to both domestic and international
holidays, are mainly set forth in the Danish arbitrations. The Act also allows parties
Holiday Act, the Danish Act on Working to agree on the procedure for appointing
Hours and the Danish Act on Working arbitrators and the conduct of the
Environment (and related executive orders). arbitration proceedings.
The above acts are all administered by Therefore, parties can include arbitration
the Ministry of Employment. Further, the clauses in their financing documents in
Danish Working Environment Authority Denmark, and these clauses will generally
(which is an agency under the Ministry be enforceable under Danish law.
of Employment) contributes to the
creation of safe working conditions at G. Trends and Projections
Danish workplaces, e.g., by carrying out 27. What are the main current trends
inspections of companies. in project financings in your
F. Jurisdiction, Waiver of jurisdiction?
Immunity The main current trends in project
25. Are submission to a foreign law and financing in Denmark are:
• Green financing: Denmark is
enforceable?
committed to achieving a carbon-
A Danish company may submit to a foreign neutral economy by 2050, and this
jurisdiction, although a judgment obtained has led to an increased focus on green
72
financing. Many projects related to sustainability objectives, and many financial

renewable energy, energy efficiency, institutions are incorporating sustainability
and sustainable infrastructure are being criteria into their lending decisions.
financed through green bonds, loans,
Another potential development in the
and other instruments.
project finance market in Denmark is the
• Public-private partnerships (PPPs): use of alternative financing structures,
The Danish government is actively such as green bonds and green loans.
promoting the use of PPPs to finance These financing structures are specifically
infrastructure projects. PPPs involve a designed to fund environmentally
partnership between the public sector sustainable projects and are often attractive
and private companies, and they are to investors with a focus on sustainability.
being used to finance projects such as
hospitals, schools, and transportation Finally, the Danish government has set
infrastructure. ambitious targets for reducing greenhouse
gas emissions and increasing the share
• ESG considerations: Environmental, of renewable energy in the country’s
social, and governance (“ESG”) energy mix. These targets are expected to
considerations are becoming drive continued growth in the renewable
increasingly important in project energy sector and may lead to increased
financing. Lenders and investors investment in project finance structures to
are placing more emphasis on the fund renewable energy projects.
sustainability and social impact of the
projects they finance. 29. What are the alternative reference
28. Are any significant development or commonly used in your jurisdiction
change expected in the near future during the LIBOR transition period?
in the project finance market?
The current Danish reference term rate for
Denmark has a strong tradition of project Danish Kroner, CIBOR, is still in place and it
finance, particularly in the renewable is expected that it will continue to exist for
energy sector. In recent years, there has years to come. There does not appear to
been a significant increase in the number be any overall requirement or desire from
of large-scale wind and solar projects any Danish authorities or regulators to
in Denmark, many of which have been discontinue CIBOR, but market participants
financed through project finance structures.
seem in general to take the view that if
One recent development in the project Europe moves away from “term rates” such
finance market in Denmark is the as EURIBOR to actual market rates/risk-free
increasing focus on sustainability and ESG rates, the Danish market will likely do the
(Environmental, Social, and Governance) same to harmonise with the international
factors. Investors are increasingly interested market. Hence, we believe that CIBOR at
in financing projects that align with their some point will be discontinued.
73
FRANCE
WILLKIE FARR & GALLAGHER LLP
Amir H. Jahanguiri Farrah Bandomi Mombongo

Partner Associate
ajahanguiri@willkie.com fmombongo@willkie.com
A. Overview More generally, the legal provisions

governing project finance are to be found
1. What is the main legislation and in in the French Civil code, Commercial
international treaties governing the code and Monetary and financial code.
International treaties:
Domestic regulatory framework:
European Union law is an important source
Public, Private Partnerships (“PPPs”) and of legislation, through the implementation
concessions are mainly governed by two of EU directives and the direct application
binding legal texts: of EU regulations governing subject
matters relevant to project finance.
- Ordinance of 23 July 2015 and Decree
France is also party to many international
of 25 March 2016 for PPPs; and
treaties governing human rights, assets
- Ordinance of 29 January 2016 for and liabilities, judicial co-operation and the
concessions. Prior to the enactment environment.
of the Ordinance of 29 January 2016, 2. How mature is the project finance
concessions were largely defined by market in your jurisdiction, and
the case law of the “Conseil d’Etat” (the what are the most significant project
French supreme administrative court), a financings closed during the last 12
number of decisions of which continue months?
to apply and which have set the The project finance market in France is a
general principles of administrative law very mature market. For a bit less than 30
applicable to concessions. years, significant transport infrastructure,
75
especially motorways, have been et seq. of the French Monetary and financial
developed using limited recourse project code) has been one of the most popular
financing. Other transport infrastructure, instruments because of its simplicity
such as high-speed and urban railway and efficiency: title to the receivables is
projects have also been developed immediately transferred to the beneficiary,
using limited recourse financing. In the which has proven to be a useful protection
years following 2003, a large number of in the case of debtors’ insolvencies.
social infrastructure (hospitals, schools, However, only credit institutions and
universities, prisons, police stations, specific investment vehicles can benefit
army barracks, sports infrastructure and from it. A reform passed in 2021 has
stadiums, government accommodation offered an alternative with the creation of
projects, etc.) were developed and financed a “common law” assignment of receivables
though the implementation of availability by way of security in the Civil code, which
scheme PPPs, making France one of the can be granted for the benefit of any type
leading project finance markets in the of creditor and offers rights comparable to
world. A large number of deals in the power those available under the Dailly assignment.
and renewables sector (such as wind and
solar projects) have also been financed Personal guarantees can also be granted
through limited recourse financing under French law, in particular suretyships
structures. In more recent times, a number (cautionnement) and on-demand
of, very large telecom fiber deals have also guarantees (garanties autonomes) granted
been developed using limited recourse by a credit institution or a parent company.
project financing. The most significant Debt delegation (délégation de paiements)
projects to have reached financial close is another technique which grants the
over the last 12 months in France include: creditors a direct right over the project
company’s debtors.
- the Cegelog deal, which is the
project for the externalization of the 4. Can the shares of a company be
development and management of pledged as a security to the benefit
state-owned housing units designated of lenders? If so, is there a specific
to the French Armed Forces with a total requirement in terms of formalities
debt amount of EUR 1.3 billion; and or procedure to be followed for
- the Obelix telecom fiber deal with a pledge?
total debt amount of EUR 1.6 billion.
Share pledges are very common in France.
B. Security Interest
Pledges over the shares of a French société
3. What are the most commonly used par actions simplifiée (which is the most
security types in project financings in commonly used corporate vehicle for
your jurisdiction? project financings in France) take the form
A variety of security interests can be used in of a financial securities account pledge.
project financings in France. These include The validity of financial securities accounts
pledges, which can be granted over assets, pledges requires a statement of pledge
shares, financial securities accounts, bank (déclaration de nantissement de comptes
accounts and a wide variety of receivables.
de titres financiers) including specific
Receivables can also be secured through an mandatory information to be signed by the
assignment by way of security. The Dailly pledgor. No further formality is required for
assignment (governed by Articles L. 313-23 the validity of the pledge.
76
For specific categories of companies which as triggering an event of default) is deemed

are not regularly incorporated in the null and void.
context of project finance transactions, If the borrower is under out-of-court,
formalities in relation to registration of a amicable proceedings (mandat ad hoc or
pledge over their shares are required under
conciliation proceedings), no automatic
French law.
stay on claims will apply, so the lenders may
5. Is private sale a recognized method theoretically enforce their security interests.
for the enforcement share pledge? It is, however, common practice that all the
What are the endorsement types creditors involved in negotiations in the
typically used for the share context of amicable proceedings commit
certificates? not to make any repayment demand or
to enforce their security interests against
Under French law, there is a general
the borrower during the period of the
prohibition of enforcement of security
negotiations (full standstill period). In
interests by way of private sale (voie
addition, in the context of conciliation
parée). However, private foreclosure
proceedings, the borrower is entitled to
(pacte commissoire) is possible and allows
request extensions of time for payment
the beneficiary to take ownership of
the pledged asset without any judicial of up to 24 months from the Court, which
procedure. may prevent the enforcement of security
interests.
Share certificates do not exist under French
law and shares are dematerialized. All If the borrower is subject to judicial
joint-stock companies (sociétés par actions), insolvency proceedings governed by the
which include the société par actions Livre VI of the French Commercial code
simplifiée, keep shareholders’ accounts (safeguard, reorganization or liquidation
specifying the identity and the number of proceedings), an automatic stay will apply
shares detained by each shareholder, which to all unsecured and secured creditors.
serve as a proof of the relevant shares’ Except for a few exceptions and depending
ownership. Shareholders’ accounts also on the type of insolvency proceedings,
specify whether the shares are subject to the lenders will in principle not be able to
any pledge. enforce their security interests during the
proceedings.
over future assets, rights and 8. Is security trustee concept
receivables of the borrower? enforceable in your jurisdiction? If
Security interests can be established over such as a parallel debt, available?
future assets, rights and receivables under
French law. A new security trustee regime was
introduced under French law by a reform
7. What are the steps to be taken by passed in 2017. It has enabled the security
the lenders to enforce their security agent to take, manage and enforce
interest, in case the borrower security interests granted in favor of the
becomes insolvent, is technically creditors, act on their behalf in relation to
insolvent and/or commences the security interests and hold title to the
composition process? security interests. The security interests
Under French law, any contractual clause held by the security agent are not part of
adversely affecting the position of the its estate or the creditors’, but are held in an
borrower as a direct result of the opening of autonomous and distinct estate. Therefore,
amicable or insolvency proceedings (such insolvency proceedings affecting the
77
security agent cannot affect the creditors’ 12. Are there any restrictions for
rights in relation to the security interests. foreign investments in your
Additionally, the French Judicial Supreme jurisdiction?
Court (Cour de cassation) has recognized A number of ordinances and decrees
the validity of parallel debt provisions. have broadened the scope of the foreign
C. Incentives and Restrictions investment control regime under French
law.
9. What are the main incentives and
exemptions for project financing in Articles L.151-3 and R. 151-1 and seq. of
your jurisdiction? the Monetary and financial code require
the prior approval of the Ministry of
Foreign and local investors may benefit Economy for foreign investments made in
from subsidies and financial incentives strategic sectors if they result in the control
based on various considerations, such of a French entity (according to different
as the project’s sector and location, criteria).
the project company’s size, the level of
Strategic sectors include activities in
contribution to research and development,
relation to national defense, public order
etc.
and public safety.
It should be noted that the European
Commission closely monitors such state aid
for compatibility with EU competition rules.
All but the smallest incentive schemes
require the Commission’s approval.
French law does not provide for any
10. Are there any incentives or minimum equity requirement in relation to
exemptions specifically applicable project financings. Even though the equity
to foreign investors? requirement will depend on the projects’
Please refer to the answer to question 9. characteristics and risks, it is unlikely
that equity will be lower than 30% of the
11. Are there any restrictions for aggregate financing in practice.
shareholder loans from abroad and/ 14. Please explain the registration
or in a foreign currency? and filing requirements which
A project company may take out loans from documents to be valid and
abroad as long as it complies with the anti- enforceable in your jurisdiction.
money laundering and terrorism financing
regulations. It should also be noted that, in In general, project documents and finance
relation to trans-border shareholder loans, documents do not require any filling or
specific tax rules may apply which may registration.
limit or eliminate the project company’s Only a number of security documents
ability to deduct interests from its taxable are subject to registration in order to
income (Article 238 A of the French General be enforceable against third parties. Per
tax code prohibits such deduction if the example:
shareholder is located in a non-cooperative
country or territory for tax purposes). - pledges of assets need to be registered
at the commercial court registry of the
Borrowing in a foreign currency is not place of registration of the pledged
subject to any limitation in particular. company; and
78
- non-possessory pledges over tangible in France with hundreds of examples in

furniture must be registered in a special a variety of projects including hospitals,
register within the commercial court schools, universities, prisons, governmental
registry of the place of registration of accommodation projects, railways,
the grantor. stadiums, sports facilities, street lighting,
army barracks, police stations, etc.
D. Insurance
15. Can local insurance policies be public authorities and the Lenders
governed by a foreign law? permissible under the local law, and
The parties to project finance documents if so, commonly seen in the Project
are free to choose the law governing the Finance market in your jurisdiction?
insurance policy in accordance with Article Direct agreements are permissible and very
7 of Regulation (EC) No 593/2008 of the common in project financings governed
European Parliament and of the Council by French law with local governments
of 17 June 2008 on the law applicable to and authorities. There are no examples of
contractual obligations (Rome I). direct agreements in the context of projects
16. Can insurance proceeds under the involving central national government in
insurance and reinsurance policies concession-based projects.
be assigned to the benefit of the Direct agreements typically provide
lenders? the lenders with specific rights such as
direct payment rights, step-in rights
Insurance proceeds constitute receivables
and substitution rights to ensure the
which can be pledged or assigned by way
continuation of the project in case of failure
of security to the benefit of the lenders.
by the project company.
20. Please indicate the types of host
to the insurance provisions
under the project financing
documentation, if any? jurisdiction.
There are no complications or concerns Pursuant to an instrument entitled “Act of
or issues in relation to the insurance acceptance of the assignment or pledge
provisions under French law in the context of a professional claim”, the public entity
of project financing. may accept to pay a significant part of
E. Financing of Public-Private the remuneration due to the project
Partnership (PPP) Projects company under a partnership contract
directly to the lenders, who benefit from a
18. Is PPP a permitted method of Dailly assignment granted by the project
developing projects, and if so, have company (in accordance with Articles L.
any PPP projects been developed to 313-29 et seq of the Monetary and financial
date in your jurisdiction? code). This may be done on a lump-sum
basis or in installments, which in fact result
PPPs are expressly permitted under
in a form of debt assumption.
Article L.1112-1 of the French Code de
la commande publique. They are refered 21. Are political risk events usually
to as “marchés de partenariat” which is a under the responsibility of the
specific form of public procurement. There public party or the private party
has been a very large recourse to PPPs under the PPP agreements?
79
Political risk events usually fall under the Any company established or operating
scope of the force majeure regime, as in France must comply with French labor
they are traditionally considered as force law and other requirements in relation
majeure events – hence not under the to environmental protection (through
responsibility of the private party. stringent permitting and consenting
processes which generally apply to all
projects), construction permitting, human
protected against a change in
rights, anti-money laundering and anti-
corruption.
agreement? F. Jurisdiction, Waiver of
A general change in law does not typically
Immunity
entitle the investors to make a claim for 25. Are submission to a foreign law and
protection or compensation. However, the waiver of immunity provisions
such measures may be afforded for specific enforceable?
changes in law in French projects.
Administrative law agreements (such as
23. Is force majeure specifically concessions and PPPs) must be governed
regulated under the local by French law. It is also the case for security
legislation? documents in relation to assets located in
France (such as real estate and shares of a
Force majeure is defined in and governed company registered in France). The other
by Article 1218 of the French Civil code: project and finance documents may be
it occurs when an event (i) beyond the governed by a foreign law chosen by the
control of the debtor, (ii) which could parties as long as such choice of governing
not reasonably be foreseen at the time law does not violate French international
of the conclusion of the contract and (iii) public policy.
the effects of which cannot be avoided Waiver of immunity provisions clearly
by appropriate measures, prevents the expressed by a foreign State are
performance of its obligations by the enforceable in France. Regarding the
debtor. Force majeure allows the affected immunity of the French public authorities,
party to suspend its performance or to the law remains silent on whether such
terminate the contract. immunity may be waived. It is however
prohibited to take any security interest over
However, the parties are free to
State-owned assets.
contractually agree on a different definition
of the force majeure or to exclude its 26. Can financing documents provide
application. for arbitration clauses?
The above-mentioned conditions to qualify Finance documents can provide for

an event as force majeure (exteriority, arbitration clauses. However, the
unpredictability and irresistibility) apply enforceability of the arbitration decision
differently under administrative law, which will be subject to an exequatur judgement
governs contracts entered into between a by a French court.
private party and a public authority. G. Trends and Projections
24. What are the general environmental 27. What are the main current trends
and social requirements in project in project financings in your
financings? jurisdiction?
80
A number of legislative reforms have made public debate for all offshore wind projects
French law more modern with regard to located in the same seafront, which is likely
taking security and the role of security to accelerate the development of future
agents. offshore windfarms.
The French banking monopoly has also This reform is in line with the European
been relaxed to enable new players such Green Deal, a package of policy initiatives
as debt funds to enter the market as aiming at bringing the EU to climate
lenders. The French banking monopoly neutrality by 2050 which includes
is the principle according to which only binding objectives. In this context, the
credit institutions and financing companies project finance market will certainly see a
(sociétés de financement) are authorized to significant increase of renewable energy
enter into credit transactions and receive transactions.
funds from the public on a regular basis In addition, the Government has recently
(Article 511-5 of the Monetary and financial announced a 100 billion euro plan for
code). There are various exceptions to the railway projects by 2040, with two main
requirement of holding a banking license, ambitions: modernizing and decarbonizing
which were extended to certain investment the rail network.
vehicles by Law of 9 December 2016 and
Ordinance of 4 October 2017: regulated 29. What are the alternative reference
funds, finance organizations (organismes interest rates which are being
de financement), which include the existing commonly used in your jurisdiction
securitization organizations (organismes during the LIBOR transition period?
de titrisation), and specialized finance EURIBOR was not affected by the LIBOR
organizations (organismes de financement transition. It is still being published and
spécialisés). no decision to cease its publication was
28. Are any significant development or taken by the European authorities. The
change expected in the near future governance and calculation methodology
in the project finance market? of EURIBOR have been strengthened
by its administrator (EMMI) as part of
The French Parliament has adopted a its prerogatives and to comply with the
new law for the acceleration of renewable FSB / IOSCO recommendations and the
energy projects on 7 February 2023, with requirements of the BMR regulation
the objective to promote and simplify the (Regulation (EU) 2016/1011 of the
development of renewable energy projects. European Parliament and of the Council of
In particular, the law has introduced 8 June 2016). EURIBOR is authorized under
planning for offshore wind projects in the BMR regulation and has been registered
France and includes measures for the with ESMA since 2 July 2019. This index can
reduction of the authorization process’ therefore continue to be used without any
duration, such as the mutualization of the time limit.
81
GIBRALTAR
HASSANS
Tim Garcia Matthew Torres

Partner Partner
tim.garcia@hassans.gi matthew.torres@hassans.gi
A. Overview Depending on the type and nature of the

applicable project, as well as the underlying
1. What is the main legislation and governing laws of the same, a range
international treaties governing the of Gibraltar legislation (and applicable
project financing in your jurisdiction? international treaties) may need to be
Gibraltar is a common law jurisdiction considered and adhered to, including
based on the British legal system, however legislation pertaining to corporate
Gibraltar (unlike Great Britain), also has structuring, tax, financing, environmental,
its own constitution which summarily, insurance, planning, health and safety,
establishes its own executive, legislative and insolvency. In addition, approvals and
and judiciary, and adopts the laws of consents from governmental bodies and
Gibraltar. Moreover, in the absence of departments may be required throughout.
any Gibraltar authority on any particular 2. How mature is the project finance
matter, English and Commonwealth case market in your jurisdiction, and
law is highly persuasive in Gibraltar and what are the most significant project
will typically be followed. To the extent financings closed during the last 12
however that such matters may concern months?
the interpretation of different Gibraltar
Notwithstanding Gibraltar’s land mass
statutory instruments and provisions, such
of approximately 6.8kmsq, the project
English and/or Commonwealth decisions
finance market in Gibraltar continues to
cannot be expressed to be binding.
go from strength to strength. Over many
Generally speaking, there are no principal years, numerous Gibraltar based entities
piece(s) of statutory legislative instruments (or subsidiaries within larger global group
relating to project finance in Gibraltar. structures) have undertaken numerous
83
global financing projects, specifically in security interests mentioned in Question 3

the context of secured and unsecured above, with the exception of a guarantee),
financing projects such as bond and note over its assets (including shares held in a
issuances. In recent years however, the subsidiary), the directors of said Gibraltar
buoyant nature of the property and real company would be required to file the
estate market in Gibraltar has provoked instrument of transfer creating said security
a notable increase in both commercial interests at Companies House, Gibraltar.
and residential property developments. In the case of a Gibraltar company this is
Accordingly, this has attracted a substantial required to be done within 30 days of the
degree of international interest and date borne on the same, and in the case of
investment in Gibraltar, specifically in the a partnership, within 21 days. Additionally,
context of development finance, with subject to the underlying transactional/
luxury property developments such as security documents’ governing law,
EuroCity and Forbes recently completing, the shares of a Gibraltar company may
and new projects (featuring reclaimed land be pledged as security by its foreign
on British Gibraltar Territorial Waters) being shareholder (however this would not be
announced such as of Victoria Quays and registrable in Gibraltar). Failure to timely
the Eastside Marina (the latter currently register the relevant security interest in
seeking to include a superyacht marina). Gibraltar could affect the priority of the
security, and additionally become void as
B. Security Interest against any creditors and/or liquidators of
3. What are the most commonly used the borrower.
security types in project financings in 5. Is private sale a recognized method
your jurisdiction? for the enforcement share pledge?
Generally, as permitted by Gibraltar law, it is What are the endorsement types
common in project financing transactions typically used for the share
for a security trustee and/or security certificates?
agent to be appointed for the purposes of In Gibraltar, a private sale is a recognized
holding security for the benefit of a single method for the enforcement of a share
lender, a syndicate of lenders, or such other pledge/mortgage of shares. The Land Law
applicable secured parties. Moreover, a and Conveyancing Act 1895 (as amended
range of security interests may be granted by the UK Conveyancing and Law of
in project financings, including but not Property Act 1881), affords creditors power
limited to: (i) all asset debentures; (ii) fixed of sale in the case of a mortgage which is
and/or floating charges; (iii) mortgages; (iv) made by deed. Generally, the power will
pledges; and ultimately (v) quasi-security arise when the secured indebtedness has
interests such as guarantees. become payable, and it enables the secured
4. Can the shares of a company be party to sell the property concerned.
pledged as a security to the benefit Statutory restrictions on the power of sale
of lenders? If so, is there a specific do exist, however such restrictions are
requirement in terms of formalities invariably included in the terms of security
or procedure to be followed for documents.
establishing or perfecting a share With regards to share certificates being
pledge? endorsed, the security document will
Yes – to the extent that a Gibraltar typically be accompanied by: (i) a signed
registered company grants a security and undated instrument of transfer of
interest (typically in the form of those shares (typically in the form of a share
84
transfer form); and (ii) signed and undated secured and unsecured parties under the
share certificates in the name of the provisions of the Insolvency Act 2011.
secured party, which would be held by
the secured party and/or security trustee/ 8. Is security trustee concept
agent once the share pledge/mortgage of enforceable in your jurisdiction? If
shares is entered to, and which can become not, is an alternative mechanism,
effective once dated in the event the such as a parallel debt, available?
indebtedness becomes due and payable. The concept of a security trustee (or
6. Can security interest be established security agent as also referred to from time
over future assets, rights and to time) is permitted in Gibraltar, and is
receivables of the borrower? common in project finance transactions.
The security trustee will be appointed to
Save with the exception of a legal
hold security for the benefit of a single
mortgage (on the basis that, generally
lender or syndicate of lenders. For the
speaking, it is not possible to create a legal
avoidance of doubt, it is typically the case
mortgage over future property unless
that registrable security in Gibraltar be
the same is both in existence and owned
by the mortgagor at the relevant time), registered in favour of the security trustee
Gibraltar law (which largely follows the (who will hold the same for and on behalf
position under common law), does allow of the lenders)
for the possibility of taking security over C. Incentives and Restrictions
intangibles such as future assets, rights and
receivables. 9. What are the main incentives and
exemptions for project financing in
7. What are the steps to be taken by your jurisdiction?
interest, in case the borrower The reality is that any incentives and/or
becomes insolvent, is technically exemptions applicable to local (as well
insolvent and/or commences as foreign investors) are not specifically
composition process? applicable to project finance in Gibraltar,
and ultimately noting that the application
From a Gibraltar legal perspective, the
and relevance of each of these will be fact
applicable security document needs to
and project specific. Moreover, tax credits
explain when and how the security can be
(including foreign tax credits), and potential
enforced, including setting out the lenders’
incentives such as development aid may,
remedies. For example, a debenture
over all the assets of the borrower would to the relevant parties, be deemed to be
typically permit the lender to appoint an incentives for project financing in Gibraltar.
administrator or administrative receiver. In order to attract investments (specifically
Where the security document is not an private developments) to Gibraltar,
all-asset debenture, it is expected that development aid for example offers
the security document would provide for promoters and developers of approved
enforcement powers to be tailored to the projects certain forms of tax relief, import
type of asset which is the subject of the duty relief, and rates relief.
security, including the appointment of a 10. Are there any incentives or
receiver with powers to manage the assets exemptions specifically applicable
comprising the security. Equally, in cases of
to foreign investors?
technical or actual insolvency, Gibraltar law
affords statutory remedies and options to Please refer to the answer to question 9.
85
11. Are there any restrictions for In addition, project financing transactions
borrowing bank loans and concerning land in Gibraltar may be subject
shareholder loans from abroad and/ to further registration requirements with
or in a foreign currency? the Gibraltar Land Registry.
Gibraltar does not currently have any D. Insurance
exchange control restrictions, there being
15. Can local insurance policies be
a complete freedom to remit funds into
governed by a foreign law?
and out of the territory and to convert
funds into other currencies. Incidentally, Generally speaking, parties are free
and subject to any potential prohibition to choose the specific choice of law
under Gibraltar law (including for example, governing policies. In our experience,
sanction regimes), Gibraltar companies are parties determine this in consideration of
permitted to hold bank accounts in foreign all relevant details of the insurable risk,
jurisdictions. including but not limited to: (i) the class
and type of business; (ii) the location of the
12. Are there any restrictions for risk; and (iii) the location of the insured.
jurisdiction? 16. Can insurance proceeds under the
Gibraltar attaches great importance to be assigned to the benefit of the
free markets and competition and save lenders?
with the exception of any potential
Subject to the form and terms of the
prohibitions under Gibraltar law (including
underlying insurance and/or reinsurance
for example, sanction regimes), there are no
policies, and on the assumption that each
restrictions imposed on foreign ownership
of the same are governed under the laws of
or investment.
Gibraltar, in our experience lenders can take
13. Is there any minimum equity security over insurance/reinsurance policies
requirement, under the legislation by an assignment by way of security.
To the best of our knowledge, there are no to the insurance provisions
minimum equity requirements in Gibraltar under the project financing
for project financings, whether under documentation, if any?
Gibraltar legislation or in practice. Specific complications, concerns and
14. Please explain the registration issues relating to insurance provisions
and filing requirements which under project financing documentation
are applicable for project finance will ultimately be driven and arise in the
documents to be valid and context of the project in question which
enforceable in your jurisdiction. will vary from deal to deal. Risks that
lenders would generally require to be
In the majority of project financing insured against, and which would require
scenarios, the only documents required careful thought and consideration, would
to be registered in Gibraltar will be the be in relation to loss or damage, third party
security documents as more particularly set liability, business interruption, start-up
out above in our response to Question 4. delays, and forms of environmental risk.
86
E. Financing of Public-Private Different types of government support in

Partnership (PPP) Projects Gibraltar may ultimately depend on the
form, nature and terms of each different
project. As a minimum, the government
will provide its co-operation in many large
date in your jurisdiction? projects, including at times the transfer
and sale of the land, and provision of
In Gibraltar, PPP is a permitted method further assistance in expediting (for cost-
of developing projects. In recent time efficient purposes), the developers’
years, particularly in the context of the provision and receipt of statutory
‘construction boom’ Gibraltar is still approvals, authorisations and consents
experiencing, efforts have been made
for the constructions and operation of the
to include the private sector in the
project.
development and fundings of public
facilities and services. Naturally, there are 21. Are political risk events usually
many different forms of PPP structures and under the responsibility of the
arrangements (which exceed the scope of public party or the private party
this text), however in Gibraltar the Build under the PPP agreements?
Operate Transfer (“BOT”) PPP method,
whereby the private sector finances, In our experience this will typically be
constructs and operates and maintains determined by the specific agreement
the facilities for a given period, with the reached by the parties in the procurement
public sector acquiring operational control stage and prior to formalizing and entering
at the end of that period. This method is into a PPP agreement. On the basis that
best known for assisting policymakers Gibraltar is considered to be a jurisdiction
with controlling capital expenditure on of political certainty and stability, we would
public infrastructure projects, and also expect the risk of any political event to be
maintaining public finances. In recent years, remote in nature, and in any event borne
there have been numerous PPP projects in
by the private party (albeit noting that this
Gibraltar, specifically in regard to schooling,
is not standardized, and the position on
healthcare, energy and government
housing. the same my fluctuate depending on the
specific nature of individual projects).
public authorities and the Lenders 22. Are investors and lenders usually
permissible under the local law, and protected against a change in
if so, commonly seen in the Project law passing subsequent to the
Finance market in your jurisdiction? signing of the relevant concession
agreement?
Direct agreements are permissible
under local law, however to the best In our experience, investors and lenders
of our knowledge, save for the BOT may from time to time (and subject always
method explained in Question 18, these to the type and nature of the project at
arrangements are not in our experience hand) seek to make provision for protective
commonly seen. mechanisms to be included within the
20. Please indicate the types of host underlying project finance documentation
government supports (including in cases of changes in law, notably in
treasury guarantee, debt the event that such changes render the
assumption etc.) available in your obligations or the performance of parties
jurisdiction. to be illegal and/or contrary to law, in
87
which case this may trigger an entitled The Plan is to be used, amongst others,
for investors and/or lenders to expect by developers when formulating new
immediate repayment. developments on the Rock, and ensure full
conformity with the policies and proposals
in the Plan. Policies and requirements
include many aspects relating to ESG
legislation?
matters, including new developments
Force majeure is not specifically regulated requirements: (i) environmental impact
under local legislation in Gibraltar. On assessment studies; (ii) appropriate
the basis that Gibraltar is a common assessments on land use; (iii) protection
law jurisdiction, force majeure clauses and enhancement of Gibraltar’s culture
are (similarly to English law), drafted in and heritage; and (iv) energy efficiency
relatively defined scope, identifying acts, and consumption. Currently, the DPC
events or circumstances beyond the as well as other related stakeholders
reasonable control of one of the parties to are in discussions with HM Government
the relevant document. To the extent that of Gibraltar to develop a new Gibraltar
the performance of a contract is rendered development plan, particularly in the
as an impossibility under the applicable context of the recent influx of residential
force majeure clause, the English common and property developments on the Rock.
law doctrine of frustration may be invoked
in certain circumstances, which may F. Jurisdiction, Waiver of
ultimately operate to terminate the said Immunity
contract. 25. Are submission to a foreign law and
24. What are the general environmental the waiver of immunity provisions
and social requirements in project enforceable?
financings? Submission to foreign law and waiver
Gibraltar’s land area amounts to of immunity provisions are enforceable,
approximately 640 hectares but due to and in certain circumstances would not
the topography of the Rock, much of this require a re-examination of the facts. This
is undevelopable. Accordingly, Gibraltar’s will however ultimately depend on the
scarce land resources have created a requirements of the foreign law in question.
coordinated set of policies and proposals 26. Can financing documents provide
which seek to manage Gibraltar’s future for arbitration clauses?
growth, and which accounts for numerous
competing environmental, social and Confirmed that Gibraltar law does not
economical demands and interests. This is prohibit parties from including arbitration
enshrined in the Gibraltar Development clauses within financing documents, and
Plan (the “Plan”), a planning scheme are (as a matter of course and best market
implemented pursuant to the Town practices) expected to typically consider
Planning Act 2018. The Plan, as enforced by and pursue different methods of alternative
the Gibraltar Development and Planning dispute resolution.
Commission (“DPC”), set out numerous
planning policies pertaining to the different
areas and zones in Gibraltar, each of which 27. What are the main current trends
differs and has their own specific set of in project financings in your
policies, considerations and safeguards. jurisdiction?
88
As alluded to in our response to Question 2, a jurisdiction, the most significant

most recently Gibraltar can be considered development or change expected in
to have enjoyed a ‘boom’ of both private the near future will be the precise form
commercial and residential property and scope of the Schengen-style treaty
developments. Notwithstanding the governing Gibraltar’s future relationship
political uncertainty of Brexit and economic with the EU, and the mutual benefits this
implications of the Covid-19 pandemic, may afford in terms of fluidity of goods and
the buoyant nature and surge of (almost people in Gibraltar. Originally announced
uninterrupted) economic activity in the on 31 December 2020, the intention by
property and real estate market in Gibraltar all parties concerned, notably Gibraltar,
has created an expectation that in the the United Kingdom and the EU (together
context of project finance, development with Gibraltar’s neighboring EU Member
finance will continue to trend as the State, Spain) was to seek to find, consider
principal protagonist. This has also been and implement a ‘bespoke solution’ of
exacerbated by the relocation of numerous developing a framework and/or treaty
ultra-high and high-net worth individuals, which would allow for the application
which has consequently attracted an array in Gibraltar of the relevant parts of the
of international investment in to Gibraltar. Schengen acquis necessary to achieve the
Currently, there are numerous property elimination of the control of the movement
developments which have either been of persons and goods (but not services)
announced; are seeking either outline or between Gibraltar and the Schengen area.
full planning permission; or are presently Since said initial announcement, all relevant
under construction. Examples include: (i) parties have entered into negotiations,
numerous high-rise residential property committing personnel and resources to
developments; (ii) a new ~£100 million various rounds of progressive dialogue with
national Category 4 football stadium a view to developing a mutually agreeable
complex (comprising 92 additional units form of treaty (which is currently expected
of residential homes, retail and office units during the course of 2023). Undoubtedly,
and a business center); and (iii) a largescale we expect any favourable treaty which is
development on the east side of Gibraltar implemented to add to Gibraltar’s offering
(encompassing, amongst other things, to both the domestic and global project
~1,300 luxury residential homes and a finance market.
550-600 berth marina for boats ranging
from six meters in length to superyachts). 29. What are the alternative reference
Undoubtedly, traditional streams of project interest rates which are being
finance in Gibraltar will also compliment commonly used in your jurisdiction
this, particularly in the context of corporate during the LIBOR transition period?
finance transactions and projects
At the time of writing, the alternative
concerning largescale secured lending
reference interest rates to LIBOR which we
in and amongst established industries
have seen deployed in project financing
in Gibraltar such as online gaming and
transactional documents are either SOFR
fintech.
(Secured Overnight Funding Rate) or SONIA
28. Are any significant development or (Sterling Overnight Index Average).
change expected in the near future
Unquestionably for both the project
finance market and for Gibraltar as
89
HUNGARY
DENTONS
Gergely Horváth
Partner
gergely.horvath@dentons.com
A. Overview that very complicated structures (e.g., with

bonds or mezzanine layer) are applied, but
1. What is the main legislation and single-lender and club deals are frequent
international treaties governing the in project financing, especially in the real
project financing in your jurisdiction? estate and energy sector, where more
The primary legislation is the Hungarian recently the PV plant financings are a
Civil Code, regulating various fundamental frequent feature.
issues, such as lending and security B. Security Interest
interests, on a general level. In addition,
there are further specific pieces of 3. What are the most commonly used
legislation on various levels regulating or security types in project financings in
otherwise affecting, for example, lenders your jurisdiction?
and related licences (a.k.a. via the Banking The Hungarian equivalents of fixed and
Act), capital adequacy rules, creating and floating charges, share pledges, as well as
registering security interests (on land, pledges over bank accounts, rights and
movables, etc.) and similar issues. receivables are granted in almost every
A special feature of Hungarian law is the case. In addition, if freehold structures
application of a construction trustee, so permit, real estate mortgages are also
relevant and mandatory for construction usually created. Other typical elements,
projects over EUR 5.3 million: it is regulated such as cost overrun guarantees, direct
in a special act. agreements and subordination are also
frequently applied.
market in your jurisdiction, and 4. Can the shares of a company be
requirement in terms of formalities
months?
We consider the Hungarian market, albeit establishing or perfecting a share
small, but rather matured: while it is rare pledge?
91
Yes, such security is available in respect becomes insolvent, is technically

of companies incorporated in the most insolvent and/or commences
common forms (such as Kft-s (limited composition process?
liability companies, similar to the German
GmbHs), and Zrt/Nyts (public or private It depends on the actual insolvency process
companies limited by shares, similar to commenced, but the fundamental rule is
the German AGs). The related specific that all creditors have to report their claims
requirements depend on the corporate to the court appointed officer (insolvency
form of the encumbered company: the office holder) if any, and then, depending
pledge over a Kft’s shares (quotas) are on the outcome of the process, either the
registered and non-possessory type debtor recovers without lenders enforcing
security (with the court of registration security or the insolvency office holder
recording any such security), while distributes the sale proceeds resulting from
the pledge over a Nyrt/Zrt’s shares are the winding-up of the debtor in accordance
either possessory pledge (a.k.a. security with the statutory order.
deposit), if granted over the (printed) 8. Is security trustee concept
share certificates or an account pledge enforceable in your jurisdiction? If
over the securities account where the not, is an alternative mechanism,
dematerialized shares are kept. Accordingly, such as a parallel debt, available?
there are related perfection requirements
(registration for Kft-s, physical handover or Yes, there is a unique Hungarian concept
account blocking for Zrt/Nyrt-s). (usually called ‘collateral agent’) which is
a special Hungarian version of an English
5. Is private sale a recognized method law-type security agent, with some notable
for the enforcement share pledge? differences regarding, inter alia, liability
(less autonomy is vested there than usual in
an LMA-type intercreditor) and the scope of
certificates?
security (it relates to asset security, but not
Yes, enforcement can take place privately applicable for guarantees).
or via court and private sale can occur.
The key rule is that the collateral is to be
sold to third parties, so appropriation 9. What are the main incentives and
(direct seizure by the creditor) is permitted exemptions for project financing in
only in rather limited cases, upon certain your jurisdiction?
conditions.
For developers, certain strategic projects
6. Can security interest be established (e.g., battery manufacturing plants) can
over future assets, rights and get direct state incentives (grants or
receivables of the borrower? tax benefits) and licensing can also be
streamlined. In certain industries (such as
Yes in most cases. Nevertheless, in practice
in energy), fixed tariff subsidies can also be
fixed charges (e.g., on PV panels) are
available). For lenders, some green projects
granted only once the assets are actually
can enjoy preferable treatment from capital
purchased and the inventory number is
adequacy/reserves point of view.
available, as this would greatly enhance any
future enforcement step. 10. Are there any incentives or
exemptions specifically applicable to
foreign investors?
interest, in case the borrower Please refer to the answer to question 9.
92
11. Are there any restrictions for D. Insurance

shareholder loans from abroad and/ 15. Can local insurance policies be
or in a foreign currency? governed by a foreign law?
Yes, a specific FDI process is relevant in case No, but Hungarian can approach non-
of non-EU lenders would rely on security Hungarian insurers for insurances, where
granted over so-called strategic assets (such the underlying law is other than Hungarian.
as power plants, shopping malls or alike). 16. Can insurance proceeds under the
The shareholding structure of the (direct insurance and reinsurance policies
and indirect) beneficiaries of the security be assigned to the benefit of the
(being either banks providing external lenders?
funding or affiliates within the same group)
are relevant for such purposes. Other than Yes.
restrictions setting from sanctions, no 17. What are the other complications,
currency-related restrictions apply. concerns or other issues in relation
12. Are there any restrictions for to the insurance provisions
foreign investments in your under the project financing
jurisdiction? documentation, if any?
Yes, as mentioned above, a specific FDI As usual, exclusions under each relevant
process is relevant in Hungary: it is mostly insurance shall be carefully assessed
relevant for (and designed to capture) by creditors and the participation of a
acquisitions, but affects financing s as well. construction trustee (referred to above) in
13. Is there any minimum equity the deal shall also be factored in.
requirement, under the legislation E. Financing of Public-Private
or in practice, for project financings Partnership (PPP) Projects
Yes, there are certain thin capitalization developing projects, and if so, have
rules that are applicable in Hungary and are any PPP projects been developed to
relevant for debt-to-equity ratios. Account
firms are usually consulted thereon.
14. Please explain the registration In theory, yes, but after a wave of PPPs
and filing requirements which in the early 2000-s (where motorways,
are applicable for project finance stadiums and swimming pools were built),
documents to be valid and such structures are nowadays not used,
enforceable in your jurisdiction. especially since 2010.
As mentioned above, the registration and 19. Are direct agreements between the
filing requirements for security interest public authorities and the Lenders
differ in the various asset types: regarding permissible under the local law, and
shares please see above, pledge over if so, commonly seen in the Project
fixed assets and receivables are registered Finance market in your jurisdiction?
in an on-line registry maintained by the
Hungarian Chamber of Public Notaries, Yes, direct agreements are required by
mortgage over lands are registered by the lenders in several (but far from all) cases,
relevant land registries, other registries are but those are usually with private parties
applicable for IP rights, vehicles, etc. Given (EPC contractors, offtakers, etc.) and
its complexity, specific advice should be rarely with public authorities (but specific
sought for every specific project. exemptions exists).
93
20. Please indicate the types of host F. Jurisdiction, Waiver of

government supports (including Immunity
assumption etc.) available in your 25. Are submission to a foreign law and
jurisdiction. the waiver of immunity provisions
enforceable?
Please see response No 9. above.
Yes, submission to a foreign jurisdiction
21. Are political risk events usually is usually recognised (subject to specific
under the responsibility of the exceptions) and immunity is not frequently
public party or the private party applicable (but if it is, it is very rarely
under the PPP agreements? waived).
In PPP, such risks were placed on the public 26. Can financing documents provide
party – noting that not many recent deals for arbitration clauses?
were concluded and it greatly depends
on the position and level of the public Yes, both Hungarian and international
party (government organs are more likely arbitration is recognized.
take this risk than, for example, local G. Trends and Projections
municipalities).
22. Are investors and lenders usually in project financings in your
protected against a change in jurisdiction?
signing of the relevant concession Renewable-related projects are likely to
agreement? remain popular in project financings. In
the real estate segment, luxury residential
Yes, other than tax laws. projects will be expected to continue or
commence, while less transactions are
anticipated on the lower retail (residential
housing and shopping mall) segments.
legislation?
28. Are any significant development or
No. Although force majeure is recognized
under Hungarian law as a factor externally
affecting contracts, it is not specifically
regulated. The entry into force of the new key
legislation regulating the land registry
cadaster will affect both real estate and
energy projects.
financings?
Financial institutions (Hungarians and non-
Hungarians alike) shall follow the applicable
ESG-related regulations (applicable on
an EU-wide level, on country level or for
any banking group), developers shall For financings in Hungarian forints, usually
meet the sectoral requirements (e.g., for BUBOR is applied, closely followed by
infrastructure, energy, real estates, etc.). EURIBOR in financings in Euros. Financings
in GBP and USD are less frequent on the
market, so the LIBOR transition period
hardly affects the local deals.
94
INDIA
JSA ADVOCATES & SOLICITORS
Tirthankar Datta Sagar Srivastava Ciol Kumar

Partner Senior Associate Associate
tirthankar.datta@ sagar.s@jsalaw.com ciol.kumar@jsalaw.com
jsalaw.com
A. Overview (a) the Securitisation and Reconstruction

of Financial Assets and Enforcement of
Security Interest Act, 2002 (“SARFAESI
Act”); and
(b) Recovery of Debts Due to Banks and
Project finance transactions in India are
Financial Institutions Act, 1993.
regulated by various Indian laws and
regulations that are applicable to such Insolvency resolution, liquidation and
transactions depending on the nature of bankruptcy and filing recovery suits is
financing and the project itself including governed by:
the following legislations governing the
contractual relationships, companies, (a) the Insolvency and Bankruptcy Code,
creating interest in immovable property: 2016 (“IBC”); and
(a) the Indian Contract Act, 1872 (“Indian (b) the Code of Civil Procedure, 1908.
Contract Act”);
Arbitration as a mode of dispute resolution
(b) the Companies Act, 2013 (“Companies is governed by the Arbitration and
Act”); and Conciliation Act , 1996 (“Arbitration Act”).
(c) the Transfer of Property Act, 1882 (the Scheduled commercial banks and NBFCs
“Transfer of Property Act”). with the Reserve Bank of India (“RBI”)
The enforcement of security interest is (India’s monetary authority, banking
governed for central banks and financial regulator and foreign exchange control law
institutions by: regulator) and regulated under:
95
(a) the Banking Regulation Act, 1949; and (d) the Airport Authority of India under the
Aircraft Act, 1934 and Aircraft Rules,
(b) the Reserve Bank of India Act,
1937.
1934 along with guidelines, master
directions, notifications and circulars Various multilateral bilateral International
issued by the RBI from time to time. Treaties may also be relevant including:
Foreign exchange related transactions are (a) Free Trade Agreements;
governed by:
(b) Comprehensive Economic Partnership
(a) the Consolidated Foreign Direct Agreements;
Investment Policy issued from time to
(c) Comprehensive Economic Co-operation
time by the Department of Industrial
Agreements;
Policy and Promotion (“FDI Policy”);
(d) Preferential Trade Agreements;
(b) Foreign Exchange Management Act,
1999 and various rules and regulations (e) The New York Convention on the
issued thereunder (“FEMA”); Recognition and Enforcement of
Foreign Arbitral Award, 1958(“New York
(c) the Foreign Exchange Management Convention”);
(Non-debt Instruments) Rules, 2019
issued by the RBI (“NDI Rules”); (f) the Geneva Convention on the
Execution of Foreign Arbitral Awards,
(d) the Foreign Exchange Management 1927 (“Geneva Convention”); and
(Debt Instruments) Regulations, 2019
issued by the RBI; (g) Cape Town Convention on International
Interests in Mobile Equipment and the
(e) the Master Direction on External Protocol on Matters Specific to Aircraft
Commercial Borrowings, Trade Credit, Equipment.
Borrowing and Lending in Foreign
Currency dated 26 March 2019 (“ECB Additionally, India has signed double tax
Guidelines”) issued by the RBI; and avoidance agreements with ninety-four
countries and limited agreements with
(f) the Foreign Exchange Management eight countries.
(Borrowing or Lending) Regulations,
2018, as amended from time to time. 2. How mature is the project finance
Additionally, in the context of infrastructure what are the most significant project
projects, sector-specific regulators govern financings closed during the last 12
projects, such as: months?
(a) the National Highway Authority of India The project finance market in India is quite
under the National Highways Authority mature. The primary sources of financing
of India Act, 1988; infrastructure projects are equity, debt
(b) the Directorate General of and government grants. Both domestic
Hydrocarbons under the Petroleum Act, financing through rupee denominated
loans and corporate bonds by scheduled
1934;
commercial banks regulated by the RBI
(c) the Central Electricity Regulatory both state owned and private, non-banking
Commission and relevant State finance companies registered with RBI
Electricity Regulatory Commission as well as foreign banks operating with
under the Electricity Act, 2003 read with licenses from the RBI; and cross-border
Electricity Rules, 2005; and debt financing through foreign currency
96
bonds and loans from international banks which is owned or leased, buildings or
and multilateral financial institutions are structures on the land, any permanent
prevalent. Private credit funds are also attachments on the land, any rights
becoming increasingly active in certain attached (such as easement rights) to the
types of mezzanine and special situation land) by way of a mortgage. The most
financings in the infrastructure project common types of mortgages used are
space. (a) a registered or English mortgage, by
Some of the significant project finance executing and registering a mortgage
deals in the last 12 months were: deed or an indenture of a mortgage; and
(b) an equitable mortgage or mortgage
Several renewable energy developers such
as Adani Green Energy Limited, Ayana by depositing the title deeds of the
Renewable Power, JSW Energy and Renew immoveable property in question with the
Power have tied up financing for their wind lender or security trustee.
or solar or hybrid power projects. The Transfer of Property Act mandates that
The roads arm of Adani Enterprises any indenture of mortgage or a mortgage
Limited, achieved financial closure for deed should be entered into by written
the development of access controlled instruments attested by two witnesses and
six lane (expandable to eight lane) registered with the relevant Sub-Registrar
greenfield Ganga Expressway Project in of Assurances, which is a governmental
Uttar Pradesh respectively on design, authority which has offices in each district
build, finance, operate and transfer (Toll) or locality in the states in India, which keep
basis under public private partnerships a record of transfer of ownership or security
(“PPP”) mode tied up project financing interest in immovable property.
of INR 102,380,000,000 (Indian Rupees
One Hundred Two Billion Three Hundred For the purposes of creating an equitable
Eighty Million) underwritten by the State mortgage or mortgage by deposit of
Bank of India. MSRDC Tunnels Limited (a title deeds, a director or authorised
wholly owned subsidiary of Maharashtra representative of the mortgagor deposits
State Road Development Corporation title deeds with the lender (or a security
Limited) achieved financial closure from trustee on its behalf ) for the property being
a consortium of local banks for designing mortgaged with the intention to create a
and constructing the missing link and mortgage. The acknowledgement of the
augmenting the existing section of the
same is recorded by the lender (or security
Mumbai Pune Expressway.
trustee on its behalf ) in a memorandum
B. Security Interest of entry. There may be a mandatory
requirement of registering or notifying the
equitable mortgage or notifying the Sub-
Registrar of Assurances in certain states.
your jurisdiction?
Pledge of Shares
Most commonly, the following forms of
security are created in project financing A security interest can be created over
transactions: shares and other securities such as
debentures by creating a pledge over such
Mortgage of immovable properties
securities in favour of a pledgee. A share
A security interest can be created over pledge agreement between the pledgor
the immovable property (such as land and pledgee records the terms of the
97
pledge, along with a separate power of for creating and perfecting a pledge on
attorney issued by the pledgor in favour of shares of companies.
the pledgee, which authorises the pledgee (a) Documentation: Execution of a share
to transfer the securities on an event of pledge agreement and a notarised
default. power of attorney.
Hypothecation or charge over movable (b) Stamp Duty: Applicable stamp duty
properties on both documents must be paid in
Under Indian law, ‘hypothecation’ involves accordance with applicable stamp laws,
the creation of a security interest by way of which vary across states.
a charge by a security provider in favour of (c) Filings:
a lender or a security trustee, without actual
delivery of possession, by executing a (i) Filings with the Registrar of
deed of hypothecation. Hypothecation can Companies (“ROC”): The charge
be created over tangible movable assets, created pursuant to the share pledge
such as fixed assets, plant and machinery, agreement must be registered with
bank accounts, current assets, stock-in the ROC by registering such creation
trade, insurance policies and receivables as of security interest in the relevant
well as intangible movable assets such as charge form, paying the requisite fees
rights accruing under project documents, and obtaining a certificate of charge
intellectual property, etc. by way of charge, from the ROC.
etc., whether existing presently or in the (ii) Filings with the Depository: In
future. The charge can be a fixed charge or case of dematerialised shares, the
a floating charge. Securities and Exchange Board of
Credit Enhancements and Contractual India (Depositories and Participants)
Undertakings Regulations, 2018 requires that a
beneficial owner of dematerialised
Separately, a debt can also be secured shares of Indian companies must give
or credit enhanced by way of corporate an intimation of a such pledge to the
guarantees or sponsor support depository in a prescribed pledge
undertakings from corporate entities format and the depository shall record
such as parent companies or other group the entries of the pledge in its records
companies, personal guarantees from accordingly.
individual promoters and non-disposal
(iii) Deposit of Share Certificates: In case
undertakings, etc.
of physical shares, if the shares of the
4. Can the shares of a company be Indian company are in physical form,
pledged as a security to the benefit then the share certificates are required
of lenders? If so, is there a specific to be physically deposited along with
requirement in terms of formalities a signed and undated share transfer
or procedure to be followed for form.
(iv) Filing with Information Utility: Under
pledge?
the IBC and under the Insolvency
Yes, as mentioned above, security can be and Bankruptcy Board of India
created by way of a pledge on the shares (Information Utility) Regulations, 2017,
of a company for securing payments of any relevant information in relation to a
debt. The following procedures are required facility and security is required to be
98
filed with the information utilities in Act read with Companies (Share Capital
the format prescribed under the said & Debentures) Rules 2014, the pledgor is
regulations. required to:
(v) Disclosures to Stock Exchanges: If the (a) intimate the company regarding the
shares of a listed company are to be transfer;
pledged, certain disclosures must be (b) execute a duly executed and undated
made by the beneficiary of the pledge share transfer form (with requite
and the pledgor who is a promoter, to stamp duty) with the pledgee (which is
the relevant stock exchanges under typically obtained upfront by the lender
the Securities and Exchange Board at the time of pledge creation);
of India (Substantial Acquisition of
Shares and Takeover) Regulations, (c) and deliver the same to the company
2011, if the pledge is in excess of within 60 (sixty) days from the date of
such execution; and
certain prescribed thresholds and
under the Securities and Exchange (d) deposit the share certificates with the
Board of India (Prohibition of Insider company,
Trading) Regulations, 2015.
after which, the company will pass a board
5. Is private sale a recognized method resolution registering the transfer. The
for the enforcement share pledge? company is required to deliver the share
What are the endorsement types certificates of all securities transferred
typically used for the share within 1 (one) month of an instrument of
certificates? transfer.
Yes, private sale is a recognized method for 6. Can security interest be established
the enforcement of security created over over future assets, rights and
shares under a share pledge agreement. receivables of the borrower?
A pledge on shares can be enforced by the Yes, please as mentioned above, under
pledgee by giving a reasonable notice to Indian laws a charge can be created on
movable assets, whether tangible or
the pledgor, which is a requirement under
intangible and whether existing presently
the Indian Contract Act. On the expiry of
or in the future. However, it may be noted
such a notice, the pledgee will have the
that a mortgage cannot be created on
right to invoke the share pledge through its
immovable properties, which have not yet
depository participant and sell the shares
been acquired and will be acquired in the
to any third party or on the stock exchange future.
(in case the shares are listed). The pledgee
does not need to obtain a court order to 7. What are the steps to be taken by
sell the pledged assets. As the pledged the lenders to enforce their security
assets are in possession of the pledgee, it interest, in case the borrower
can directly dispose of the pledged shares. becomes insolvent, is technically
insolvent and/or commences
Please note that public unlisted companies composition process?
and companies listed with a stock exchange
are mandatorily required to issue shares in Under the relevant financing and security
documents, a lender would have the right
dematerialised form.
to enforce its security upon occurrence of
In case of private companies with physical an event of default. Following process is
shares, in accordance with the Companies followed for enforcement of the security:
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Immovable Property reasonable notice of enforcement to the

pledgor. The pledgee does not need to
If the mortgage is an English Mortgage,
obtain a court order to sell the pledged
the mortgagee has the power to sell
shares unless the pledgor or the borrower
the mortgaged property without the
has obtained an interim injunction order
intervention of the court, subject to certain
from a court. If the pledged shares are held
notification requirements. Where the
in physical form, the pledgee must submit
mortgage is an equitable mortgage, the
the executed share transfer forms it holds
mortgagor must apply to the court for a
to the company whose shares are being
decree to sell the mortgaged property in
order to recover the debt. pledged. The company will then need to
approve the transfer of shares in the name
Secured creditors such as Indian banks, of the lender or third-party transferee at its
certain notified financial institutions and board meeting. If the company refuses to
debenture trustees for listed and secured approve the transfer of shares, the lender or
non-convertible debentures (“NCDs”) can third-party transferee will need to approach
enforce security under the SARFAESI Act, the competent courts and tribunals to
which is a specialised legislation, which challenge such refusal.
provides for a quicker mode of enforcing
security out of court by taking possession Typically, most concession agreements
(actual or symbolic). stipulate that consent is required from the
concessioning authority prior to effecting a
Additionally, it is pertinent to note that change in control of the project company. If
the Supreme Court of India has held that a pledge enforcement results in a change of
the enforcement of a mortgage is not an control, prior consent of the concessioning
arbitrable dispute and should only be tried authority will also be required for
by a judicial forum, and not by an arbitral enforcement of the pledge.
tribunal.
Substitution under Project Documents
Movable Property
Upon the occurrence of payment defaults,
The terms of hypothecation are the lenders usually have the right to seek
entirely regulated by the terms of the substitution of the project counterparty
deed of hypothecation between the with a person selected by the lenders, as
hypothecator (the security provider) and per the terms of the relevant concession
the hypothecatee (the lender). A deed agreement. The lenders may in some cases
of hypothecation can be enforced either be able to enter into a direct agreement
by appointing a receiver and selling the with the concessioning authority. Some
charged assets or by obtaining a decree for concession agreements like for highway
the sale of the movable property. Indian projects provide for a tripartite substitution
banks, certain notified financial institutions
agreement format between the lender,
and debenture trustees for NCDs can
concessioning authority and the project
enforce hypothecation under the SARFAESI
special purpose vehicle / borrower.
Act, which provides for a quicker mode of
The lenders’ selectee usually needs to
enforcing security out of court by taking
be a person who is approved by the
possession of the property (actual or
concessioning authority or as per the terms
symbolic).
of the concession agreement.
Pledge over Shares
Corporate Insolvency Resolution Process
A pledgee may enforce a pledge by giving (“CIRP”)
100
If a company makes any default in making The interim insolvency resolution

a payment of INR 10,000,000 (Rupees Ten professional will take over the management
Million only) or more, then the creditors, of the corporate debtor and take all actions
individually and/ or through other creditors for and on behalf of the corporate debtor.
(CIRP against the corporate debtor can be The financial institutions maintaining
filed jointly by not less than one hundred the accounts of the corporate debtor,
of such creditors in the same class or not will act on the instructions of the interim
less than 10% of the total number of such insolvency resolution professional and will
creditors in the same class, whichever is furnish all information of the corporate
less), can choose to file an application debtor as available with them. The interim
for initiating the corporate insolvency insolvency resolution professional will be
resolution process against such company responsible for ensuring that the corporate
as the corporate debtor before the relevant debtor runs on a going concern basis.
National Company Law Tribunal (“NCLT”) The interim insolvency resolution
under Section 7 of the IBC. professional will also form a committee
As per the provisions of the IBC, of creditors (“COC”) in accordance with
upon admission of an application for the provisions of the IBC. The interim
commencement of a corporate insolvency resolution professional may be confirmed
as the resolution professional by the COC
resolution, the NCLT shall by order, inter
or the COC may appoint another person
alia:
in place as the resolution professional. The
(a) declare a moratorium prohibiting, inter COC will approve a resolution plan for the
alia: corporate debtor. Where there are financial
creditors, the COC will only comprise
(i) initiation of any suit or proceeding
financial creditors (but excluding any
against the corporate debtor
financial creditors that are related parties of
including execution of any judgment,
the corporate debtor). The decisions at the
decree or order in any court or
COC have to be taken by 51%, 66% or 90%
tribunal; majority of financial creditors in terms of
(ii) transfer, alienation, encumbrance or the value of the financial debt, depending
disposal of any assets of the corporate on the decision to be taken. The creditors
debtor; will be the members of the COC of the
corporate debtor. If the creditors constitute
(iii) any action to foreclose, recover 66% or more of the financial debt of the
or enforce any security interest corporate debtor, they will be able to
created by the corporate debtor in finalise a resolution plan. However, if they
respect of its properties including do not hold 66% or more of the financial
any action under SARFAESI Act, till debt, then they will also need the buy-in
the completion of the insolvency of other financial creditors to approve a
resolution process; plan acceptable to them. As per the IBC
(b) appoint an interim insolvency and the Insolvency and Bankruptcy Board
resolution professional; and of India (Insolvency Resolution Process
for Corporate Persons) Regulations, 2016
(c) cause a public announcement of the (as amended), operational creditors will
initiation of corporate insolvency have to be paid in priority to the financial
resolution process in respect of the creditors of the corporate debtor as part of
corporate debtor. the resolution plan. However, the resolution
101
applicant can assume in the resolution on behalf of the lenders in accordance

plan that the liquidation value due to with the terms that have been mutually
operational creditors is zero in case the agreed upon. This agent is in charge of
liquidation estate is not sufficient to pay the coordinating the process of drawdown of
debts ranking above operational creditors loans and administration.
as per the prescribed waterfall under the
IBC or specify in the resolution plan that However, it is possible to have parallel debt
the amount to be paid to the operational under multiple banking arrangements
creditors. with different lenders where each lender
enters into bilateral financing and security
It may be noted that the COC can choose documents. However, in case of pledge
to liquidate the corporate debtor if the of dematerialised shares, a single person
resolution plan is not viable or sustainable. is recorded as the holder of a pledge with
In such case, the insolvency resolution the depository and thereafter a security
professional will recommend to the NCLT trustee or a security agent may need to
for liquidation of the corporate debtor. be appointed. Additionally, earlier charge
If the resolution plan is approved by holders may need to cede charge if
the prescribed majority of the COC and theirpriority is to be pari passu by issuing
the NCLT, the resolution plan will be a consent letter, security sharing letter or
implemented for insolvency resolution of
signing up to an inter-creditor agreement.
the corporate debtor (assuming there are
no appeals against the NCLT order). Appointing of an onshore security trustee
is generally preferred. Additionally,
The entire CIRP (except the implementation
appointed security trustee or security agent
of the resolution plan) is required to be
would make filings with authorities and
completed within a period of 330 days from
enforcement of security interests easier.
the insolvency commencement date.
enforceable in your jurisdiction? If 9. What are the main incentives and
not, is an alternative mechanism, exemptions for project financing in
such as a parallel debt, available? your jurisdiction?
The principles of agency and trust are PPP projects have been incentivising the
acknowledged and widely accepted in the projects through government schemes
Indian banking sector. In India, for usual for making them commercially viable
financing transaction involving multiple and bankable PPP projects. Such funding
lenders, security interest generally is schemes include the Viability Gap Funding
created in the name of a trustee company (VGF) scheme of up to 40% of the cost
who holds the security for the consortium of the project or the India Infrastructure
of lenders as a trustee. This is done for Project Development Fund (“IIPDF”).
the simplification and convenience of
creation and enforcement of security and Other tax incentives are available for all
syndication of loans. A separate agreement infrastructure-related projects. A deduction
for appointment of such security trustee is of 100% of the capital expenditure for
executed. projects that commence on or after April 1,
2017. Certain state governments have also
Generally, in a financing arrangement
provided tax incentives including:
comprising of consortium of lenders in
India, facility agent is also appointed • Electricity duty exemptions.
102
• Rebates in tariffs for electricity, water A borrower availing of an ECB facility

or gas. should be eligible to receive FDI (even if
such FDI is subject to any conditions under
• Subsidies on clean manufacturing
the prevalent FDI policy). The following
technology, pollution control and so on.
eligibility criteria have to be complied by
India is also a signatory to numerous a foreign lender to be recognised as an
bilateral free trade agreements, double “eligible lender”:
taxation avoidance treaties (“DTAT”),
comprehensive economic partnership (a) a resident of a country that is a
agreements or co-operation agreements, member of the Financial Action
and preferential trade agreements (which Task Force (“FATF”) or a member
aim to protect foreign investments in of a FATF-Style Regional Body; and
projects in India). These treaties and should not be a country identified in
agreements protect foreign investors even the public statement of the FATF as
in the event of foreclosure of the project, a jurisdiction having a strategic Anti-
subject to the RBI and other industry- Money Laundering or Combating the
related authority guidelines. Financing of Terrorism deficiencies to
which counter measures apply or a
However, to avoid tax avoidance and treaty
jurisdiction that has not made sufficient
shopping, recently DTATs with certain
countries have been sought to be amended progress in addressing the deficiencies
by the Indian government. or has not committed to an action plan
developed with the FATF to address the
10. Are there any incentives or deficiencies;
to foreign investors? (b) a resident of a country whose securities
market regulator is a signatory to the
The government has fully liberalised International Organisation of Securities
investments in the infrastructure sector Commission’s (IOSCO’s) Multilateral
and permits foreign direct investment Memorandum of Understanding or a
(“FDI”) of up to 100% of the share capital
signatory to bilateral Memorandum of
of a company through the automatic route
Understanding with the Securities and
i.e., without requiring prior approval of the
Exchange Board of India (“SEBI”) for
Government of India.
information sharing arrangements;
(c) a multilateral and regional financial
shareholder loans from abroad and/ institution where India is a member
or in a foreign currency? country;
External Commercial Borrowings (d) foreign equity holders; or
Loans, credit facilities granted by a foreign (e) foreign branches or subsidiaries of

lender or bonds subscribed by foreign Indian banks (only for foreign currency
capital market investors, to or issued by, an ECBs and except in certain cases).
Indian borrower is governed by FEMA, and The minimum average maturity period
the ECB Guidelines. (“MAMP”) for ECBs ranges from 1 year (for
There are two types of external commercial ECBs up to USD 50 million or its equivalent
borrowings (“ECBs”): (a) foreign currency- per financial year) and generally for 3 years.
denominated ECBs; and (b) rupee- In certain situations, based on the end use
denominated ECB. of the ECBs (such as use for working capital
103
purposes, general corporate or repayment of the total investment of such FPI in

of rupee loans) the prescribed MAMP may corporate bonds on an end-of-day
vary from 5 years, 7 years or 10 years. basis;
Additionally, proceeds of ECBs cannot be (b) investment by an FPI should not exceed
utilised for certain negative end usesreal 50% of the issue size of the NCDs;
estate activities, investment in capital
(c) the above-mentioned caps of 30% and
market and equity investment.
50% are not applicable for certain types
An eligible foreign lender providing an of exempted securities such as security
ECB to an Indian borrower is not required receipts and debt instruments issued
to obtain any consent or licence to lend by asset reconstruction companies and
in India to an eligible Indian borrower debt instruments issued by an entity
or to enforce its rights under any loan under CIRP or defaulted NCDs.
agreement. However, an Indian borrower
Voluntary Retention Route
is required to apply for a loan registration
number with the RBI through an Authorized Under the Voluntary Retention Route, no
Dealer Bank (which is a bank licensed by minimum residual maturity of the NCDs
the RBI to deal in foreign currency and is stipulated for investing in NCDs by an
has certain delegation authority under FPI. There are no limits to the number of
exchange control regulations). corporate bonds that can be subscribed
by an FPI (subscription to 100% of the
Under the ECB Guidelines, there are ceilings
corporate bonds is permissible).
prescribed for all-in-costs which include
rate of interest, other fees, expenses, However, there is a minimum retention
charges, guarantee fees and export credit period of 3 (three) years during which time
agency charges. the FPI has voluntarily committed to retain
the amount allotted to it invested in India
FPI Route
and this retention period will be applicable
Under Indian law, entities registered with to 75% of the total amount allotted for
SEBI as ‘foreign portfolio investors’ (“FPI”) investment to an FPI by RBI.
are permitted to subscribe to corporate
bonds (or as referred to in India as non-
convertible debentures) issued by Indian
jurisdiction?
companies. There are two routes in which
an FPI may subscribe to NCDs issued by an Transactions dealing with the inflows and
Indian company: outflows of currency are governed by
FEMA. The policy framework on foreign
General Route
investment in India is transparent and
Under the general route, an FPI may invest comprehensible and aimed at promoting
in NCDs issued by a company in India and creating a conducive environment for
subject to compliance with the following: foreign investment.
(a) an FPI may subscribe to corporate A non-resident entity may invest or
bonds with minimum residual maturity participate in India in the following ways:
of above one year only – however,
Foreign Direct Investment
an FPI may invest in securities with
residual maturity of up to one year if An investor investing under the FDI route
such investment does not exceed 30% can invest in equity instruments such as
104
equity shares, compulsorily convertible India such as biotechnology, information

debentures or compulsorily convertible technology (hardware and software
preference shares or in 10% or more of the development), nanotechnology, seed
post issue paid-up equity capital on a fully research and development, new chemical
diluted basis of a listed Indian company and entities in the pharmaceutical sector, dairy
even contribution to the capital of a limited and poultry industries, bio-fuels, certain
liability partnership. capacity hotel-cum convention centres and
the infrastructure sector.
Investments under this route are subject
to the sectoral caps or limits, as the case FVCIs can invest in unlisted equity and
may be, and the conditionalities specified equity linked instrument and debt/
under the NDI Rules and the FDI Policy debt instruments, units of certain types
(as amended by various press notes from of pooled investment funds, and equity
time to time) issued by the Department of or equity linked instrument and debt
Industrial Policy and Promotion Ministry instrument issued by an Indian start-up.
of Commerce and Industry Government FVCIs can invest in debt securities where
of India and also requirements/ policies in which the FVCI has already made an
prescribed by relevant sectoral regulators investment by way of equity.
and government policies, if any.
Certain sectors are placed either under the requirement, under the legislation
automatic route (i.e., without requiring or in practice, for project financings
the prior approval of the Government of in your jurisdiction?
India) or under the approval route (i.e.,
While there is no minimum equity
which requires the prior approval of the
requirement under the Indian laws and
Government of India).
legislations, as a practice for project
Foreign Portfolio Investors (FPI) financings generally debt to equity ratios
between the ranges of 80:20-70:30 are
A separate registration is issued by the
followed, depending on the nature of the
SEBI under the Securities and Exchange
sponsor entity. In India, for construction of
Board of India (Foreign Portfolio Investors)
power projects, bid documents are issued
Regulations, 2019 to foreign entities to
for inviting tenders. Bid documents and
operate as an FPI.
tender conditions may prescribe debt
As mentioned earlier, FPIs can invest in equity requirements. Additionally, we
listed and with certain restrictions on end have also seen that obligations are placed
use, unlisted debt securities. FPIs also over the borrowing entity for bringing
invest in certain securities including equity in minimum equity to the project under
shares listed on the stock exchange, units of project documents or under project finance
mutual funds and certain regulated pooled documentation.
investment funds.
Foreign Venture Capital Investment and filing requirements which
The Foreign Venture Capital Investment
(“FVCI”) regime is a route that permits
enforceable in your jurisdiction.
certain identified eligible foreign entities
which are registered with SEBI as ‘foreign In India, there are multiple requirements to
venture capital investors’ to make venture create, perfect and record security interests.
capital investments in specified sectors in These include:
105
(a) Registration with the ROC: The (e) Registration with the Sub-Registrar of
particulars of charge/security interests Assurances: An indenture of mortgage
over any type of property of companies executed for an English mortgage or
and limited liability partnership have a registered mortgage or a mortgage
to be reported with the ROC within 30 deed is required to be registered with
days of creation of such charge by the the local sub-registrar of assurances.
person who has created the security In some states, an equitable mortgage
interest. Unless the security interest also needs to be registered with or
is registered and the registration notified to the land registry. This is
certificate is issued by the ROC, the accompanied with payment of state-
charge-holder’s claim will not be specific registration fees, as applicable
recognised by the liquidator or other in the state of registration of such
creditors of the company. document.
(b) Filing with the Central Registry of
(f) No-objection certificate of the Income
Securitisation Asset Reconstruction and
Tax Authorities: Prior to creating a
Security Interest of India (“CERSAI”):
charge over certain specified fixed
The particulars of charge/security
assets, it may be necessary to procure
interest over immovable properties
prior consent of the Indian income
and movable properties have to
be registered with the CERSAI, a tax authorities to ensure that pending
repository created under the SARFAESI income tax dues are not given a priority
Act. A secured creditor is permitted to the dues of a secured creditor.
to exercise enforcement rights on a D. Insurance
security interest under the procedure
provided in the SARFAESI Act and gets 15. Can local insurance policies be
a priority against government taxes governed by a foreign law?
and dues only if such security interest The choice of foreign law clauses made
is not registered with CERSAI. There are by parties in contracts based on parties’
operational issues and ambiguities in
autonomy should be upheld by the Indian
relation to filings by non-residents and
courts, except where public policy issues
certain forms of security.
are involved. However, if the insurance
(c) Filings with the Information contract is being undertaken in India it
Utilities: Information of any financial would also need to be in compliance with
indebtedness availed along with Indian law and regulations.
information relating to assets over
which any security interest has been 16. Can insurance proceeds under the
created has to be submitted to insurance and reinsurance policies
information utilities set up under the be assigned to the benefit of the
IBC. lenders?
(d) Depository: In case of pledge of Yes, insurance proceeds and rights of a

dematerialised securities, pledge has to borrower under insurance contracts can
be recorded in the depository system be assigned to the benefit of lenders. This
with the depository participant holding is usually done by a charge under a deed
the shares on behalf of the pledgor. The of hypothecation. It is also possible to
relevant depository thereupon marks assign the insurance proceeds in favour of
an entry of such charge in its records the lenders (including foreign lenders) by
recording the pledge of the securities. naming them as beneficiaries or first loss
106
payees of an insurance policy by obtaining infrastructure through the PPP model

an endorsement of the insurance policy. across the country. The government of
The conditions for applying insurance India has streamlined the appraisal and
proceeds are often incorporated in the approval mechanism of certain central PPP
transaction documents. Typically, insurance projects by setting up the Public Private
proceeds are required to be deposited Partnership Appraisal Committee.
into an escrow account or a trust and The development of a mass rapid transit
retention account in case of project system in Mumbai, various large airports
finance transactions in India and used in Delhi, Mumbai, Bengaluru and Goa
for mandatory prepayment or in case of including two greenfield airports being
smaller claims for replacement of assets. developed in Jewar (near the National
The insurance proceeds are then applied Capital Region) and in Navi Mumbai (on the
in accordance with the cash-flow waterfall outskirts of Mumbai) and several national
as provided under the escrow account highway projects launched by the National
agreement. Highway Authority of India (“NHAI”) have
17. What are the other complications, also been under the PPP model.
concerns or other issues in relation 19. Are direct agreements between the
to the insurance provisions public authorities and the Lenders
under the project financing permissible under the local law, and
documentation, if any? if so, commonly seen in the Project
There are no major complications or issues Finance market in your jurisdiction?
in relation to insurance provisions under Yes, direct agreements between public
the project financing documentation. The authorities and lenders are permissible.
process for marking lenders as first loss
payees or beneficiaries is set out above. Signing direct agreements or substitution
Other considerations in relation to the agreements with government
inter-play of insurance proceeds and the counterparties in projects is prevalent
trust and retention account for a project are where it is specifically contemplated under
also mentioned above. the concession agreement such as the NHAI
concession agreements. For private project
E. Financing of Public-Private counterparties, direct agreements may be
Partnership (PPP) Projects negotiated in some cases and in some cases
the project contract will upfront permit an
assignment in favour of the lenders. These
direct agreements are usually limited to
step-in rights to the lenders in the event of
the concessionaire’s default, which allows
PPP projects are prevalent methods them to replace the borrower with a third-
used in India to enable private sector party entity and prevent termination.
participation in the development of
sectors such as infrastructure, power,
transport, telecommunications and
certain utilities (greenfield airports and
urban rail infrastructure). The Department
jurisdiction.
of Economic Affairs of the Ministry of
Finance has been primarily overseeing There are several different government
the development of the central public support schemes such as VGF as mentioned
107
earlier to cover up to 40% of the total 22. Are investors and lenders usually
project cost, Jawaharlal Nehru National protected against a change in
Urban Renewal Mission for funding law passing subsequent to the
infrastructure projects such as road signing of the relevant concession
networks, water and sanitation, solid agreement?
waste management and other urban A concession agreement would usually
transportation projects, in major cities and provide compensation or adjustment of
the IIPDF set up in 2007 by the Ministry of the tariff to private parties for qualifying
Finance to provide financial support for changes in the law or a fundamental
quality project development activities. change in the law.
Additionally, certain financial institutions With respect to qualifying changes in the

have also been incorporated or set up as law, the scope of relief provided to a private
wholly owned companies of the Indian party is to a reasonable extent, only if the
increased costs are a direct consequence
government such as Indian Infrastructure
of the change and occur after a prescribed
Finance Company Limited or the Indian
cut-off date, which is usually the bid
Renewable Energy Development
submission date. However, disputes in
Agency Limited which makes use of the relation to the attributability of such costs
government’s ability to borrow money on are resolved through the dispute resolution
the open market to build a sizable fund mechanism provided in the agreement.
that can then lend money to PPP or specific
types of projects. India’s largest bank, which
is a public sector undertaking, the State
legislation?
Bank of India is also a major financier for
infrastructure projects. National Investment Yes, force majeure is a recognised legal
and Infrastructure Fund was set up as a doctrine under Indian law and contractually
sovereign wealth fund for providing long- provided in various concession agreements.
term capital for infra-related projects. If the non-performance of obligations is
owning to a force majeure event which are
21. Are political risk events usually usually events specified as being outside
under the responsibility of the the control of the parties, a party may be
public party or the private party exempted from the consequences of non-
under the PPP agreements? performance. Prolonged force majeure may
also lead to termination of the agreement.
Typically, a concession agreement would
include political events (including legal Section 32 of the Indian Contract Act,
risks) under force majeure provisions. 1872 provides that contracts will be held
void if it is contingent on the occurrence
Following the occurrence of an event
of an event, which subsequently becomes
which would trigger force majeure, all costs
impossible. Similarly, Section 56 of the
related to such an event will be reimbursed
Indian Contract Act provides that an
by the government party. A concession agreement to do an impossible act in itself
agreement would ideally also provide is void. Prior to the execution of a project
scope claiming additional compensation to agreement, the parties agree upon an
the concessionaire in the event of certain exhaustive list of events that would trigger
identified categories of force majeure provisions in relation to the consequences
events (including political events). of force majeure events.
108
24. What are the general environmental Responsibility Policy) Rules, 2014, also
and social requirements in project mandate companies with a certain net
financings? worth to spend at least 2% of their average
net profits from the previous three financial
The Indian regulatory framework in relation
years on corporate social responsibility
to environmental, social and governance
initiatives and prescribes other governance
(“ESG”) is codified under various
measures such as constituting a corporate
legislations, which cover a plethora of ESG
social responsibility committee. The
related issues, such as:
Companies Act also requires the board
(a) environmental protection (e.g., the report to contain certain details relating
Environment Protection Act, 1986, the to steps taken for conservation of energy,
Air (Prevention and Control of Pollution) alternative sources of energy etc.
Act, 1981, the Water (Prevention and
Control of Pollution) Act, 1974, etc.); Additionally, there are certain provisions
of the regulations prescribed by SEBI
(b) employee benefits (e.g., the Factories which provide for certain disclosures for
Act, 1948, the Code on Wages, 2019, certain categories of listed entities by
etc.); and market capitalisation to have a business
(c) corporate governance (e.g., the responsibility report describing the
Companies Act, SEBI, Prevention of initiatives taken by the listed entity from
Money Laundering, 2002, etc.) an environmental, social and governance
perspective.
The Environment Protection Act, 1986
categorises industries, in accordance with F. Jurisdiction, Waiver of
the levels of pollution that results from Immunity
their operations, as red, orange, green or 25. Are submission to a foreign law and
white and a prior clearance of the Ministry the waiver of immunity provisions
of Environment and Forests is required enforceable?
depending on the category of the project.
Under the other legislations mentioned Submission to foreign law:
above, projects are also mandatorily The bona fide choice of a foreign law and
required to obtain ‘consent to establish’ submission to foreign jurisdiction as per
and ‘consent to operate’ permits from the the parties’ intention the governing law
relevant state pollution control board and of the contract would be recognised
depending on the location and impact of and upheld by Indian courts subject to
the project. Renewable energy projects certain exemptions, such as if the choice
are under the white-list category and of jurisdiction is oppressive or is in a forum
exempted to obtain such approvals.
non conveniens, if the same is against public
Labour licenses, principal employer policy or the basic principles of morality
registration and factory licenses are also and justice.
required to be obtained from government
Similarly, agreements executed with
authorities in accordance with relevant
governmental authorities would normally
labour codes.
be governed by Indian law. Security
The Companies Act also provides enhanced documents creating a charge over any
governance norms for larger companies. property situated in India should be
Certain provisions of the Companies Act governed by Indian law in order for it to be
read with the Companies (Corporate Social enforceable.
109
While India does not have a comprehensive (b) the party against whom the award is
legislation governing a foreign state’s invoked was not given proper notice
immunity, it is a signatory to the United of the appointment of the arbitrator
Nations Convention on the Jurisdictional or of the arbitral proceedings or was
Immunities of the States and their Property. otherwise unable to present his case;
Additionally, as per Section 86 of the Civil
Procedure Code, 1808, no foreign state can (c) the award deals with a difference
be sued in any Indian court without the not contemplated by or not falling
prior consent of the central government. within the terms of the submission
to arbitration, or it contains decisions
Transaction documents specifically lay on matters beyond the scope of the
down waiver of immunity clauses. The submission to arbitration, provided
Supreme Court of India in a judicial decision that, if the decisions on matters
has held that the immunity enjoyed by submitted to arbitration can be
a foreign state is not absolute. A foreign separated from those not so submitted,
state will enjoy immunity if the acts are that part of the award which contains
government acts and are not considered decisions on matters submitted to
commercial or non-sovereign in nature. arbitration may be enforced;
26. Can financing documents provide (d) the composition of the arbitral
authority or the arbitral procedure
Yes, financing documents can provide for was not in accordance with the
arbitration clauses in accordance with the agreement of the parties, or failing
provisions of the Arbitration Act. such agreement, was not in accordance
with the law of the country where the
India is a signatory to the New York
arbitration took place;
Convention and the Geneva Convention,
and the Arbitration Act recognizes the (e) the award has not yet become binding
enforcement of foreign awards. A foreign on the parties or has been set aside or
award will be enforceable in India if the suspended by a competent authority of
seat is in a country which is a signatory to the country in which or under the law
the New York Convention or the Geneva of which that award was made;
Convention and the award is made in
a territory which has been notified as a (f) the subject-matter of the difference is
convention country by India. not capable of settlement by arbitration
under the law of India; or
However, as per Section 48 of the
Arbitration Act, enforcement of a foreign (g) the enforcement of the award would be
award governed by the New York contrary to the public policy of India.
Convention or the Geneva Convention may The Supreme Court, in a judicial decision
be refused on the following grounds: has in the case of a mortgage of immovable
(a) the parties to the arbitration agreement property, the dispute has been held to be
were, under the law applicable to them, non-arbitrable as it deals with rights in rem
under some incapacity, or the said instead of a right in personam.
agreement is not valid under the law
to which the parties have subjected it
or failing any indication thereon, under 27. What are the main current trends
the law of the country where the award in project financings in your
was made; jurisdiction?
110
Some of the main current trends in project The Electricity Act , 2003 is also proposed
financing in India include a push towards to be amended to address various issues
the renewable energy industry. India has in being faced by the power sector. There are
the 26th Session of the Conference of the certain amendments proposed in an Energy
Parties to the United Nations Framework Conservation Act, 2001 for incentivising
Convention on Climate Change in Glasgow non-fossil fuel energy sources and penalise
from the earlier Paris Climate Accords industrial polluters. A regulatory framework
committed to decarbonisation by reducing for carbon credit trading is also proposed
carbon emissions by 50% by 2030 and to be implemented soon. The Government
becoming energy independent by 2047 of India has introduced a “National
and net zero by 2070. Green Hydrogen Mission” which aims to
provide a comprehensive action plan for
India has a significant infrastructure gap, establishing a Green Hydrogen ecosystem
and the Indian government is investing and catalysing a systemic response to the
heavily in infrastructure development. opportunities and challenges of this sector.
This includes projects such as highways,
railways, airports, ports, and logistics which 29. What are the alternative reference
are attracting significant portion of project interest rates which are being
financing in India. Logistics facilities under commonly used in your jurisdiction
a new policy are proposed to attract new during the LIBOR transition period?
investment. Energy transition has increased As mentioned above, the foreign currency
focus to battery storage, green hydrogen borrowings in India are through ECBs. The
and electric vehicles as well. RBI has issued notification on changes in
Infrastructure investment trusts (“InvITs”) ECB Guidelines due to LIBOR transition
have been gaining traction in India as a dated December 08, 2021, wherein RBI
means of forming platforms for revenue has clarified that a benchmark rate for an
generating operational infrastructure ECB would include any widely accepted
projects by private equity players. The NHAI interbank rate or alternative reference
has formed its own InvIT for monetisation rate (“ARR”). The policy position of foreign
of road projects and there are many private financial institutions are driven by the
sponsor held InvITs as well. requirements of the ECB guidelines in
relation to lending to Indian borrowers.
change expected in the near future In India, majority of the foreign currency
in the project finance market? borrowers are adopting to either Term
Secured Overnight (Term SOFR) Financing
Under the Union Budget for the financial Rate or Compounded Secured Overnight
year 2023–24, India, the budgetary Financing Rate (Compounded SOFR).
allocations for key non-fossil fuel energy We have also seen, depending on the
projects have been increased significantly, underlying currency of the borrowing,
especially for the bioenergy programme, other popular ARRs such as Sterling
the solar energy projects and most notable Overnight Index Average (SONIA) and
for the grid renewable energy projects. Tokyo Overnight Average rate (TONA).
111
IVORY COAST
GENI & KEBE
Dr. Francky Lukanda Dr. Mohamoud Sangare

Senior Associate Associate
f.lukanda@gsklaw.sn m.sangare@gsklaw.sn
A. Overview • 2016 Decision Relating to the

Implementation of the Monetary
Penalties Mechanisms Applicable on
project financing in your jurisdiction? the Regional Financial Market of the
WAMU;
There is no single focus legislation
governing project finance in Côte d’Ivoire. • 1974 Law Financial Markets in Côte
The legal framework of project finance d’Ivoire;
comprises a variety of international
treaties, domestic laws and regulations, • 2011 WAEMU Instruction on Regional
and a number of sector-specific laws and financial markets;
regulations which vary from one project
• 2015 WAEMU Instruction governing
to another. The main legal framework of
activities of electronic money issuers;
project financing in Côte d’Ivoire includes
the following international treaties, and • 2013 Law on Electronic Transactions in
domestic laws and regulations: Côte d’Ivoire;
• 2020 General rules of the Regional
• 2010 Regulation on the external
Stock Exchange (Bourse Régionale Des
Valeurs Mobilières, (BRVM)); financial relations of the Member States
of the WAEMU
• 2010 WAMU Banking Framework
Regulation; • 2014 Law on the Litigation of
• 2010 Regulation Relating to Covered Infringements of the Regulation on
Bonds in the West African Economic External Financial Relations of WAEMU
and Monetary Union (“WAEMU”); Member States;
113
• 2014 OHADA Uniform Act on than the average rate of return on the
Commercial Companies and Economic investments and require large collateral,
Interest Groups; which is prohibitive for most MSMEs. An
important reason behind the low extension
• 2010 OHADA Uniform Act on Securities; of credit is the fact that commercial banks
• 2018 OHADA Uniform Act Organizing can easily be profitable through investment
Simplified Recovery Procedures and in government bonds that have high
Enforcement Measures profitability.
• 2017 OHADA Uniform Act on According to a 2020 World Bank report on

Accounting Law and Financial the country’s private sector diagnosis, the
Reporting; key constraints to greater development of
the financial sector include (a) low deposit
• 2015 OHADA Uniform Act Organizing mobilization, (b) poor financial inclusion, (c)
Collective Proceedings for Clearing of weak credit information infrastructure, (d)
Debts; underdeveloped local capital markets, and
• 2018 Ordinance on the Investment (v) limited availability of digital financial
Code; services.
The above notwithstanding, the most
• 2019 Ordinance Amending the 2018
significant project financings closed during
Ordinance on the Investment Code;
the last 12 months include:
• 2009 Ordinance on the Banking Law;
• Singrobo-Ahouaty hydroelectric
• 2018 Decree Setting up the Rules project: The financing of the Singrobo-
relating to Public-Private Partnership Ahouaty hydroelectric project has
Contracts; been completed with the mobilization
of 174.3 million euros. The funds
• 2016 Consumer (Protection) Law were raised from several international
• 2016 Anti-money laundering Law financial institutions.
• 2022 Cote d’Ivoire General Tax Code; • Montage Gold’s Koné project: West
Africa-focused gold explorer Montage
2. How mature is the project finance Gold (TSXV: MAU) has closed a
market in your jurisdiction, and financing of approximately C$20
what are the most significant project million ($15.5m) to fund its acquisition
financings closed during the last 12 and subsequent development of the
months? Mankono-Sissédougou joint venture
Côte d’Ivoire is regarded as one of the project in Côte d’Ivoire.
most developed financial sectors in the B. Security Interest
Economic Community of West African
States (ECOWAS) region. However, credit 3. What are the most commonly used
growth remains heavily concentrated, security types in project financings in
and many micro, small and medium-sized your jurisdiction?
enterprises (“MSMEs”) are experiencing The most commonly used security types
difficulties in accessing credit. According to in Côte d’Ivoire are governed by the 2010
the SME Finance Forum, the MSME finance OHADA Uniform Act on Securities. The
gap in Côte d’Ivoire was estimated to be latter provides for limitative and restricted
USD 2.4 billion in 2017. Available credit list of security interests that can be granted
often has interest rates that are higher in a framework of a project finance :
114
• Surety Bonds (Cautionnement); on Commercial Companies and Economic

• Autonomous guarantee and Interest Groups and the General Tax Code).
autonomous counter-guarantee; Regarding the specific requirement in
• Retention Rights (Possessory Lien); terms of formalities or procedure to be
followed for establishing or perfecting a
• Property retained or transferred as
share pledge, the 2010 OHADA Uniform Act
security
on securities provides that any pledge of
o Retention of Title (Réserve de shares shall be done in writing and include
propriété); the following information:
o Property transferred as Security; 1. designation of the parties to the pledge
 Assignment by way of security agreement;
 Cash collateral 2. identification of the registered office

and incorporation (“RCCM”) number of
• Pledge of tangible assets: the issuer of shares;
o Pledge over movable assets (including 3. shares value (or their valuation
motors vehicles, professional method), and where applicable, the
equipment, and inventory) numbers of the shares pledged;
• Pledge over intangible assets: 4. any information allowing the
o Pledge of receivables; individualisation of the underlying
secured obligation such as its amount
o Pledge of bank account;
or valuation, its term and maturity.
o Pledge of shares and financial
Moreover, in some instances, a prior
instruments;
approval of the pledgor’s board may be
o Pledge of securities account; required for the pledge to be valid. A
o Pledge of business ; careful review of the relevant provisions
of the pledgor’s articles of association will
o Pledge of intellectual property rights ; determine whether such prior approval is
• Mortgages. required or not. However, any enforcement
of pledge of shares are subject to the
4. Can the shares of a company be provisions of company law regarding the
pledged as a security to the benefit admission of new shareholder.
requirement in terms of formalities Furthermore, the total amount of secured
or procedure to be followed for obligations shall be clearly stated in the
establishing or perfecting a share security documents. In that regard, the
pledge? parties to the pledge agreement are
expected to agree on a maximum amount
The shares of any company duly
of the secured guarantee which would
incorporated in Côte d’Ivoire can be
include principal, interests, fees and
pledged as a security to the benefit of
ancillary of the secured obligations.
lenders, subject to the requirements
provided for in the applicable laws The perfection formalities of any pledge of
(mainly the 2010 OHADA Uniform Act on shares usually include the following two
Securities, the 2014 OHADA Uniform Act steps :
115
Step 1 - Registration of the pledge Pursuant to Article 104 of the 2010

agreement and any document evidencing OHADA Uniform Act on securities, the lack
the underlying secured obligation with the of payment by the due date allows the
Tax Administration: pledgee-creditor, in possession of a writ of
execution, to proceed to the forceful sale
Any documents to be filed with the Tax of the collateral eight days after notice has
administration shall be in French. If the been duly served on the debtor and, where
documents evidencing the underlying necessary, on the third party settlor under
secured obligation are in a foreign the conditions laid down by the provisions
language a certified French translation organizing measures of execution from
thereof shall be provided for purposes of which no pledge may derogate. Under such
registration with the Tax Administration. a situation, he can exercise its preference
The registration process takes around 7-10 right on the price of the collateral sold
business days to complete. Depending on based on article 226 of the same Act.
the type of document (pledge agreement
or loan) to be registered, the applicant The endorsement types typically used
will be required to pay the applicable for the share certificates are the bearer or
registration fees and the stamp duties of registered forms.
XOF 1000 (approx. € 1,52) per page. Shares and bonds shall be in the form
of bearer bonds or registered securities
Step 2 - Filing of the pledge agreement
irrespective of whether they are issued
with the Trade Registry (“RCCM”) :
against non-cash contributions or cash
The filing of the pledge agreement with the contributions. However, registered
RCCM can take around 7-10 business days securities may be the exclusive form
to complete or longer. imposed by the provisions of the Act or by
the Articles of Association.
The fees payable at the RCCM include a
fixed fee of XOF 15,000 (approx. € 23) and The owner of securities which are part of an
a proportional fee set by tranche on a issue comprising bearer bonds shall have
percentage of a maximum amount of the the option, notwithstanding any clause to
secured obligations: the contrary, to convert his bearer bonds
into registered securities and vice-versa.
• from XOF 1 to XOF 300,000 (approx. €
457): 0.15 % 6. Can security interest be established
• from XOF 300,001 to XOF 1,000,000 receivables of the borrower?
(approx. €1525): 0.10 %
A security interest may be granted on
• from XOF 1,000,001 to XOF 2,000,000 the borrower’s future assets, rights and
(approx. € 3049): 0.05% • above XOF claims provided that they are identified or
2,000,000: 0.02%. identifiable.
Overall, perfection of a security would 7. What are the steps to be taken by
take approximately three to four weeks to the lenders to enforce their security
complete in Côte d’Ivoire. interest, in case the borrower
composition process?
typically used for the share Pursuant to Article 75 of the 2015 OHADA
certificates? Uniform Act on collective proceedings and
116
wiping off debts, the opening of collective that the bankruptcy judge may authorize
proceedings automatically prohibits the debtor and or the trustee to make an
enforcement procedures or suspends act of disposal unrelated to the day-to-day
all individual lawsuits or arbitration management of the company, to grant a
proceedings by creditors. If enforcement mortgage, a pledge or a collateral or to
procedures were not yet in progress, they compromise.
will no longer be exercised, whereas if they
were pending, they will be suspended.
The same goes for individual lawsuits or
arbitration proceedings by creditors.
In general, all the proceedings remain Under Côte d’Ivoire law, it is possible to
subject to the rigor of suspension or appoint a security agent/trustee. Any such
prohibition when they are initiated by agent can be a foreign person. However,
the creditors after the opening of the financial or credit institutions are the only
collective proceedings. Legal actions and eligible entity to act as a security agent
enforcement procedures other than those
under the OHADA Law system.
referred to above may only be exercised
or pursued during the legal redress or The security agent can represent secured
liquidation of property proceedings against creditors for virtually all matters related to
the debtor, assisted by the trustee in the the secured obligations and can make the
case of legal redress or represented by various required filings at the competent
the trustee in the case of liquidation of RCCM in the sole name of the security
property. However, the creditors benefiting agent. When so acting and for such filings,
from these guarantees can take protective the security agent must clearly indicate its
measures. The restriction to the individual capacity as security agent.
right of the creditors also concerns the In some cases, the 2010 OHADA Uniform
stopping of the flow of the registrations of Act on securities provides that the creation
the securities. or enforcement of the security leads to
Lastly, the opening of collective a transfer of ownership of collateral in
proceedings also has the consequence of favour of the secured party. In the case of
stopping, with regard to the general body a security agent, the new law provides that
of creditors only, the accrual of legal and such collateral will constitute a dedicated
contractual interest, all interest and late estate (patrimoine d’affectation) of the
payment increases on all claims, whether security agent solely for the purpose of its
or not they are guaranteed by a security. mission as security agent, and that such
However, in the case of interest resulting property must be segregated from the
from loan contracts concluded for a term agent’s own assets.
of one (1) year or more or contracts with a The security deed may be subject to a
deferred payment of one (1) year or more, foreign law but must comply with the
the course of interest shall continue during provisions of the Uniform Act.
the legal redress proceedings.
In principle, only the bankruptcy judge
has the power to decide on the admission
or rejection of a claim. Indeed, article exemptions for project financing in
11 and article 148 paragraph 1 of the your jurisdiction?
2015 OHADA Uniform Act on collective The main incentives and exemptions
proceedings and wiping off debts provide for project financing in Côte d’Ivoire
117
are provided for in the 2018 Investment • XOF 200 million (VAT and working
Code which provides for tax benefits capital exclusive) for large companies
in three geographical zones (A, B, and (with more than XOF 1 billion turnover).
C), to be defined by an Order issued by
• XOF 50 million (VAT and working capital
the government. The duration for the
tax benefit granted in the respective exclusive) for SMEs.
geographical zone is as follows: • For shopping centres: XOF 10 billion
• Zone A 5 years . in Zone A and XOF 5 billion in Zones B
and C.
• Zone B 10 years .
• Zone C 15 years . • For Category 1 hotels: XOF 5 billion in
Zone A and XOF 2 billion in Zones B
The Investment Code includes two specific and C.
tax incentive regimes: the Investment
Declaration Regime and the Investment For Category 2 hotels: Less than XOF 5
Approval Regime. Both regimes apply to all billion in Zone A and less than XOF 2 billion
economic activities, excluding finance and in Zones B and C.
banking, non-industrial buildings’ builders,
For major structuring investments: XOF 100
liberal activities (e.g., lawyer, notary), and
billion in Zone A, XOF 50 billion in Zone B,
commerce activities. However, investment
and XOF 15 billion in Zone C.
related to the creation or the development
of important shopping centers could The benefit from the Investment Code is
qualify for the exemptions if certain granted by the Centre for the Promotion
conditions are met. of Investments (named CEPICI) after an
The Investment Code has also created application is filed by the requestor.
priority economic sectors (Category 1), as During the investment period, the
opposed to non-priority economic sectors. beneficiary enjoys the following:
Category 1 includes: • Exemption from customs duties
• Agriculture and agro-industrial (excluding statistic fee and community
activities. levies).
• Hotels for projects from XOF 5 billion in • Temporary suspension of VAT on
Zone A and from XOF 2 billion in Zones acquisition of equipment, goods, and
B and C. service for activities subject to VAT.
• Health.
• Exemption of VAT for activities
• Private investment in high and exempted.
specialised education.
Following the completion of the
Category 2 includes all other economic investment, the beneficiary enjoys the
sectors (except those excluded from following exemptions during a period
the benefit from the Investment Code) that depends on the Category of activity
and hotel projects that do not reach the and Zone the company is located in. The
thresholds for Category 1.
investment companies approved for
For the Investment Approval Regime, the developing activities are not concerned by
minimum investment cost is: the below exemptions.
118
Capital investment incentives import taxes and duties, including VAT on

materials, machines, and equipment used
With prior approval of the tax authorities
in research activities; registration duties
and varying with geographical location, applicable to in-kind or cash share-capital
35% to 40% of the total investment in fixed contributions; real estate tax; CIT; and
assets related to commercial, industrial, or minimum tax.
agricultural activity may be deducted from
taxable income. The deduction is limited In the exploration phase, mining
to 50% of taxable profits. The balance of subcontractors can benefit from the same
deduction of the first year may be carried import VAT and customs exemptions
forward over the three following years. granted to mining title holders.
The minimum investment threshold Export incentives for petroleum service

required to benefit from the tax reduction contractors
measure is XOF 100 million. A special and optional tax treatment
Tax credit for waste recycling business applies to petroleum service contractors
that meet established criteria. The FY21
A tax credit is granted to waste recycling Financial Law provides for two rates as
business for the four years following the follows:
end of the investment.
• 6% for service providers to oil
This tax credit is equal to 10% of the companies in the exploration phase.
investment amount but cannot exceed 50%
of the taxable profits. • 2.17% for service providers to oil
companies in the exploitation phase.
Special incentive tax measures for
investments in agro industry The above-mentioned rates are applicable
on all tax-free turnover made in Côte
Special incentive tax measures are granted d’Ivoire (FY22 Financial Law).
for investments made in cashew and rubber
processing under the approval investments This optional simplified tax regime covers
regime of the Investment Code. dividend tax and payroll tax.
The specific incentive measures provide CIT and the tax on insurance premiums are
additional tax credits and exemptions for exempted.
companies operating in Category 1. Standard rates apply for business franchise
Tax credit for hiring and training tax and social security contributions for
local personnel. The exemption from
Tax credits are available for small and customs duties and VAT for oil companies is
medium enterprises (SMEs) and large extended to petroleum service contractors.
companies for hiring local individuals and
Favorable tax regime for investment
interns for degree validation internships.
companies with fixed capital
Export incentives
The 2022 tax schedule provides for a
No VAT is levied on export sales. favorable tax regime for the benefit of
fixed capital investment companies. This
Export incentives for the mining industry
regime results in exemptions, particularly
During the exploration phase, investments in terms of income tax and IRVM, for a
may be exempt from payroll tax; VAT on period of 15 years from the date of creation
goods and services; additional tax (on the of the company. They also benefit from
sale of goods) on imports and purchases; all exemptions on capital gains from the
119
sale of securities as well as in terms of Payments abroad for capital transactions,

registration fees. other than those provided for in the
previous paragraph, must be the subject
of an application for foreign exchange
authorization, submitted to the Minister of
Finance. Each application for authorization
Not specifically applicable to foreign must be accompanied by supporting
investors. The incentives or exemptions documents attesting to the nature and
described above will apply to all investors reality of the operation (Article 7 of the
regardless of their nationality. 2010 WAEMU Regulation N°9).
11. Are there any restrictions for Any reimbursement of any foreign
borrowing bank loans and borrowing must be reported for statistical
shareholder loans from abroad and/ purposes to the Directorate of External
or in a foreign currency? Finance (“FINEX”) and the BCEAO, with all
Pursuant to the Article 2 of the 2010 reimbursement activity carried out through
WAEMU Regulation N°09 relating to the an authorized intermediary.(Article 11 of
external financial relations of Member the 2010 WAEMU Regulation N°9). The
States of the WAEMU, the foreign exchange term extensions and early repayments of
transactions, capital flows and settlements loans must be notified to the authorized
of any kind between a WAEMU Member intermediaries by borrowers.
State and a foreigner or within the WAEMU With respect to investment operations,
between a resident and a non-resident may any investments in a WAEMU member
only be carried out through the Central state and the transfer of investments
Bank (“BCEAO”), the Administration or the between non-residents are reported for
Post Office, an approved intermediary or a statistical purposes to the FINEX and to the
manual exchange licensee. Central Bank (BCEAO) in the case of direct
Current payments to foreign countries investment.
can be executed by the intermediaries 12. Are there any restrictions for
mentioned in Article 2 of the 2010 WAEMU foreign investments in your
Regulation N°09, under their responsibility, jurisdiction?
based on the principle of freedom of
transfer. There are no general restrictions on foreign
investors incorporating or acquiring the
In that regard, payments to foreign shares of a local company. However, there
countries relating to transactions are sector-specific market access limitations
concerning, among other things, interest applicable to foreign investments in the
and dividends, are authorized on a general ride-hailing services, land, and suppliers in
basis, subject to the presentation of
the oil and gas sectors.
supporting documents to the relevant
intermediary (Article 4 of the 2010 WAEMU In the sector of the ride-hailing services,
Regulation N°9). Furthermore, the transfer Ivorian law requires the operator to
of sums required for, among other things, establish a local entity with at least 25%
the contractual amortization of debts share capital held by Ivorian nationals (See
can be freely executed by the approved Article 8 of the 2021 Decree No. 2021-
intermediary subject to the presentation of 860 on the Regulation of Private Public
supporting documents. Transport of Persons).
120
In the land sector, foreign nationals or be submitted to the concession authority

foreign entities are precluded from holding before execution and any changes required
any interest in rural land. (See Article 1 of by the concession authority must be
Law on Rural Land). incorporated into the project documents.
In oil and gas sectors, holders of oil and D. Insurance
gas companies operating in Côte d’Ivoire
are expected, in all sectors of the value
chain, from exploration to exploitation,
to give preference to Ivorian companies Although policymaking related to the
for subcontracting activities, provision of sector is under the responsibility of the
services and supply of goods, and enjoins Ivorian Insurance Department at the
them to exploit the financial and insurance Ministry of Economy and Finance, Côte
services available in Côte d’Ivoire. d’Ivoire is also part of CIMA, the regional
insurance body that issues regulation
and steers enforcement efforts for its
14-member countries.
in your jurisdiction? Since the signing of its founding treaty
in 1992 and the establishment of its first
There is no minimum equity requirement
insurance code in 1995, CIMA has overseen
for project financings in Côte d’Ivoire.
the regulatory implementation and
14. Please explain the registration enforcement of insurance rules for Côte
and filing requirements which d’Ivoire, Gabon, Cameroon, Benin, the
are applicable for project finance Central African Republic, Congo, Mali, Niger,
documents to be valid and Guinea, Equatorial Guinea, Chad, Togo,
enforceable in your jurisdiction. Senegal and Burkina Faso.
Project finance documents to be valid The consequence of being a member of this
and enforceable in Cote d’Ivoire must be organization is that the CIMA regulation
registered with the Tax Administration applies to the Côte d’Ivoire legal system.
and filed at the Ministry of Economy and
As a result, a local insurance policy cannot
Finance.
be governed by a foreign law.
In terms of procedural requirements, any
company creating a security interest over
its assets must register the charge with
the relevant registre du commerce. If a
lenders?
charge is created but not registered with
the RCCM, the claim will not be recognized Insurance proceeds under the insurance
by the liquidator or other charge holders of and reinsurance policies be assigned to the
the borrower company. benefit of the lenders, provided that such
an assignment is consented to in writing by
For all public-private partnership (“PPP”)
the initial insured (Article 59 of CIMA Code).
projects, the relevant government provider
(concession authority) and the private party 17. What are the other complications,
developing the project must enter into a concerns or other issues in relation
concession agreement. The concession to the insurance provisions
agreements often specify that all related under the project financing
project documents and amendments must documentation, if any?
121
Pursuant to Article 422 of the General Tax projects have been developed to date in
Code, any insurance agreement concluded Cote d’Ivoire. These include:
with an insurance company or with any
• PPP contract for the design-financing-
other Ivorian or foreign insurer is subject,
installation-user training-operations-
regardless of the place and date on which
maintenance and renewal of certain
it is or has been concluded to a compulsory
annual tax. equipment of an IT solution for securing
the collection of traffic rights related to
The tax is levied on the amount of the sums the activities of the administration of
stipulated for the benefit of the insurer maritime affairs concluded between the
and an accessories from which the insurer Ivorian Ministry of Transport and the
benefits directly or indirectly from the company Continental Maritime Services
action of the insured. (CMS);
The rate of the tax is set at 14,5% (refer to • PPP contract for the financing,
Article 423-7 of the General Tax Code). equipment, operation and maintenance
of equipment concluded between the
The reinsurance agreement will be
Ministry of Transport and the company
subject to VAT at the rate of 18%. This VAT
NAS Ivoire for the reinforcement of the
is only due when the beneficiary of the
airport’s performance and the provision
reinsurance is established in Côte d’Ivoire
of quality ground handling services at
or when the service is used in Côte d’Ivoire
competitive costs;
(refer to Article 425 of the General Tax
Code). • PPP contract for the construction,
financing and operation of the
E. Financing of Public-Private Kossihouen technical recovery and
Partnership (PPP) Projects landfill centre (CVET) concluded
18. Is PPP a permitted method of between the Ministry of Sanitation
developing projects, and if so, have and Hygiene and the company Clean
any PPP projects been developed to Eburnie; and
date in your jurisdiction? • PPP contract for the construction,
PPP is a permitted method of developing financing and equipment of the
projects in Côte d’Ivoire. Since 2012, the university campus of San-Pedro
Government of Côte d’Ivoire (GoCI) has concluded between the Ministry
put in place a public-private partnership of Higher Education and Scientific
(PPP) legal and institutional framework Research and Envol Partenariats CI.
with the adoption of the following two 19. Are direct agreements between the
decrees: (a) the PPP Decree No. 12-1151 public authorities and the Lenders
of 19 December and (b) a decree setting permissible under the local law, and
the institutional framework for PPP if so, commonly seen in the Project
development, which includes the creation Finance market in your jurisdiction?
of the National Public Private Partnerships
Committee (CNP-PPP). The latter has Direct agreements between the public
authorities and the Lenders are governed
benefited from a comprehensive World
by Article 20 of the 2018 Decree Laying
Bank support under the Côte d’Ivoire
out the Rules relating to Public-Private
Infrastructure Financing Project (P158820).
Partnership Contracts. However, they are
Based on the PPP projects authority’s not widely used in the Project Finance due
activity report of 22 July 2022, many to their restrictive nature.
122
In terms of Article 20 of the 2018 Decree protect them from various risks that may
Laying out the Rules relating to Public- affect the project’s cash flows, especially
Private Partnership Contracts, the direct those risks that are beyond the control of
agreements procedure may only be used: the private partner. There are no specific
provisions on the types of host government
• when compelling urgency, motivated
supports available. The parties at the
by unpredictable circumstances or
negation table usually determine on a case-
force majeure, not allowing to meet
by-case basis their needs and the supports
the deadlines provided in tender
that they seek from the government.
procedures or competitive dialogue,
requires an immediate response; 21. Are political risk events usually
• where the project relates to defense or
national security;
• where only one source is able to
provide the requested service, where Usually, depending on the structure of the
the provision of the service requires the transaction, the parties determine freely
use of a right of intellectual property, which side is best suited to bear the pollical
professional secrets or other rights risk associated with the project without
exclusive property or possession of one jeopardizing the very existence of the
or more persons; project.
• when the services can only be 22. Are investors and lenders usually
entrusted to an operator determined protected against a change in
for artistic, technical or investment law passing subsequent to the
reasons important prerequisites; signing of the relevant concession
agreement?
• where a screening or tendering
procedure has been unsuccessful, or The short response is yes. In general, the
that only one compliant offer has been investors and lenders provide for clauses
submitted in the case provided for in on force majeure, unforeseeability and “le
the Article 14, and where, in the opinion fait du prince” protected against a change
of the Contracting Authority, a new in law passing subsequent to the signing of
procedure short-listing or tendering the relevant concession agreement
would have little chance of the timely
award of the PPP contract.
Any direct negotiation procedure is carried legislation?
out in accordance with a framework
document drawn up by the contracting Force majeure is regulated under the 2018
authority and submitted for prior approval Decree Laying out the Rules relating to
by the supervisory authority. Public-Private Partnership Contracts.
20. Please indicate the types of host 24. What are the general environmental
government supports (including and social requirements in project
treasury guarantee, debt financings?
assumption etc.) available in your In terms of general environmental
jurisdiction. and social requirements in project
In a project finance, government financings, please kindly note that a party
guarantees are often requested by private implementing and operating a financed
sector investors— especially lenders—to project is expected to meet the following:
123
• Assessment and Management of Aims to protect cultural heritage

Environmental and Social Risks through consultation procedures,
and Impacts: Requires borrowers community access and removal of
to incorporate an environmental replicable cultural heritage.
and social management system
(ESMS) to identify environmental
and social risks in a project; establish Immunity
an overarching environmental and 25. Are submission to a foreign law and
social policy, management programs, the waiver of immunity provisions
emergency preparedness and response enforceable?
and organizational capacity and
competency; enable stakeholder The submission to a foreign law and
engagement; and coordinate the waiver of immunity provisions are
monitoring and review. enforceable unless it is contrary to public
order and morality.
• Labor and Working Conditions:
Aims to promote fair treatment of 26. Can financing documents provide
workers, improve worker management for arbitration clauses?
relationships and promote compliance The short response is yes.
with national employment laws. The
specific standard will depend on the G. Trends and Projections
nature of the relationship.
• Community Health, Safety, and Security: in project financings in your
Requires borrowers to evaluate health jurisdiction?
and safety risks including infrastructure
Cote d’Ivoire has a development plan
and equipment design and safety,
to accelerate its economic and social
hazardous materials management and
transformation and become an upper
safety, ecosystem services, community
middle-income country by 2030. National
exposure to disease, and emergency
Development Plan is valued at 90 billion
preparedness and response.
euros. 7 priority industrial clusters have
• Land Acquisition and Involuntary been identified by the Côte d’Ivoire
Resettlement: Includes community government according to regional
engagement, compensation and economic potentialities. These include:
benefits for displaced persons, project Agro-industry, Chemicals – Plasturgy,
design considerations to minimize Construction and Building Materials,
displacement, grievance mechanisms, Pharmaceutical Industry, Textile Industry,
and resettlement and livelihood Packaging, and Automotive & OEM. Other
restoration planning. growth niches to be harnessed include:
Digital Economy, Tourism and Hospitality,
• Biodiversity Conservation and
and Creative Industries.
Sustainable Management of Living
Natural Resources. Under the priority sectors and growth
niches listed above, there are investment
• Indigenous Peoples: Requires parties to
opportunities in a number of key sectors
avoid adverse impacts on communities
including:
of indigenous peoples and to engage
with affected communities to ensure • Farming Sector, particularly in
they have given their Free Prior and agriculture machinery, fertilizers and
Informed Consent. Cultural Heritage: crop protection products
124
• Agro-Industry, particularly in processing Climate change issues and policy options

of cocoa, cashew nuts, fruits and
Côte d’Ivoire is 130 on the 2021 Global
vegetables, palm oil, coffee, and natural
Climate Risk Index (GCRI). More than two-
rubber
thirds of its coastline is affected by coastal
• Housing & Construction particularly erosion. Its economy is dependent on
in social housing, Middle and climate-sensitive sectors— agriculture,
high standing housing, Malls, and livestock, aquaculture, and energy. In July
Commercial centers 2018, the World Bank evaluated the losses
• Mining & Energies, particularly in gold to GDP associated with climate change at
and natural resources exploitation, between $681 million and $1.4 billion in
building, operation and maintenance constant 2017 $ between now and 2040.
of hydropower, solar, biomass and PEV To counter the threat, the government
power plants. is conducting several programs. During
COP26, it committed to reduce its GHGs
• Tourism & Hospitality, particularly in
by 30.4% between then and 2030 (versus
building and operation of hotels and
an initial target of 28.2% in 2015). The
recreational facilities, seaside tourism,
financing of the updated NDC, at a cost
ecotourism, medical tourism, business
of about $22 billion, requires resources
tourism
from climate funds and the private sector,
• Health & Pharmaceutical, particularly because the government allocates only
in building private hospitals, an average of $400 billion a year to
modernisation of technical facilities and environmental protection. To reinforce
equipment resilience and accompany the energy
• Digital Economy, Invest in data centers, transition, the NDP 2021–2025 aims to
optical fiber networks, biotechnology increase contributions to RE in the energy
and ICT mix from 39.5% to 42% between 2019 and
2025, accelerate development of the low-
• Transports & Logistics, particularly in
carbon strategy, and reduce damages and
Invest to extend port terminals, BRT
losses linked to natural disasters.
projects, railroads construction, ride
hailing services 28. Are any significant development or
Moreover, the reduction of tariff and in the project finance market?
nontariff barriers introduced as part of
the new African Continental Free Trade Geneva, 10 March 2022 - The Enhanced
Agreement (“AfCFTA”) offers further Integrated Framework (EIF), the United
growth opportunities in some of the Nations Economic Commission for Africa
priority sectors listed above. However, The (UNECA) and the International Islamic Trade
Ivorian manufacturing sector, dominated Finance Corporation (ITFC) are partnering
by low-tech industries, has not fully in a new project to help eight African
benefitted from the opening of regional countries operationalise the AfCFTA.
and global markets. Once implemented, the The project was launched at a virtual event
AfCFTA would not only boost intra-African on 10 March that brought together trade
trade by an estimated USD 70 billion ministers from Senegal, Niger and Togo, as
by 2040, but it would also provide Côte well as government representatives from
d’Ivoire with greater access to the large Guinea, Burkina Faso and Mauritania. The
consumer markets in South Africa, Ethiopia, project will support the implementation
Kenya, and Angola. of over 30 activities in the FTAA strategies
125
of Burkina Faso, Côte d’Ivoire, Guinea, developed African countries. It is also

Mauritania, Niger, Senegal, Togo and expected that the AfCFTA will pave the way
Tunisia. for increased inter-African trade through
By assisting in the implementation of improved access to the intercontinental
priority actions formulated by the ECA, market.
the project will contribute to creating 29. What are the alternative reference
an environment where trade can be
more efficient and inclusive in the eight
beneficiary countries. By the end of the
project, their capacity will have been during the LIBOR transition period?
strengthened for tangible results, such as As a country previously covered by LIBOR,
jobs and other economic opportunities for alternative rates like ESTER, SARON,
project financings. SONIA and SOFR are used. In any case, the
The AfCFTA is expected to boost intra- effective total interest rate (in French “taux
African trade and have positive spillover effectif global” or “TEG”) must be set out in
effects on trade between the least writing and comply with usury legislation.
126
KAZAKHSTAN
GRATA
Lola Abdukhalykova Aigerim Kenbayeva Alen Kim

Councel Senior Associate Junior Associate
labdukhalykova@ akenbayeva@ akim@gratanet.com
gratanet.com gratanet.com
A. Overview 6) the Law on Public Private Partnership

dated 31 October 2015 No. 379-V (the
“PPP Law”);
project financing in your jurisdiction? 7) the Law on Concessions dated 7 July
2006 No. 167-III (the “Concessions
The main legislation governing the project
Law”); and
financing in the Republic of Kazakhstan
(“Kazakhstan”) are: 8) other legal acts.
1) the Constitution dated 30 August 1995; The main international treaties governing
2) the Civil Code (General Part) dated 27 the project financing in Kazakhstan are:
December 1994 and the Civil Code 1) the 1965 Washington Convention on
(Special Part) dated 1 July 1999 No. 409- the Settlement of Investment Disputes
I (the “Civil Code”); between States and Nationals of Other
States;
3) the Entrepreneurial Code dated
29 October 2015 No. 375-V (the 2) the 1985 Seoul Convention on
Establishing the Multilateral Investment
“Entrepreneurial Code”);
Guarantee Agency;
4) the Law on Securities Market dated 2 3) the 1993 Ashgabat Agreement on
July 2003 No. 461-II; Cooperation in the field of Investment
5) the Law on Project Financing and Activity;
Securitization dated 20 February 2006 4) the 1997 Moscow Convention on
No. 126-III; Protection of Rights of Investor;
127
5) agreements on encouragement and thousand tons per year (entered

mutual protection of investments with the TOP-10 global producers of this
around 52 countries (USA, UK, Germany, product);
France, Netherlands, Russia, etc.);
2) Construction of the first domestic plant
6) the 1994 Lisbon Energy Charter Treaty;
and for the production of tire products with
a capacity of 3.5 million tires annually.
7) other international treaties8. It is expected that it will fully cover
2. How mature is the project finance the needs of domestic automakers.
market in your jurisdiction, and Investments in the project amounted to
what are the most significant project 171 billion tenge;
financings closed during the last 12 3) Construction of a gas turbine plant
months? with a capacity of 57 MW at the Aktobe
Project finance in the strict sense of the CHPP, construction of 12 renewable
term (i.e., where the financing structure is energy projects for 385 MW, auctions
held for the commissioning of flexible
based on the performance of the project
capacities for 1200 MW and the
itself ) has not yet developed and is not
selection of renewable energy projects
tested so far in Kazakhstan. So-called
with a total capacity of 440 MW.
‘project finance’ transactions that took
place in Kazakhstan so far, in fact, were There are a number of major projects
either conventional bank loans (mostly announced and/or being implemented in
by international financial institutions like Kazakhstan.
the European Bank for Reconstruction and
Development (EBRD) or the International
Finance Corporation (IFC)) that have 3. What are the most commonly used
somehow benefited from government security types in project financings in
guarantees, security packages, direct your jurisdiction?
budgetary investments or net private Kazakh law provides for several methods
investments. of securing obligation. Obligations could
Although the Kazakh law on Securitization be secured by penalty, pledge, surety,
was adopted in 2006 and later in 2012 guarantee, deposit, withholding of the
it was transformed into the Kazakh law debtor’s property, guarantee deposit,
on Project Financing and Securitization security deposit, and other methods
(the (“Law on Project Financing and stipulated by legislation or agreement9.
Securitization”), we are not aware of major The most commonly used types of security
projects being implemented under its in Kazakhstan are pledges and guarantees.
framework.
Though assignment is not strictly
The major projects implemented in speaking a type of security under Kazakh
Kazakhstan over the last 12 months include law, it is quite often a part of a standard
the following: security package in international finance
transactions.
1) Construction of the plant for the
production of polypropylene in the Also, in a typical project finance deal
Atyrau region with a capacity of 500 creditors require so-called “step-in” rights
8 https://investmentpolicy.unctad.org/international-investment-agreements/countries/107/kazakhstan
9 Article 292 of the Civil Code.
128
that enable them to appoint a nominee Securities Depository is provided under the
to undertake the project company rights corporate documents of the LLP and in this
together with the project company itself case pledge over participatory interests
(with the project company remaining must be registered with the Central
liable for all the obligations) or appoint Securities Depository.
a new obligor in the place of the project
Establishing and perfecting a share pledge
company to repay the amounts due to the
shall be made in the same manner as
lenders. These “step-in” rights enable the most other types of pledges of movable
lenders to take over control of the project property.
and implement the project by finding a
long-term buyer, thus ensuring that the It should be noted that a purchaser of
project continues generating revenues. It more than 50% of shares or participatory
should be noted that Kazakh law does not interests in a Kazakh company may
recognise concept of “step-in rights”. be required to obtain approval of
such purchase from the Competition
Agency. If the purchase is subject to the
antimonopoly approval (this will depend
on the combined asset value or annual
turnover of the purchaser and the Kazakh
entity), then the purchaser will be required
to apply for approval within 30 days after
pledge?
the public auction at which it acquired
Holders of shares of a Kazakh joint-stock the shares or participatory interests.
company (the “JSC”) and participatory If the pledge provides for a transfer of
interests of a Kazakh limited liability voting rights in the event of default over
partnership (the “LLP”) have the right more than 50% of shares or participatory
to pledge all or part of such shares or interests, such transfer may be a subject
participatory interests respectively in favour of separate approval of the Competition
of creditors (including foreign creditors). Agency.
The major shortcoming of such a pledge
is that the creditors would not be entitled
to take possession of the shares but must
instead seek to sell the shares through a
public auction.
certificates?
A pledge over shares of the JSC must be
Under the Civil Code, a secured creditor
registered with the Central Securities
cannot simply take possession of the
Depository, which will make an entry
collateral (except for cash and receivables).
regarding the pledge in the system of
The creditor shall seek to sell the collateral
registers of security holders. Such pledge is
through a public auction and recover
only valid upon its registration.
the debt from the sale proceeds. The
Another form of commercial legal entity sale proceeds will be used first to cover
under Kazakh law is an LLP which has expenses incurred in connection with the
participatory interests as opposed to enforcement and sale (including any fines
shares. A pledge over participatory interests imposed on the debtor by a court marshal
of the LLP is, generally, can be registered during the enforcement). After that, the
with the “State Corporation “Government proceeds will be used to repay the debts.
for Citizens” NJSC, unless the Central The remainder, if any, will be returned to
129
the debtor. Enforcement may take up to would require the customer to reimburse
6 months from the moment of default to the lenders for the paid court fee).
the sale of the pledged property. It may
Enforcement may take up to 6 months from
take longer if the pledgor contests the
the moment of default to the sale of the
underlying default.
pledged property. It may take longer if the
A pledge agreement may be enforced pledgor contests the underlying default.
either through a court-supervised judicial The enforcement costs should be in a range
procedure or through an out-of-court of several thousand U.S. dollars (without
procedure. The relevant pledge agreement taking into account the court fee). The law,
must specify the mode of enforcement however, provides that expenses incurred
(i.e., through the courts or without court by the pledgee are recoverable from the
involvement). We outline those in more sale proceeds, and the court fees are to be
details below. reimbursed by the pledgor.
Out-of-Court Enforcement. In the out-of- Judicial Enforcement. If the lender enforces
court enforcement procedure, the pledgee the pledge through a court-supervised
(its representative) will organize and carry procedure, it will be necessary for the
out the enforcement procedure, including lender to pay a court fee in the amount
the sale of the collateral. For this, it will be of 3% of the value of the collateral. If the
necessary for the pledgee’s representative lender is successful in its court action
to carry out a number of procedural steps, seeking pledge enforcement, the court
including preparing and registering a will order the customer to reimburse the
default notice, publishing an auction notice lenders for the court fees paid by the lender
in mass media, and conducting the auction. in commencing the court action.
In case the auction fails for the reason of In case of enforcement through judicial
being attended by less than two bidders, action, the court marshal is obliged under
the pledgee will have the option to either the law to conduct the auction and sell
take possession of the collateral at its the collateral within four months after he
estimated value determined by a licensed received the relevant court order. This term
appraiser or to conduct a new auction. may be extended in certain circumstances.
If the pledge agreement provides for out- 6. Can security interest be established
of-court pledge enforcement procedure, over future assets, rights and
the lenders will be able to enforce the receivables of the borrower?
pledge by selling the collateral without
Yes, security interest be established over
the need to pay the court fee or any other
future assets, rights and receivables of the
State fee. However, if the local borrower
borrower. With limited exceptions, the law
refuses to cooperate with the lenders in
does not limit the types of property that
selling the collateral or otherwise obstructs
can be pledged. After-acquired assets may
the enforcement of the pledge, the lenders
be pledged, as well as goods in turnover,
will have no other recourse but to apply
such as inventories, raw materials, semi-
to a Kazakhstani court seeking judicial
finished goods, and finished products.
enforcement of the pledge. In such case,
it will be necessary for the lenders to pay It is possible for a company to pledge
a court fee in the amount of 3% of the its monetary claims under a contract
value of the collateral (if the lenders are (e.g., insurance agreement or off-take
successful in their litigation, the court agreements) provided that such claims are
130
assignable. Where rights to receivables are 8. Is security trustee concept

pledged, the enforcement will be carried enforceable in your jurisdiction? If
out by way of assignment of the relevant not, is an alternative mechanism,
rights to the pledgee (i.e., without the such as a parallel debt, available?
public auction as it is with most other types While the concept of so-called ‘co-pledgees’
of collateral). has been, arguably, recently introduced in
7. What are the steps to be taken by legislation of the Republic of Kazakhstan in
the lenders to enforce their security Article 305-1 of the Civil Code, in absence of
interest, in case the borrower court practice it is still fair to say that
becomes insolvent, is technically Kazakhstan does not recognise trusts and
insolvent and/or commences accordingly, security must be granted to
composition process? the actual creditor, i.e., the creditor which
advances the loan. Accordingly, as a matter
Final liquidation of a Kazakh legal entity of Kazakhstan law, a security trustee (who
upon bankruptcy involves a disposal of is not the actual creditor) cannot hold
the debtor’s assets and distribution of the security and act as a pledgee on behalf of
proceeds to creditors in the payment order the creditors. Thus, if loan participation is
established in the Law on Rehabilitation transferred, any pledge or mortgage for
and Bankruptcy. that loan must be re-registered in the name
of the new creditor.
A pledge would effectively be terminated
in the event of bankruptcy of the pledgor. Accordingly, it is uncertain whether any
Creditors secured by a pledge become security arrangement whereby a security
creditors of the second priority and trustee acts as a holder of security on behalf
unsecured creditors become creditors of of the creditors would be enforceable
the fifth (last) priority and their claims are in Kazakhstan. Parallel debt structure
satisfied only after settlement of all other seems to address above issue and shall
claims.10 be enforceable under Kazakh law. It shall
be noted, however, that it has not been
In order to become creditors of the tested in the Kazakh courts and there is a
second priority secured creditors must theoretical risk that parallel debt structure
submit their claims to an interim manager may be challenged as sham transaction for
within one month period from the day of the purposes of Kazakh law.
announcement on receiving claims from
creditors, otherwise they will become C. Incentives and Restrictions
creditors of the fifth (last) priority. 9. What are the main incentives and
Note that creditors having security other exemptions for project financing in
than a pledge governed by Kazakh law your jurisdiction?
would be considered unsecured creditors in There are no specific incentives and
insolvency proceedings. exemptions for project financing in
Technical insolvency (i.e., not associated Kazakhstan. However, some categories
with initiation of insolvency proceedings in of projects may benefit from incentives
the manner set out by Kazakh law) does not and exemptions designed to encourage
affect the steps to be taken by the lenders investments in certain industries.
to enforce their security interest. For instance, so-called investment
10 Article 100 of the Kazakh Law on Rehabilitation and Bankruptcy dated 7 March 2014 No. 176-V (the “Law on
Rehabilitation and Bankruptcy”)
131
preferences are available to so-called expropriation without compensation and

investment projects, i.e., a complex of against discrimination, national treatment
measures providing for investments in or most-favoured nation treatment of
creation of new or expansion/renewal of foreign investors, guarantees of fair and
existing production facilities5. To receive equitable treatment, etc.
the benefits, the investor (which in most
cases should be a Kazakhstani company, 11. Are there any restrictions for
e.g., a local subsidiary of a foreign investor) borrowing bank loans and
shall sign an investment contract with the shareholder loans from abroad and/
government. or in a foreign currency?
In case of projects being implemented There are no restrictions for borrowing
in the framework of the PPP Law or bank loans and shareholder loans from
Concessions Law, an investor is entitled abroad and/or in a foreign currency.
to get such measures of so-called ‘state However, currency control and regulation
support’ as state sureties for infrastructure requirements may apply: e.g., if the amount
bonds; state guarantees for loans, the of a loan to be granted from a foreign
proceeds of which are to be used for PPP/ legal entity to a local legal entity exceeds
concession agreement purposes; transfer of 500,000 US dollars, then corresponding
the exclusive IP rights owned by the State; loan agreement is subject to record
provision of so-called ‘in-kind grants’ (e.g., registration with the National Bank of
land, machinery); co-financing by the State; Kazakhstan.12
guaranteed offtake by the State of a certain
amount of goods (works, services) to be 12. Are there any restrictions for
produced by the PPP/concession facility, foreign investments in your
and/or some others11. jurisdiction?
Depending on the size of the project, an There are restrictions on foreign
investor may get the following investment ownership and/or control in legal
preferences: exemption from customs entities operating in certain industries
duties, exemption from import value- in Kazakhstan, for example, a 20% limit
added tax (VAT) for certain specified in mass media companies, a 49% limit
products, state in-kind grants, i.e., assets; in airline companies, a 49% limit in
tax preferences in the form of corporate telecommunication companies being
income tax and land tax exemptions, as intercity and/or international operators;
well as a property tax exemption, stability
restrictions on foreign companies’
of tax laws, stability of work permit laws;
participation in banks and insurance
and/or some others.
companies, etc.
exemptions specifically applicable 13. Is there any minimum equity
to foreign investors? requirement, under the legislation
Kazakhstan is a party to bilateral and in your jurisdiction?
multilateral investment treaties which
provide for such commonly used protection There are no specific requirements for
of foreign investors as protection against project financings.
11 Article 27 of the PPP Law, Article 14 of the Concessions Law

12 Paragraph 9 of the Rules for Monitoring Currency Operations in Kazakhstan approved by Resolution of the Management
Board of the National Bank of Kazakhstan dated 10 April 2019 No. 64.
132
Requirements may apply in case of seeking o apostillization or legalization of

so-called investment preferences under documents issued abroad should the
the Commercial Code. There are following relevant document be submitted to a
minimum investment requirements in local state body.
relation to investment projects13:
D. Insurance
o around 16 million US dollars for priority
investment projects on construction of
new manufacturing objects;
o around 40 million US dollars for priority Property interests located on the territory
investment projects on expansion of Kazakhstan and belonging to a
and/or modernization of existing legal entity or an individual resident of
manufacturing objects; Kazakhstan may only be insured by a local
insurance company or a local branch of
o around 60 million US dollars for foreign insurance (reinsurance) company.14
conclusion of an investment
agreement; Agreements between local residents shall
be governed by Kazakh law. Therefore,
o around 600 million US dollars over 8
local insurance agreements between
years for conclusion of an investment
local insurers and local residents shall be
obligations agreement.
governed by Kazakh law. Should a foreigner
14. Please explain the registration be seeking a local insurance policy from a
and filing requirements which local insurer, generally it could be governed
are applicable for project finance by a foreign law assuming that all Kazakh
documents to be valid and law requirements are met15.
Normally the following registration and insurance and reinsurance policies
filing requirements may arise in a project be assigned to the benefit of the
finance transaction being implemented in lenders?
Kazakhstan:
A policy holder or a beneficiary under
o registration of rights to and an insurance policy must have insurable
encumbrances on real estate (e.g., lease interest in the insured property.16
of a land plot); Accordingly, where the lender has insurable
o registration of pledge to ensure its interest in the insured property, the lender
first ranking (in case of most types of may be named as the beneficiary in the
movable property) or to ensure its relevant insurance policy. However, where
validity (in case of immovable property the lender does not have such interest, it
and some types of movable property); may not be named as the beneficiary.
o record registration of loan agreements Accordingly, Kazakh legislation provides
for the amount exceeding 500,000 US a pledgee with a priority right to receive
dollars if a loan is provided by a foreign insurance proceeds under an insurance
legal entity to a local legal entity; contract relating to the pledged property.
13 Article 284, 295-2, 295-3 of the Kazakh Entrepreneurial Code dated 29 October 2015 No. 375-V
14 Article 5-1.1 of the Kazakh Law on Insurance Activity dated 18 December 2000 No. 126-II
15 Articles 1084 and 1112 of the Civil Code
16 Article 817 of the Civil Code
133
The pledgor will be entitled to the education, healthcare and transportation.

insurance proceeds only if the pledgee The Big Almaty Ring Road, also known as
waives its priority rights to such insurance “BAKAD” by its local abbreviation, is the
proceeds.17 Thus, where the insured only project that is considered to be an
property is pledged in favor of the lenders, internationally tendered long-term PPP
the lenders will have priority right to the that has reached financial close with the
insurance proceeds in respect of such involvement of foreign banks.
property.
E. Overview public authorities and the Lenders
17. What are the other complications, if so, commonly seen in the Project
concerns or other issues in relation Finance market in your jurisdiction?
under the project financing Yes, direct agreements between the public
documentation, if any? authorities and the Lenders permissible
are under the local law. However, they are
There are no issues in relation to the not commonly seen in the Project Finance
insurance provisions under the project market in Kazakhstan as until recently
financing documentation. As stated they were available only for major PPP and
in question 14, it is worth mentioning concession projects.
that local insurance companies or local
Direct agreement with a lender of a private
branches of foreign insurance (reinsurance)
partner shall provide for the following
companies are allowed to insure risks in conditions18:
Kazakhstan (foreign reinsurance is widely
used in projects with foreign investors). 1) obligation of a public partner to inform
lenders of a private partner on material
F. Financing of Public-Private breach of obligations under a PPP
Partnership (PPP) Projects agreement that could lead to default
18. Is PPP a permitted method of under a PPP agreement;
developing projects, and if so, have 2) pledge of rights under a PPP agreement
any PPP projects been developed to and (or) assignment of claims, or
date in your jurisdiction? transfer of debt of a private partner
Yes, PPP is a permitted method of shall be upon consent of a public
developing projects. Moreover, Kazakhstan partner;
has special PPP and Concessions Law 3) right of creditors of a private partner
and developed PPP legislation as well as to request replacement of a private
political will to use the PPP tool to improve partner in case of material breach of
local infrastructure. its obligations under a PPP agreement,
As of 1 August 2022, 1,357 PPP projects are which may lead to default under terms
being implemented in Kazakhstan which of a PPP agreement, as well as to
attracted more than 29 billion US dollars nominate a new private partner;
of investment. However, in practice most 4) procedure for replacement of a private
PPP projects are of small size, in the area of partner;
17 Article 306.2 of the Civil Code

18 Article 47 of the PPP Law.
134
5) other conditions not contradicting cannot expect state support in the form of
the legislation of the Republic of state sureties for infrastructure bonds, state
Kazakhstan. guarantees for loans and co-financing by
It should be mentioned that the Concession the state21.
Law also stipulates the concept of direct The Concessions Law also provides the total
agreement, but it is available only for the amount of obligations of the concessor
concession projects of special importance19. related to22:
20. Please indicate the types of host (a) the compensation of investment
government supports (including expenses of the concessionary;
(b) state surety for infrastructure bonds;
jurisdiction. (c) state guarantees for loans;
(d) transfer to the concessionary of
The Concessions Law contemplates the
following measures of state support for exclusive rights for intellectual property
the concessionary to encourage private that belongs to the state;
investments into the concession projects20: (e) provision of ‘in-kind’ grants; and
(a) state sureties for infrastructure bonds (f) co-financing of the concession project,
issued and placed in accordance with shall not exceed the concessionary’s
the concession agreement on the total expenditures for construction or
Kazakh stock exchange; reconstruction of the concession facility
(b) state guarantees for loans, the proceeds or both, incurred under the relevant
of which are to be used for concession concession agreement.
agreement purposes; The PPP Law provides measures of state
(c) transfer of the exclusive IP rights owned support identical to the Concession Law,
by the state to the concessionary; though, unlike the Concession Law, the list
(d) provision of ‘in-kind grants’ (e.g., land, of these measures of the ‘state support’ in
machinery); the PPP Law is not exhaustive23. Another
difference is that unlike the Concession
(e) co-financing of concession projects by
Law, the PPP Law does not require the
the state; and
infrastructure bonds to be placed on the
(f) guaranteed offtake by the state of Kazakhstan stock exchange only (i.e.,
a certain amount of goods (works, they may be placed abroad). The PPP Law
services) to be produced by the also provides that the total amount of
concession facility. measures of state support and payments
A concessionary may be granted one or from the state budget for the purposes of
several of the above measures of state financing (recovery of costs) in relation to
support, however, if the concession creation and (or) reconstruction of the PPP
facility is to remain private property when facility, cannot exceed the total amount
completed, rather than being transferred of expenditures for construction and (or)
to state ownership, the concessionary reconstruction of the PPP facility.
19 Article 26-2 of the Concession Law.

20 Article 14 of the Concession Law.
21 Article 14.2 of the Concession Law.
23 Article 27.2 of the PPP Law.
135
21. Are political risk events usually has not fulfilled or improperly fulfilled
under the responsibility of the its obligations shall be liable if it does
public party or the private party not prove that proper performance was
under the PPP agreements? impossible due to force majeure, which
One of the main principles of the PPP is includes emergencies and unavoidable
securing mutually beneficial balance of circumstances (natural disasters, military
allocation of risks between public and actions, etc). However, Kazakh law
private partners24. As a general principle of emphasizes that such conditions do not
the PPP Law, risk should be placed where include, in particular, a shortage of the
it is best managed and such allocation items, works, or services required for the
shall be stipulated in the PPP agreement25. execution on the market. The agreement
Generally, political risk events usually are may allow for additional consequences of
under the responsibility of the public party force majeure. There is also no remedy for
under the PPP agreements. any party to the contract, as in case of force
majeure both parties suffer losses.
protected against a change in Entrepreneurs who are unable to meet
law passing subsequent to the their contractual duties due to an
signing of the relevant concession emergency must demonstrate how the
agreement? incident affected their ability to fulfill
each obligation in order to establish force
Both the PPP Law and the Concessions
majeure. They may submit an application
Law lack the ‘stability clause’ that is meant
to the Foreign Trade Chamber to support
to protect the private party from possible
the force majeure situation. According to
changes in legislation. However, in both
the terms of international agreements and
cases the private party may rely to certain
extent on the general rule set out in Article foreign trade contracts, the Foreign Trade
383 of the Civil Code which states that if, Chamber certifies the force majeure.
after the conclusion of the contract, the It is also worth mentioning that the term
legislation establishes rules binding on of the PPP agreement may be extended by
the parties other than those that were a court decision in the manner prescribed
in force at the time of the conclusion of by the PPP agreement in cases such
the contract, the terms of the concluded as delays or suspension of the public-
contract shall remain in force unless the private partnership project as a result of
law establishes that its effect extends to circumstances beyond the control of the
relations arising from previously concluded parties to the PPP agreement27.
contracts.
23. Is force majeure specifically and social requirements in project
regulated under the local financings?
legislation?
The Environmental Code regulates
Yes, force majeure is specifically regulated environmental use and protection issues.
under Kazakhstan legislation. Facilities that have the potential to have
According to Kazakh law26, an entity that an impact on the environment or human

25 Article 14 of the PPP Law.
26 Article 359 of the Civil Code.
136
health must conduct an environmental as the governing law of the concession

impact assessment (“EIA”). A thorough agreement, our interpretation of the
process for carrying out an environmental law suggests that only Kazakh law can
impact assessment is provided by the be governing law of the concession
Code. Depending on the classification agreements.
of the enterprise, the Code specifies the
The PPP Law explicitly confirms that
kind and specifics of the environmental
if a private sector partner under a PPP
licenses needed. Chapter 7 of the
agreement is a non-resident, the parties
Environmental Code contains a section shall have discretion to choose the
on EIAs, the circumstances in which they applicable law of the PPP agreement.28
must be performed, and the procedure for
conducting the EIA. The state (represented by the government)
takes part in relationships regulated by
The Equator principles and the civil legislation on an equal basis with
environmental, social, and governance other participants and is liable for its
safeguards which may be crucial for undertakings with its own property.
bankability are not specifically regulated Therefore, if the government enters
under Kazakh law. Moreover, some into commercial activity, it loses special
requirements of the Equator principles treatment or sovereign immunity. The
related to the resettlement do not conform government, as a public person, waives its
to the Kazakhstani legislation. sovereign immunity.
The State environmental inspectors of the The concept of waiver of rights is, generally,
Ministry for Environment Protection or its not recognised by Kazakh law, however,
local territorial departments are entitled if the State enters, for instance, into an
to carry out regular, annual environmental agreement governed by English law
inspections of companies that are that provides for a waiver immunity and
required to have environmental permits. international arbitration, such a contractual
If a company commits no environmental arrangement shall be legal and enforceable
violations during three consecutive years, from the Kazakh law perspective.
state environmental inspections may
be conducted once every three years. 26. Can financing documents provide
However, in cases of environmental for arbitration clauses?
accidents, health, safety and other Yes, financing documents can provide
emergency situations, State environmental arbitration clauses.
inspectors are empowered to carry out
The PPP Law29, as amended, extends the
extraordinary inspections.
circumstances in which the parties to the
G. Jurisdiction, Waiver of PPP agreement may agree on Kazakhstan
Immunity or international arbitration for dispute
resolution purposes. In addition to the
25. Are submission to a foreign law and
case where the private partner is a non-
resident, the PPP Law allows for arbitration
enforceable?
to be selected if at least one of the private
Even though the Concession Law does not partner’s shareholders holding 25% or
specifically prohibit having a foreign law more of voting shares is non-resident in

137
Kazakhstan. However, this provision applies and decided to invest at least part of the
only to PPP projects costing more than four wealth from commodity exports in long-
million times MCI (approx. US $30 million). postponed infrastructure projects, thirdly,
following the coronavirus outbreak, the
Only concession projects of special
need to attract private investment in
importance can benefit from an
Kazakhstan’s healthcare system, agriculture,
international arbitration clause in the
utilities, and other public infrastructure
concession agreement, even if all parties to
becomes even more acute. Such IFIs as
it are residents of Kazakhstan, but at least
EBRD, ADB and IFC provide technical
one shareholder of the concessionary is a
non-resident30. assistance in the development of projects
in the mentioned areas.
The Republic of Kazakhstan is not party to
any multilateral or bilateral treaties with 28. Are any significant development or
any Western jurisdiction or the United change expected in the near future
States for the mutual enforcement of in the project finance market?
court judgments. Consequently, should a Kazakhstan should tap into the huge
judgment be obtained from a court in any potential of participating in China’s One
Western jurisdiction or the United States, it Belt and One Road Initiative by promoting
is highly unlikely to be given direct effect in PPP best practice to ensure high quality at
Kazakhstan courts. lower costs.
H. Trends and Projections Activation of PPP in infrastructure,
27. What are the main current trends energy, transport is expected. In June
in project financings in your 2022, President Tokayev announced an
jurisdiction? investment package worth 20 billion
USD until 2025 aimed at enhancing the
PPP projects in the field of education diversification of transit and transport
account for more than half (55%) of the routes, as well as the implementation of
total number of PPP contracts. In second integrated logistics solutions. Among the
and third place are the healthcare and proposed projects, are upgrades to the
utilities sectors, respectively. At the same Middle Corridor, which would help connect
time, the largest projects have been Kazakhstan to the Black Sea via Azerbaijan
implemented in the field of transport and and Georgia.
infrastructure.
It is expected that proper PPPs and interest rates which are being
project finance deals will finally take off commonly used in your jurisdiction
in Kazakhstan in the near future, firstly during the LIBOR transition period?
because proper legislation on PPPs has
been put in place, secondly, after decades LIBOR is being replaced by such products as
of neglect, the government of Kazakhstan Sonia for British pounds, Tona for Japanese
has finally not only declared, but seems yen, Saron for Swiss francs, and others. In
to confirm its readiness to improve the addition, interest rates may be calculated
investment climate and to attract private depending on the so-called base rate
investments through PPPs (including which is set out by the National Bank of
into the housing and utilities sector) Kazakhstan31.

31 16.75% as of March 2023.
138
KYRGYZSTAN
GRATA
Sultan Tolomushev Elmira Usenova

Senior Associate Associate
stolomushev@ eusenova@
gratanet.com gratanet.com
A. Overview The Law of the Kyrgyz Republic “On

securities market” dated 24 July 2009 No.
1. What is the main legislation and 251;
project financing in your jurisdiction? The Law of the Kyrgyz Republic “On public-
private partnership” dated 11 August 2021
The main legislation governing project No. 98;
financing in the Kyrgyz Republic includes:
The Law of the Kyrgyz Republic “On Pledge”
Civil Code of the Kyrgyz Republic dated 8 dated 12 March 2005 No. 49;
May 1996 No. 15 (Part I);
As for the international treaties, the
Civil Code of the Kyrgyz Republic dated 5
following are relevant:
January 1998 No. 1 (Part II);
The Convention on the Recognition and
Land Code of the Kyrgyz Republic dated 2
Enforcement of Foreign Arbitral Awards
June 1999 No. 45;
(New York Convention) dated 10 June 1958;
The Law of the Kyrgyz Republic “On
The Convention on the Settlement of
business partnerships and companies”
Investment Disputes between States
dated 15 November 1996 No. 60;
and Nationals of Other States (ICSID
The Law of the Kyrgyz Republic “On joint Convention) dated 18 March 1965;
stock companies” dated 27 March 2003 No.
In addition, The Kyrgyz Republic has
64;
entered into a number of bilateral treaties
The Law of the Kyrgyz Republic “On on mutual support, encouragement and
investments in the Kyrgyz Republic” dated protection of investment with the following
27 March 2003 No. 66; countries:
139
The People’s Republic of China (1995); 2. How mature is the project finance
The Republic of Turkey (1996); market in your jurisdiction, and
The Republic of Ukraine (1993);
The United States of America (1994); months?
The Republic of Armenia (1995);
The project finance market in the Kyrgyz
The United Kingdom of Great Britain and Republic is relatively small and still
Northern Ireland (1998); developing. However, there have been
The Republic of France (1997); some notable project financings in the
The Islamic Republic of Iran (2005); country such as
The Republic of Azerbaijan (1997); • Construction of Upper Naryn
The Federal Republic of Germany (2006); hydropower plant cascade (still
ongoing. The project provides for the
The Republic of Georgia (2016);
construction of four HPPs with total
The Republic of India (2000); installed capacity of 237.7 MW. The total
The Republic of Kazakhstan (1997); cost of the project – 727 650 000 US
The Republic of Belarus (2001); dollars;
The People’s Republic of Mongolia (1999); • Building infrastructure of information

system for fee collection. The project
The Swiss Confederation (2003);
provides for the set-up of infrastructure
The Republic of Tajikistan (2001); of the information system for fee
The Kingdom of Sweden (2003); collection that includes 42 control
The Republic of Moldova (2004); points, 2 user service centers, one
of which will be combined with the
The Republic of Finland (2004);
service center for freight traffic on
The Republic of Korea (2008); public roads using global navigation
The Republic of Latvia (2008); technologies (GPS, GLONASS, Galileo
The Republic of Lithuania (2009); etc.) The total cost of the project –
58 200 000 US dollars;
Denmark (2001);
Malaysia (1995); Overall, while the project finance market
in the Kyrgyz Republic is still developing,
The Islamic Republic of Pakistan (1996);
there are opportunities for financing in the
The Republic of Indonesia (1997); country, particularly in the energy sector.
The Republic of Uzbekistan (1997);
The United Arab Emirates (2014);
State of Qatar (2014);
State of Kuwait (2015); your jurisdiction?
The Republic of Austria (2016).
The types of security that may be used
It is important to note that project can vary depending on the specific
financing in the Kyrgyz Republic may also circumstances of the project and the
be subject to various regulations issued by preferences of the parties involved. Some
the National Bank of the Kyrgyz Republic common types of security that may be used
and other regulatory bodies. in project financings include:
140
• Mortgage: This is a form of security requirement in terms of formalities

that involves the transfer of a property or procedure to be followed for
interest to the lender, which serves as establishing or perfecting a share
collateral for the loan. If the borrower pledge?
defaults on the loan, the lender may
Yes, the shares of the company can be
foreclose on the property and sell it to
pledged as security to the benefit of
recover its investment.
lenders.
• Pledge: This is a form of security that
There are specific requirements and
involves the transfer of possession of procedures that must be followed for
a movable asset, such as shares in a establishing or perfecting a share pledge in
company or equipment, to the lender the Kyrgyz Republic.
as collateral for the loan. If the borrower
defaults on the loan, the lender may Under the Kyrgyz legislation, a share pledge
sell the pledged asset to recover its is established through a written agreement
investment. between the pledgor (the shareholder) and
the pledgee (the creditor). The agreement
• Guarantee: This is a form of security that must specify the number and type of shares
involves a third party (such as a parent being pledged, the amount of the secured
company or a government entity) debt, the duration of the pledge and other
providing a guarantee to the lender terms.
that the borrower will repay the loan. If
the borrower defaults on the loan, the To perfect a share pledge, the pledge
agreement must be registered with the
guarantor is obligated to repay the loan
Pledge Registration Department of the
on the borrower’s behalf.
Ministry of Justice of the Kyrgyz Republic.
• Assignment of rights: An assignment of The registration process involves paying
rights is a transfer of contractual rights state fee, submitting application and the
from one party to another. In project original pledge agreement.
financings in the Kyrgyz Republic, an
It’s important to note that failure to register
assignment of rights is commonly
a share pledge with the authorized state
used to transfer the right to receive body may result in the pledge being
payments from the project to the ineffective against third parties, so it’s
lender, thereby providing additional essential to follow the proper registration
security for the lender. procedures to ensure the validity and
It is important to note that the use of enforceability of the pledge.
security in project financings can be 5. Is private sale a recognized method
complex and may involve a combination for the enforcement share pledge?
of different types of security. The specific What are the endorsement types
security types used in a project financing typically used for the share
transaction in the Kyrgyz Republic will certificates?
depend on the nature of the project and
the lender’s requirements. Lenders typically Yes, private sale is a recognized method
seek to obtain as much security as possible for enforcing a share pledge in the Kyrgyz
Republic. The pledgor and pledgee can
to protect their investment in the project.
agree on the terms of the private sale in
4. Can the shares of a company be the pledge agreement, or the sale can
pledged as a security to the benefit be conducted through a court-approved
of lenders? If so, is there a specific public auction.
141
In the event of default by the pledgor, the Regarding the steps to be taken by
pledgee may enforce the pledge by selling lenders to enforce their security interest
the pledged shares. The pledgee must in the event of the borrower’s insolvency,
provide the pledgor with notice of the technical insolvency, or composition
intended sale, including the time, place, process in the Kyrgyz Republic, there
and method of sale, as well as the minimum may be some variation depending on the
price for the sale, which must be equal to or specific circumstances and the terms of the
greater than the outstanding debt secured security agreement. However, the general
by the pledge. steps that may be taken are:
If the pledged shares are sold for more than • Verify the security interest: The lenders
the outstanding debt, the excess proceeds should review the security agreement
must be returned to the pledgor. If the and ensure that it has been properly
pledged shares are sold for less than the executed and registered, if applicable,
outstanding debt, the pledgor remains to determine the validity and
liable for the remaining debt. enforceability of the security interest.
As for the endorsement types used for the
• Assess the priority of the security
share certificates, on the territory of the
interest: If there are multiple security
Kyrgyz Republic, all emissive securities are
interests over the same asset or
issued in form of book entry securities.
property, the lenders should assess the
6. Can security interest be established priority of their security interest relative
over future assets, rights and to other security interests.
• Notify the insolvency administrator: The
Yes, security interests can be established lenders should notify the insolvency
over future assets, rights, and receivables of administrator or receiver of their
the borrower in the Kyrgyz Republic. security interest and provide evidence
Under the Kyrgyz legislation, a security of the security interest, such as a copy
interest can be established over future of the security agreement and proof of
assets and rights by way of a pledge registration.
agreement. The agreement must specify
• Participate in the insolvency
the future assets and rights to be pledged.
proceedings: The lenders should
Similarly, security interests can be
participate in the insolvency
established over future receivables through
proceedings and file a claim for the
a pledge agreement.
outstanding debt secured by the
It is important to note that the specific security interest.
requirements and procedures for
establishing security interests over future Enforce the security interest: If the
assets, rights, and receivables may vary borrower’s assets are insufficient to satisfy
depending on the type of asset or right the outstanding debt, the lenders may
in question and the specific terms of the enforce their security interest by selling
pledge agreement. the pledged assets or property through a
public auction or private sale, as permitted
by Kyrgyz legislation.
interest, in case the borrower 8. Is security trustee concept
becomes insolvent, is technically enforceable in your jurisdiction? If
insolvent and/or commences not, is an alternative mechanism,
composition process? such as a parallel debt, available?
142
The concept of a security trustee is not typically include provisions for the
specifically provided for in the laws of settlement of investment disputes
the Kyrgyz Republic. However, lenders through international arbitration.
(pledgees) can appoint a pledge manager
• Government guarantees: The Kyrgyz
to represent the pledgee in exercising
Republic government may provide
all of the pledgee’s rights to the pledged
guarantees for project financing, which
property.
can reduce the perceived risk of the
Information on the appointment or investment and lower the financing
termination of the powers of the pledge costs. These guarantees typically cover
manager shall be sent to the pledger political risks such as expropriation,
and in case of a registered pledge shall breach of contract by the government,
be submitted to the local body of the and transfer restrictions.
authorized state body for registration of
• Concessional financing: The Kyrgyz
rights to immovable property, if the subject
Republic is eligible for concessional
of the pledge is immovable property, if the
financing from international financial
subject of the pledge is movable property,
institutions such as the World Bank,
the information shall be reflected in the
Asian Development Bank, and
pledge notice as provided by the Kyrgyz
European Bank for Reconstruction
legislation.
and Development. This financing is
In terms of the use of a parallel debt typically offered at lower interest rates
mechanism, this is not expressly provided and longer repayment periods than
for in the laws of the Kyrgyz Republic. commercial financing.
C. Incentives and Restrictions • Renewable energy incentives: The
Kyrgyz Republic has significant
potential for renewable energy
development, and offers a range of
your jurisdiction?
incentives for projects in this sector.
The main incentives and exemptions for These incentives include feed-in tariffs,
project financing in the Kyrgyz Republic tax exemptions, and simplified licensing
include: procedures.
• Tax incentives: The Kyrgyz Republic • Infrastructure development: The
offers a range of tax incentives to Kyrgyz Republic government is actively
attract foreign investment, including promoting infrastructure development,
exemptions or reductions in corporate including transport, energy, and
income tax, property tax, and customs telecommunications. Projects in these
duties. sectors may be eligible for government
support, including tax incentives and
• Investment protection: The Kyrgyz
guarantees.
Republic has signed bilateral
investment treaties with a number It is important to note that the specific
of countries, which provide foreign incentives and exemptions available for
investors with protection against project financing in the Kyrgyz Republic
expropriation and other forms of may vary depending on the sector, size, and
political risk. These agreements also location of the project.
143
10. Are there any incentives or unrestricted money transfers; should

exemptions specifically applicable provisions restricting money transfers in
to foreign investors? foreign currency be introduced into the
legislation of the Kyrgyz Republic, these
There are several incentives and
provisions will not apply to foreign
exemptions available specifically for foreign
investors, with the exception of cases
investors in the Kyrgyz Republic. Some of
where investors engage in illegitimate
these incentives and exemptions include:
activities (such as money laundering);
• National treatment of business
• The right to: establish legal entities
activities, equal investment rights of
of any organizational and legal form
domestic and foreign investors, no
provided by the legislation of the
intervention into the business activities
Kyrgyz Republic; open branches
of investors, protection and restitution
and representative offices within
of infringed rights of investors in
the territory of the Kyrgyz Republic;
accordance with the laws of the Kyrgyz
select any organizational and
Republic;
managerial structure for the business
• Export or repatriation of profit gained entities, unless a different structure
on investment, proceeds of investment is explicitly required by law for the
activities in the Kyrgyz Republic, given organizational and legal form
property, and information, out of the of a business entity; acquire property
Kyrgyz Republic; (except land plots), shares, other
securities, including governmental
• Protection against expropriation
securities; participate in privatization
(nationalization, requisition, or other
of state property, establish associations
equivalent measures, including action
and other unions; hire local and foreign
or omission on the part of authorized
employees subject to the legislation
government bodies of the Kyrgyz
of the Kyrgyz Republic; and engage
Republic that has resulted in seizure of
in other investment activities not
investor’s funds or investor’s deprivation
prohibited by legislation in the Kyrgyz
of the possibility to use the results of
Republic;
their investment). In exceptional cases
involving public interest, investments • Recognition by public authorities and
may be expropriated with concurrent officials of the Kyrgyz Republic of all
state guarantees of appropriate intellectual property rights of foreign
coverage of damage incurred by the investors;
investor;
• In the event of amendments to the
• The investor’s right to freely use the legislation on investments, or the tax
income derived from their activities in legislation of the Kyrgyz Republic or
the Kyrgyz Republic; the non-tax payments legislation, the
investor and the investee who meet
• The freedom to invest in any form into
the statutory requirements have the
objects and activities not prohibited by
right, during 10 years from the date of
the legislation of the Kyrgyz Republic,
signing the stabilization agreement,
including the activities subject to
to choose such conditions as may be
licensing;
most favourable to them for paying
• Freedom of monetary transactions (free taxes including value added tax but
conversion of currency, unbound and excluding other indirect taxes, and
144
nontax payments (except fees and such as transfer into ownership in case
charges for public services) in the of foreclosure of mortgage loan with the
manner provided by the laws of the obligation of subsequent alienation of the
Kyrgyz Republic. The procedure and land plot within two years from the date of
conditions for applying stabilization origination of ownership of land or long-
regime to tax and nontax legal term leasehold rights.
relationships are established by the
It is important to note that the regulations
laws of the Kyrgyz Republic;
and restrictions on foreign investments in
• Other guarantees specifically the Kyrgyz Republic are subject to change,
provided in bilateral and multilateral and may vary depending on the nature and
international treaties on the promotion size of the investment.
and protection of investment, to which
the Kyrgyz Republic is a party.
11. Are there any restrictions for or in practice, for project financings
borrowing bank loans and in your jurisdiction?
There is no specific minimum equity
requirement for project financing in the
No. There are no restrictions for borrowing Kyrgyz Republic under the legislation.
bank loans and shareholder loans from However, the actual equity requirement
abroad and/or in a foreign currency. may vary depending on the type, size, and
risk profile of the project, as well as the
requirements of the lenders or investors
involved.
jurisdiction?
Yes, there are restrictions on foreign
investments in the Kyrgyz Republic. Below
are some of the key restrictions on foreign
investments in the Kyrgyz Republic:
Restrictions on foreign ownership: Certain
To be valid and enforceable in the Kyrgyz
sectors of the economy, such as media,
Republic, project finance documents may
broadcasting, and defense industries,
need to be registered or filed with various
may be subject to restrictions on foreign
government authorities. The registration
ownership.
and filing requirements that are applicable
Requirements for obtaining permits: will depend on the nature and structure
Foreign investors may need to obtain of the project, as well as the type of
permits or approvals from government document in question. Below are some
authorities before making investments of the common registration and filing
in certain sectors or industries. These requirements that may be applicable for
requirements may vary depending on the project finance documents in the Kyrgyz
nature and size of the investment. Republic:
Limits on land ownership: Foreign Registration of security documents:
individuals and legal entities are not Security documents, such as mortgages
allowed to own land in the Kyrgyz or pledges, must be registered with the
Republic, except in limited circumstances authorized state bodies. The registration
145
process involves filing an application and 16. Can insurance proceeds under the
paying a registration fee. Once registered, insurance and reinsurance policies
the security document will be publicly be assigned to the benefit of the
recorded and enforceable against third lenders?
parties.
Generally, the assignment of insurance
Filing of corporate documents: and reinsurance proceeds under insurance
Project companies may need to file or reinsurance policies to the benefit
corporate documents, such as articles of the lenders is not prohibited under
of incorporation or bylaws, with the Insurance law. It’s worth noting that this
authorized state bodies. This filing is
might be subject to certain restrictions
required to establish the legal existence
and limitations. It’s essential to review the
of the company and ensure that it is
registered and in good standing. terms and conditions of each insurance
agreement.
Compliance with licensing requirements:
Certain projects, such as those in 17. What are the other complications,
the energy or mining sectors, may concerns or other issues in relation
require special permits or licenses from to the insurance provisions
government agencies. Compliance with under the project financing
these licensing requirements may be documentation, if any?
a condition precedent to the validity
In Kyrgyzstan there might be several
and enforceability of project finance
documents. potential complications, concerns
or issues in relation to the insurance
It is important to note that the specific provisions under the project financing
registration and filing requirements documentation. Firstly, their compliance
applicable to project finance documents in to project financing documentation
the Kyrgyz Republic may vary depending under legal regulatory framework set
on the type of project and the legal
forth by Kyrgyzstani legislation. Secondly,
structure of the transaction.
one of the key concerns with insurance
D. Insurance provisions in project financing is ensuring
15. Can local insurance policies be that the insurance coverage is adequate
governed by a foreign law? to protect the project and its participants
from potential risks and losses. The project
The insurance activity is mainly regulated documents may require certain types
by the Law of the Kyrgyz Republic “On and levels of insurance coverage, and the
organization of insurance in the Kyrgyz insurance policies should be carefully
Republic” dated 23 July 1998 No. 96
reviewed to ensure they meet these
(“Insurance law”) and fundamentals are
requirements. Thirdly, insurance provisions
provided in the Civil Code of the Kyrgyz
Republic dated 8 May 1996 No.15. In of project financing documentation
accordance with Insurance law the should clearly state and include events
insurance policy should be governed of force majeure defined by Kyrgyzstani
by Kyrgyz laws, including the terms and legislation. Overall, it is essential for parties
conditions of the policy and the rights and to carefully review and consider the
obligations of the insurer and the insured. insurance provisions in project financing
It’s worth noting that insurance activity is documentation for compliance with
subject to licensing in the Kyrgyz Republic. legislation.
146
E. Financing of Public-Private public authorities and the Lenders are

Partnership (PPP) Projects permissible only in case the amount of
investment is more than 1 billion Kyrgyz
18. Is PPP a permitted method of soms (approximately 11 439 278 USD).
developing projects, and if so, have The PPP project is awarded through direct
any PPP projects been developed to negotiations provided that the investment
date in your jurisdiction? meets the set investment amount and the
In accordance with the legislation of qualification requirements.
the Kyrgyz Republic, Public-Private 20. Please indicate the types of host
Partnership (“PPP”) is a permitted method government supports (including
of developing projects. The PPP as a treasury guarantee, debt
method of developing projects is regulated assumption etc.) available in your
by the Law of the Kyrgyz Republic “On jurisdiction.
public-private partnership” dated 11 August
2021 No. 98. The government of the Kyrgyz Republic has
demonstrated commitment to supporting
The Kyrgyz Republic has been actively PPP projects. There are several government
developing PPP projects. To date, there supports available in the Kyrgyz Republic:
are 19 implemented PPP projects, 5
PPP projects at the competition stage, - Provision of guarantee for the
and 44 PPP projects are currently under fulfillment of obligations by the state
preparation. Most PPP projects are partner.
developed in areas of transport, energy, - Provision of guarantee of minimum
social, and environment. Some of the profitability of the PPP project;
prominent PPP projects developed in
- Provisions by the tax legislation of the
Kyrgyzstan are the following:
Kyrgyz Republic;
- Establishment of hemodialysis centers - Provisions of preferential rental rates for
in Kyrgyz Republic; the use of property owned by the state
- Electronic ticketing in public transport; and/or municipality;
- Reconstruction of the cinema for - Provision of state or municipal

children ‘Kyzyl Kyrgyzstan”; preferences under the PPP agreement;
- Provision of assistance in obtaining
- Modernization of airports of the Kyrgyz
permits and licenses.
Republic;
Some of the government guarantees
- Bishkek city public transportation available in the Kyrgyz Republic:
improvement;
- Non-interference by the state partner
- Installation of CT scanners in public in the economic activity of the private
healthcare institutions. partner;
19. Are direct agreements between the - Protection of property of a private
public authorities and the Lenders partner from nationalization or other
permissible under the local law, and equivalent measures;
- Rightly to freely own, use and dispose
of investments made to the PPP project
In accordance with Kyrgyzstani legislation and the income and profits received
on PPP, direct agreements between the from it;
147
- Right to carry out operations on the 22. Are investors and lenders usually
sale and purchase of cash and non-cash protected against a change in
national and/or foreign currency on the law passing subsequent to the
territory of the Kyrgyz Republic; signing of the relevant concession
agreement?
- Right to review the terms or early
terminations of the PPP agreement Yes, in accordance with Article 6 of the PPP
and receive compensation for damage Law any laws and by-laws adopted after the
caused due to the adoption of legal conclusion of PPP agreement and affecting
acts deteriorating conditions of project PPP issues are not applicable to existing
implementation. project agreements. An exemption of
applicability is illustrated in cases when the
21. Are political risk events usually initiative to apply amended legal provisions
under the responsibility of the or newly adopted laws comes from the
public party or the private party private partner. In this case, amendments
under the PPP agreements? to existing agreements shall be made in
accordance with the procedure stipulated
The allocation of risk between partners
by the relevant PPP agreement.
is one of the most crucial ways to ensure
the successful implementation of a PPP 23. Is force majeure specifically
arrangement. Article 6 of the PPP law regulated under the local
ensures principle of fair distribution of risks. legislation?
In accordance with Article 14 of the PPP Generally, force majeure is regulated
law, PPP agreement should include term on by the civil legislation of the Kyrgyz
distribution of risks between the public and Republic. Para. 3 of Article 356 of the
private partners. Civil Code of the Kyrgyz Republic defines
The allocation of political risk in PPP force majeure and provides a respective
agreements depends on the specific regulation for its applicability. Para. 3 of
terms of the agreement, as well as the Article 356 of the Civil Code provides a
basis for exemption from liability in cases
nature of the risk. Generally, political
of force majeure. In accordance with the
risks are shared between the public and
above-mentioned legal provision force
private partners. In some cases, the public
majeure is extraordinary and unavoidable
party may assume a greater share of the
circumstances under the given conditions.
political risk, particularly in cases where
Such circumstances, however, do not
the project involves a public service or
include a breach of duty on the part of the
infrastructure that is of critical importance debtor’s counterparties, the unavailability
to the government. On the other hand, of goods on the market needed for the
in some cases, the private party may fulfillment of obligations, or the debtor’s
assume more political risk in exchange for lack of the necessary funds.
greater potential rewards or as a condition
of securing financing for the project. It’s worth noting that in accordance with
Therefore, the allocation of political risk provisions of the above-mentioned Article,
in PPP agreements will depend on the the agreement may provide for other
specific circumstances of the project conditions of exemption from liability.
and the priorities and preferences of the 24. What are the general environmental
public and private parties involved in PPP and social requirements in project
arrangements. financings?
148
In accordance with Kyrgyz law, it’s Model Law on International Commercial

prohibited to finance and implement Arbitration and ratified ICSID Convention.
projects related to use of natural resources
without a positive conclusion of the state’s For instance, Article 19 of the PPP Law
ecological expertise. Particularly, according states that any disputes arising between
to the Regulation on the procedure of parties to the PPP agreement in connection
environmental impact assessment in the with the conclusion, performance, and
Kyrgyz Republic projects should undergo termination of said agreement shall
the assessment process to consider the be resolved through negotiations in
potential environmental impact of the compliance with the provisions of the
project. Moreover, an environmental PPP agreement. In case the parties cannot
management plan should be designed to resolve a dispute amicably, the dispute shall
ensure that the project will be operated in be considered either by the state courts of
an environmentally responsible manner. the Kyrgyz Republic or the international
Regarding social requirements in project court/arbitrational tribunal if the PPP
financing, there are general requirements
agreement provides for it. Thus, the PPP
to engage with local communities and
agreement provides for arbitration clauses.
stakeholders and ensure compliance with
labor legislation of the Kyrgyz Republic. In order to ensure the enforceability of an
F. Jurisdiction, Waiver of arbitration clause in a financing document
Immunity in Kyrgyzstan, parties should consider the
following:
the waiver of immunity provisions 1. An arbitration agreement should be in
enforceable? writing and signed by the parties. It can
be in the form of a separate agreement
In accordance with the civil legislation
or as a clause within the financing
of the Kyrgyz Republic, agreements
can be governed by foreign law. The documents.
enforceability of a submission to a foreign 2. The arbitration agreement should
law rather that Kyrgyz law should be clearly identify the disputes that are
clearly indicated or directly derived from subject to arbitration and the rules
the terms of the agreement. In accordance
and procedures that will govern the
with Kyrgyz legislation, the freedom of
arbitration.
parties to choose the governing law of
their agreement is recognized. Waiver of 3. The arbitration agreement should
immunity is generally recognized action specify the seat or legal place of
which is subject to certain limitations under arbitration, which is the jurisdiction
by legislation of the Kyrgyz Republic. in which the arbitration will take
26. Can financing documents provide place. Parties may choose a foreign
for arbitration clauses? seat of arbitration, but this may affect
the enforceability of the award in
Yes, financing documents can include
Kyrgyzstan.
arbitration clauses in the Kyrgyz Republic.
In accordance with Kyrgyzstani legislation, 4. Parties should ensure that the
parties are free to agree to resolve any arbitration agreement complies with
arising disputes through arbitration. The any mandatory provisions of Kyrgyz law
Kyrgyz Republic has adopted UNCITRAL and does not violate public policy.
149
G. Trends and Projections and provide guarantees that will attract

foreign investments into the country.
in project financings in your 28. Are any significant development or
jurisdiction? change expected in the near future
The Kyrgyz Republic is currently at the
stage of developing its economy and As mentioned earlier the project finance
project financing overall. Some of the main market is still developing in the Kyrgyz
trends in project financing include the Republic. The government of the Kyrgyz
following: Republic will likely to implement the
following measures:
- Public-Private Partnerships (PPPs):
PPP projects became one of the most - Further support and development
popular methods of project financing of PPP. The Kyrgyz government has
in the Kyrgyz Republic. Particularly, expressed a strong commitment to
PPPs are mainly used in infrastructure, developing PPP projects. Reviewing
experience of our country PPP is a
transport and energy sectors. It’s worth
key mechanism for financing public
noting that renewable energy is a
infrastructure projects. It is expected
separate block of PPP projects that is
that more PPP projects will be launched
highly supported and developing in the
in the coming years and that the
Kyrgyz Republic. For instance, IFC and
government will continue to implement
the government of the Kyrgyz Republic
legal and regulatory reforms to
will cooperate in the development of
encourage private sector participation.
a solar plant under the Scaling Solar
Program. - Focus on renewable energy and
mining sectors. As mentioned above,
- Mining: The mining sector is a key driver the Kyrgyz government actively
of the Kyrgyz economy, and project participates in PPP projects focused
financing in this sector is focused on on the renewable energy sector.
the development of new mines and the The mining sector is a crucial area of
expansion of existing operations. As of development and our authorities will
today, there were several big projects in likely to implement new reforms to
mining sector. promote its development.
- Islamic finance: Project financing based - The Kyrgyz government also
on Islamic principles has been actively stipulates on importance of digital
developing in the Kyrgyz Republic. transformation. In coming years there
There are several banks, microfinance are expected more projects in digital
companies that support and provide infrastructure, e-commerce platforms
financing on Islamic principles. and financial technologies.
- Microfinance: Microfinance has become 29. What are the alternative reference
an important source of funding for interest rates which are being
small and medium-sized enterprises commonly used in your jurisdiction
(SMEs) in the Kyrgyz Republic, during the LIBOR transition period?
particularly in rural areas. During the LIBOR transition period, the
Considering above mentioned RFR rates is commonly used in the Kyrgyz
developments and focus sectors, project Republic. Alternative rates are Secured
financing is rapidly developing in the Overnight Financing Rate (SOFR) for USD
Kyrgyz Republic. The government of the and Sterling Overnight Index Average
Kyrgyz Republic tries to implement reforms (SONIA) for GBP.
150
LIBYA
TUMI LAW FIRM
Dr. Mohamed Tumi Mazen Tumi Malak Ejledi

Founder Partner Junior Associate
mtumi@ mmtumi@ malak.ejledi@
tumilawfirm.com tumilawfirm.com tumilawfirm.com
Imtinan Al Rwemed Hannah Khllat

Junior Associate Junior Associate
imtinan.alrwemed@ hannah.khllat@
tumilawfirm.com tumilawfirm.com

international treaties governing the what are the most significant project
project financing in your jurisdiction? financings closed during the last 12
months?
• Commercial code (for private projects)
• The Regulations Governing The project finance is undeveloped and
Administrative Contracts (if the uncommon practice in Libya as a result of
Government is a party) political and economic instability.
151
B. Security Interest remaining funds, according to Articles 999-

1031 of the Commercial Code.
security types in project financings in And in case there is a mortgage with the
your jurisdiction? bank, the bank can seize it immediately to
collect the value of the loan in the event
• Mortgages that the company becomes insolvent and is
• Personal guarantee unable to pay its debts to the bank.
4. Can the shares of a company be 8. Is security trustee concept

pledged as a security to the benefit enforceable in your jurisdiction? If
of lenders? If so, is there a specific not, is an alternative mechanism,
requirement in terms of formalities such as a parallel debt, available?
or procedure to be followed for Not applicable.
pledge? C. Incentives and Restrictions
Yes, the shares of a company could be 9. What are the main incentives and
pledged as a security to the benefit of exemptions for project financing in
your jurisdiction?
lenders. Article 140 requires the approval of
the company for shares’ pledge, it stipulates There are currently no incentives nor
that “If the company approved shares’ exemptions rendered for project financing
pledge, this will be considered as prior in Libya.
approval for transfer of the pledged shares
to the buyer in case of execution on shares.”
5. Is private sale a recognized method to foreign investors?
Yes, foreign investors that come under
Law No. 9 for the year 2010 Regarding
Investment Promotion enjoy extensive
certificates? privileges and exemptions. The incentives
Not applicable. provided for by law can be encapsulated
as tax customs exemptions on equipment,
6. Can security interest be established a five-ear income tax exemption, a tax
over future assets, rights and exemption on reinvested profits and
receivables of the borrower? exemptions on production tax and expert
Not applicable. fees for goods produced for export markets.
Investors are also granted the privilege to
7. What are the steps to be taken by transfer net profits overseas, defer losses
the lenders to enforce their security to future years, import necessary goods,
interest, in case the borrower and hire foreign labor if local labor was
becomes insolvent, is technically unavailable. Foreign workers may acquire
insolvent and/or commences residency permits and entry reentry
composition process? visas for five years and transfer earnings
overseas.
In case the borrower becomes insolvent,
the creditors shall participate in what 11. Are there any restrictions for
results from the liquidation of the borrowing bank loans and
company’s liabilities, according to their shareholder loans from abroad and/
order of date and priority in sharing the or in a foreign currency?
152
Yes, there exists limited restrictions on D. Insurance

borrowing bank loans and shareholder
loads from abroad albeit in national or in 15. Can local insurance policies be
foreign currency. governed by a foreign law?
12. Are there any restrictions for No.

jurisdiction?
Yes, there are. Both Law No. 9 for the year be assigned to the benefit of the
2010 Regarding Investment Promotion lenders?
as well as Law No. 23 for the year 2010
Regarding Commercial Activities contain Yes.
restrictions placed on foreign participation
and investments in general that manifest in
capital requirements and restricted types of
activities. to the insurance provisions
13. Is there any minimum equity documentation, if any?
or in practice, for project financings There are no other complications, concerns
in your jurisdiction? or other issues in relation to the insurance
provisions under the project financing
The minimum equity requirement is
dependent on the particular type of the documentation.
project concerned. E. Financing of Public-Private
The following is an example for such: Partnership (PPP) Projects
Decree 207 for the year 2012 Concerning 18. Is PPP a permitted method of
Participation of Foreigners stipulates that
when foreign contribution exists, the
minimum project value for the following
contracts is ought to be 50 million date in your jurisdiction?
Libyan dinars: Building and construction, Public-Private Partnership Projects are lack
construction of roads, bridges and dams, of sufficient regulation within the Libyan
marine constructions such as marine quays,
jurisdiction and therefore a seldomly used
break waters, dry docks and deepening
method of developing projects in Libya.
ports, construction of airports and runways,
Laying railways and construction of This is particularly as public procurement
stations. is more regulated and therefore more
14. Please explain the registration commonly used as a preferred method of
and filing requirements which project development.
enforceable in your jurisdiction. public authorities and the Lenders
The requirements are dependent on the if so, commonly seen in the Project
particular nature of the project concerned; Finance market in your jurisdiction?
requirements are different across the
different types of projects; i.e., it is on a They are indeed permissible under Libyan
case-by-case basis. law, but not commonly seen.
153
20. Please indicate the types of host F. Jurisdiction, Waiver of

government supports (including Immunity
jurisdiction. enforceable?
Libyan law does not permit governmental This depends on whether the waiver of
support in the form of debt assumptions or
immunity is in relation to the right to not
financial guarantees on a particular project.
be sued or the seizure of public assets. As
21. Are political risk events usually regards to the latter, the waiver of immunity
under the responsibility of the in relation to the seizure of public assets
public party or the private party will not be enforceable.
The submission to a foreign law, granted
There is no straightforward answer due to: that is both agreed upon by the parties, can
i. The inexistence of sufficient regulation be indeed enforceable. This is contingent
on Private-Public Partnership however on the public party obtaining the
necessary approvals.
ii. The uncommon nature of PPP projects
means there are not enough cases and 26. Can financing documents provide
projects to safely conclude nor assume for arbitration clauses?
who ‘usually takes’ the responsibility’. Libya law does not prohibit the inclusion
22. Are investors and lenders usually of arbitration clauses in financing
protected against a change in agreements, provided that the public party
law passing subsequent to the has obtained the necessary approval from
signing of the relevant concession relevant authorities prior to signing such
agreement? agreements.
Protection against change in law is G. Trends and Projections
not guaranteed. This is predominantly 27. What are the main current trends
dependent on contents of the newly passed in project financings in your
law and whether it contains exceptions to jurisdiction?
its application. A predominate example
of this within the Libyan jurisdiction is the The main current trend in Libya is the Public
passing of Law No.1 of 2013 Regarding the Funding and Loans.
Prohibition of Interest-Based Transactions in 28. Are any significant development or
Libya which had a retrospective effect and change expected in the near future
ended all interest-based transactions even in the project finance market?
if signed prior to the date of the passing of To the best of our knowledge, there will
the legislation. be no significant development or change
23. Is force majeure specifically expected in the near future.
regulated under the local 29. What are the alternative reference
legislation? interest rates which are being
Yes, force majeure is regulated by virtue of commonly used in your jurisdiction
Art.220 of the Libyan Civil Code. during the LIBOR transition period?
24. What are the general environmental Interest rates have been prohibited by law
in all types of transactions since 2016.
financings?
Not applicable.
154
NETHERLANDS
ORANGE CLOVER
Kees Hooft
Partner
kees.hooft@orangecloverlaw.com

Dutch project finance transactions are The project finance market in the
generally regulated by the Dutch Civil Code Netherlands is considered mature, with a
(DCC). There are no specific regulations strong track record of successful project
applicable to project finance in the financings across various sectors, such
Netherlands. Project finance transactions as renewable energy, infrastructure and
may fall within the scope of the Dutch transportation. Significant activity is
Financial Supervision Act (DFSA) and may involved in large scale offshore windfarms.
trigger the Dutch Competition Act. B. Security Interest
Furthermore, depending on the type 3. What are the most commonly used
of project, various specific laws and security types in project financings in
regulations may apply, including your jurisdiction?
laws relating to (among others): the
The most commonly used security types
environment, maritime constructions,
in project financings in the Netherlands
mining, energy, health and public include mortgages, pledge of shares,
commissioning. pledge of movable assets, and pledge of
The Netherlands is also a party to several receivables (including bank accounts and
international treaties that may be insurance and project contracts).
relevant for project financings, such as 4. Can the shares of a company be
the Convention on the Recognition and pledged as a security to the benefit
Enforcement of Foreign Arbitral Awards of lenders? If so, is there a specific
(the New York Convention). requirement in terms of formalities
155
or procedure to be followed for by means of a (a) public auction sale, (b)

establishing or perfecting a share private sale with the agreement of the
pledge? security provider or (c) private sale with
the agreement of the relevant court. The
Shares of a company can be pledged
enforcement can take place regardless of
as a security to the benefit of lenders. A
the bankruptcy of the security provider
Dutch notarial deed of pledge of shares is
(provided that the bankruptcy trustee may
required.
require the mortgagee/pledgee to apply a
5. Is private sale a recognized method limited cooling-down period of maximum 4
for the enforcement share pledge? months). In case of a pledge of receivables,
What are the endorsement types the pledgee may notify the debtor to pay
typically used for the share to its account and apply the receipts to its
certificates? secured claim.
Enforcement of a share pledge can take 8. Is security trustee concept
place by means of a private sale either enforceable in your jurisdiction? If
(a) with the agreement of the pledgor not, is an alternative mechanism,
provided as of the time enforcement such as a parallel debt, available?
becomes possible or (b) with the approval
The security trustee concept is not
of the relevant Dutch court. Typically BV
considered enforceable in the Netherlands.
type of companies are used in project
The parallel debt structure is normally used
finance which only have registered shares
in joint security arrangements.
and no share certificates.
over future assets, rights and 9. What are the main incentives and
receivables of the borrower? exemptions for project financing in
your jurisdiction?
A pledge can be established over
future movable assets. A pledge can be The most widespread current incentive
established over future receivables where supporting Dutch project financings is the
the debtor has been notified of the right of Dutch renewable energy subsidy scheme.
pledge. An undisclosed pledge cannot be
established over receivables (not arising
out of an existing legal relationship). A
mortgage cannot be established over
future immovable property. A pledge can Not specific or relevant to project
be established over future shares. financings.
7. What are the steps to be taken by 11. Are there any restrictions for
the lenders to enforce their security borrowing bank loans and
interest, in case the borrower shareholder loans from abroad and/
becomes insolvent, is technically or in a foreign currency?
There are no restrictions for borrowing
bank loans and shareholder loans from
In case of payment default (and in case abroad and/or in a foreign currency in
of occurrence of any other additional the Netherlands other than in respect of
agreed enforcement trigger), a pledgor or consumers, i.e., where amounts are greater
mortgagee can enforce its security interest than EUR 100,000.
156
12. Are there any restrictions for Security assignments are not available
foreign investments in your under Dutch law. There is no Dutch law
jurisdiction? restriction on pledging insurance proceeds
provided these do not insure liability
Generally, there are no restrictions for
foreign investments in the Netherlands. towards third parties. Pledge or transfer
There are certain (limited) foreign direct restrictions in the insurance policies will
investment screening and restriction limit the possibility to provide valid pledges
mechanisms in place and coming into thereover.
place. 17. What are the other complications,
13. Is there any minimum equity concerns or other issues in relation
requirement, under the legislation to the insurance provisions
or in practice, for project financings under the project financing
in your jurisdiction? documentation, if any?
There is no minimum equity requirement, No specific ones worth mentioning in our

under the legislation for project financings view.
in the Netherlands. In practice, project
financiers will have minimum equity
requirements.
enforceable in your jurisdiction. PPP is a permitted method of developing
There are only limited formal requirements projects in the Netherlands and there
for project finance documents in the have been several successful PPP projects
Netherlands. These include amongst other developed in the country, particularly in the
(a) mortgages need to occur by means infrastructure and public services sectors.
of a notarial deed of mortgage with 19. Are direct agreements between the
registration in the Dutch land registry, (b) public authorities and the Lenders
pledges of shares need to occur by means permissible under the local law, and
of a Dutch notarial deed and (c) non- if so, commonly seen in the Project
possessory pledges of movable assets and Finance market in your jurisdiction?
undisclosed pledges of receivables need to
be registered with the relevant Dutch tax Direct agreements between public
authorities (for time-stamping purposes). authorities and lenders are permissible
under local law and are commonly seen
D. Insurance in the project finance market in the
15. Can local insurance policies be Netherlands.
Local insurance policies can be governed government supports (including
by a foreign law. treasury guarantee, debt
jurisdiction.
be assigned to the benefit of the Host government supports available in the
lenders? Netherlands include Dutch development
157
bank financing, Dutch state backed export consent. Additional assessments may
guarantee, and the renewable energy apply depending on the specifics. Specific
subsidy scheme. environmental licences may apply
depending on the project specifics.
under the responsibility of the F. Jurisdiction, Waiver of
public party or the private party Immunity
Political risk events are usually the the waiver of immunity provisions
responsibility of the private party under enforceable?
PPP agreements in the Netherlands.
Submission to a foreign law and the waiver
22. Are investors and lenders usually of immunity provisions are generally
protected against a change in enforceable in the Netherlands.
agreement?
Yes.
Investors and lenders are usually not
protected against changes in law passing G. Trends and Projections
subsequent to the signing of the relevant
concession agreement in the Netherlands.
They may have certain protections under
jurisdiction?
bilateral investment treaties.
Currently, the main trend in project
financings in the Netherlands is a focus on
renewable energy projects.
legislation?
Force majeure is provided for under Dutch
contract law, but can and is normally
contractually agreed upon specifically.
No.
and social requirements in project 29. What are the alternative reference
financings? interest rates which are being
The environmental and social requirements
for project financings will depend on
the specifics of the project financing. Dutch project financings are mainly
Generally, projects will need to be assessed EURIBOR based.
to determine possible environmental
effects. Before development consent is
granted, projects likely to have significant
effects on the environment by virtue of
their nature, size or location must undergo
an Environmental Impact Assessment
(“EIA”). The developer will be required
to submit an EIA to the competent
authority when applying for development
158
NIGERIA
BLOOMFIELD LAW
Dr. Ayodele Oni Adebisi Lamidi

Partner Associate
ayodele.oni@ Adebisi.lamidi@
bloomfield-law.com bloomfield-law.com
A. Overview i. Conveyancing and Law of Property Act

of 1881
1. What are the main legislation and
international treaties governing j. Property and Conveyancing Law of
project financing in your jurisdiction? 1959
k. Land Use Act, Cap L5, Laws of the
There are no legislations that apply Federation of Nigeria 2004
specifically or govern project finance in
Nigeria. However, there are a plethora of l. Mortgage and Property Law of Lagos
State 2010
laws and legal instruments that may apply
to project finance and the list below is not m. Registration of Titles Law
exhaustive: n. Stamped Duties Act
a. Business Facilitation (Miscellaneous o. Secured Transactions in Moveable
Provision) Act Assets Act 2017
b. Companies and Allied Matters Act p. Double Taxation Treaties
(“CAMA”) 2020
c. Companies Income Tax Act
d. The Central Bank of Nigeria Act what are the most significant project
e. Public Procurement Act 2007 financings closed during the last 12
f. Investment and Securities Act 2007 months?
g. Foreign Exchange (Monitoring and The projects finance market in Nigeria is
Miscellaneous Provisions) Act 2004 relatively mature, with significant activity
h. Infrastructure Concession Regulatory in sectors such as oil and gas, power,
Commission (Establishment) Act 2005 infrastructure, and real estate. Despite
(the “ICRC Act”) economic challenges, there have been
159
some significant project financings closed merely evidencing title and not an
in Nigeria over the last twelve (12) months instrument conferring title. Thus, for the
some of which are: shares of a company to be effectively
pledged as a security to the benefit of
a. The construction of a $1.5 billion deep
lenders, in addition to the deposit of the
seaport in the Lekki Free Trade zone,
share certificate, the borrower must also
Lagos which is designed to handle four
deposit an executed but undated share
million (4,000,000,000) metric tons of
transfer instrument (which the lender may
dry goods a year.
file with the appropriate authority in the
b. A $2.5 billion financing deal for event of a breach) with the lender.
the development of a three million
(3,000,000) tonnes Dangote Fertilizer
Plant in Lagos. What are the endorsement types
c. The first phase of the Lagos Blue Line typically used for the share
Rail Project. certificates?
d. The 32 metric ton per hour Lagos Rice Yes, private sale/private placement of
Mill. shares is a recognized method for the
enforcement of share pledge in Nigeria.
e. 18.75km 6 lane rigid pavement Eleko
Junction to Epe Expressway. There are no endorsement types for share
certificates in Nigeria. Share certificates
B. Security Interest (which are in registered form) is prima
3. What are the most commonly used facie evidence of the title of a member
security types in project financings in to the shares of a company and contain
your jurisdiction? terms such as name and number of shares
held by a member. Upon the enforcement
The most used security types in project of a share pledge, the Lender will file
financings in Nigeria are mortgage over the undated but executed share transfer
project assets, bank account charge, share instrument with the Corporate Affairs
charge, all assets debenture, assignment Commission (“CAC”) and submit the
of project revenues, lien, lease, guarantees acknowledgement from CAC as well as
(corporate, bank or personal), assignment the share certificate of the borrower to the
of interest in contract and letters of credit company. The company once satisfied that
amongst others. the interest in the shares has passed to the
4. Can the shares of a company be Lender will enter the name of the member
pledged as a security to the benefit in the register of members, cancel the
previous share certificate of the borrower
and issue a new certificate in the name of
the Lender.
establishing or perfecting a share 6. Can security interest be established
pledge? over future assets, rights and
The shares of a company cannot be
pledged as a security by the mere deposit Yes, security interests can be created over
of a share certificate to a lender. This is future assets, rights, and receivables of
because a share certificate is a document the borrower in Nigeria either by way of a
160
floating charge over a specified category but must act in good faith in realising
of assets or fixed charge where the future such proceeds. The lender also becomes a
assets in question are clearly identifiable. trustee of the borrower for any proceeds
from the sale of the secured assets and
has a duty to deliver to the borrower the
balance of the proceeds of enforcement
after deducting amounts required to
discharge the secured obligations.
composition process? 8. Is security trustee concept
Where the borrower becomes insolvent, is enforceable in your jurisdiction? If
technically insolvent and/or commences
composition process, the lender is only
able to enforce its security interest Yes, the concept of security trustee is
in accordance with the enforcement enforceable in Nigeria. The trustee holds
provisions and other terms of the finance the securities created on a trust for the
and security documents, and as provided lender/ investors in project financing.
by applicable law. Security documents
governed by Nigerian law typically specify
the events that allow the security interest 9. What are the main incentives and
to be enforced. Once the lender is entitled exemptions for project financing in
to enforce the security in accordance with your jurisdiction?
its terms, the security documents typically
There are several incentives and
provide for enforcement through either
exemptions for project financing in Nigeria
the: (i) creditor’s or security trustee/agent’s
which are mostly designed to encourage
exercise of a power of sale to dispose of
investment in specific sectors of the
the secured assets; or (ii) appointment
economy, promote economic growth and
of a receiver or a receiver/manager in
create employment opportunities. The
respect of the secured assets. If the power
availability and applicability of some of the
of sale has arisen and is exercised, the sale
incentives and exemptions listed below
of the secured assets can be by public
may vary depending on the specific project,
auction or, if expressly provided in the
sector, and investor.
security document, by private sale. The
appointment of a receiver or a receiver/ a. Tax holidays: pioneer companies in
manager needs to be registered at the CAC. certain industries may on application
be granted tax holidays for an initial
However, where the security interest is a period of three (3) years which may
mortgage on a real property, the lender as be extended for up to two (2) years.
mortgagee can also: (i) apply for a court Companies engaged in gas utilization
order to extinguish the mortgagor’s equity are also entitled to a tax-free period of
of redemption and vest the mortgagor’s up to five (5) years;
entire interest in the mortgagee; or (ii) enter
into and take possession of the mortgaged b. Export incentives: export processing
zones and free trade zones are zones in
property.
Nigeria that are free of tax and foreign
The lender is not obligated to maximise the exchange restrictions. The Duty Draw
proceeds from enforcement of the security, Back scheme in the export processing
161
zone provides for fixed and individual 11. Are there any restrictions for
draw-back facilities that provide for borrowing bank loans and
refund of duties and sub-charges on shareholder loans from abroad and/
raw materials; or in a foreign currency?
c. Gas utilization incentives: companies There are no restrictions for borrowing bank
engaged in gas utilization are entitled loans and shareholder loan from abroad
and in a foreign currency. However, for a
to accelerated capital allowance
company accessing foreign currency to be
after tax free period. Investors in gas
able to repatriate the same to the country
pipelines can also obtain additional tax of source at the Central Bank of Nigeria
free period of five (5) years; (“CBN”) official exchange rate, the company
d. Road Infrastructure Development is required to bring in its foreign currency
into Nigeria through an authorized dealer
Scheme: participants in the scheme are
using a Certificate of Capital Importation
entitled to recover the cost incurred
(“CCI”). An authorized dealer must issue
by them in the construction or the company an electronic CCI (“E-CCI”)
refurbishment of eligible roads as credit within twenty-four (24) hours of capital
against company income tax payable; importation. The e-CCI allows the company
and the right to the repatriation of capital and
access to foreign exchange (“FX”) at the
e. The Companies Income Tax Act (“CITA”)
CBN official exchange rate.
specifies incentives that are applicable
to the construction, ownership, and It is important to note that in recent times,
operation of power projects. CITA the CBN is finding it very difficult to make
grants a maximum of seventy per cent FX available to businesses including
companies that imported foreign currency
(70%) tax exemption on interest on
into the country through an authorised
foreign loans where the repayment
dealer and have a valid e-CCI due to the
period of the loan is above seven (7) shortage of foreign currency in Nigeria.
years and the moratorium period is not
less than two (2) years.32 Additionally, 12. Are there any restrictions for
CITA prescribes incentives available to
jurisdiction?
companies for the reconstruction or
replacement of plants and machinery Yes. a foreigner who intends to invest
and grants an investment allowance directly in Nigeria is required to incorporate
to a company that has incurred a company except he falls within the
exemptions listed in Section 80 of CAMA as
expenditure on plant and equipment at
amended by the Business Facilitation Act
the rate of ten percent (10%)33 amongst
2022 which includes a company invited into
others. Nigeria to execute any specified individual
10. Are there any incentives or project, foreign companies in Nigeria for
exemptions specifically applicable the execution of specific individual loan
to foreign investors? projects on behalf of a donor country,
foreign government owned companies
Please refer to the answer to question 9. engaged solely in export promotional
32 Third Schedule Table I (as amended by the Finance Act, 2019).

33 See Section 32 of CITA.
162
activities, engineering consultant and Concession Agreement: The Infrastructure

technical experts engaged by any Concession Regulatory Commission, under
government agency for the execution of a the ICRC Act, is required to take custody of
specified individual project, and any other every concession agreement made under
company exempted by other Acts of the the Act and monitor compliance with the
National Assembly. terms and conditions of such agreement.
Further, foreign investors are prohibited Foreign Technology Transfer Agreement:
from incorporating a company that the National Office for Technology
will venture into businesses listed as Acquisition and Promotion Act requires
the ‘negative list’ under the Nigerian that all contracts and agreements for the
Investment Promotion Commission Act. transfer of foreign technology to Nigerian
These businesses are as follows: partners be registered with the National
• production of arms and ammunitions. Office for Technology Acquisition and
Promotion.
• production of and dealing in narcotic
drugs and psychotropic substances. Security Document relating to
Immoveable Property such as Land: For
• production of military and para-military security interests created on land such as a
wears and accoutrement, including mortgage and assignment amongst others
those of the Police and the Customs,
to be valid, the consent of the appropriate
Immigration and Prison Services.
regulatory authority must be first be sought
• such other items as the Federal and obtained, the document must be
Executive Council may, from time to stamped at the Federal Inland Revenue
time, determine. Services (FIRS) and registered at the
relevant land registry (to constitute a valid
notice of any encumbrance created on the
land to the public).
in your jurisdiction? Finance Documents such as loan
There is no minimum equity requirement agreements and security documents: Our
for project financing in Nigeria. law particularly, Section 22 of the Stamp
Duties Act, Cap. S8, Laws of the Federation
14. Please explain the registration of Nigeria (LFN), 2004, requires that
and filing requirements which instruments executed in or outside Nigeria
are applicable for project finance to be stamped in order for the same to be
documents to be valid and admissible in evidence before Nigerian
enforceable in your jurisdiction. courts and to be enforceable by the said
Project Finance documents are generally courts. Thus, the Finance Documents will
not required to be registered and filed be liable to stamp duty and are required,
in Nigeria to be valid and enforceable in where they are executed in Nigeria, to be
Nigeria. However, where any legislation stamped within forty (40) days from the
requires any document forming part date they were executed in Nigeria and
of project finance documents to be where they are executed outside Nigeria,
registered and filed, such document to be stamped within thirty (30) days from
must be registered and filed to be valid the date they are first received in Nigeria,
and enforceable. Examples of such in order to render them enforceable and
requirements are outlined below: admissible in evidence in Nigerian courts.
163
Generally, not stamping an instrument that 16. Can insurance proceeds under the
is required to be stamped will not render it insurance and reinsurance policies
or the security interest created thereunder be assigned to the benefit of the
void or invalid. However, a court in Nigeria lenders?
may not admit an unstamped instrument
Insurance proceeds are usually assigned
for the purpose of proving the content of by way of security for the benefit of the
such document and any security document lenders, with a provision for reassignment
that is required to be registered with the to the assignor after the secured
CAC (as further discussed below) must obligations have been discharged. The
be stamped prior to its submission for Central Bank of Nigeria prohibits a Nigerian
registration. resident (whether a corporate or a natural
Similarly, Section 222 of CAMA provides person) from assigning Nigerian residents’
that any security document or instrument annuities and insurance policies to non-
under which a company creates a residents. If a non-resident lender proposes
charge must be registered with CAC. Any to take security over residents’ insurance
registrable charge that is not registered policies, that lender would either: (i)
with the CAC within ninety (90) days appoint a local security agent to which the
of its creation will be void against a insurance proceeds are assigned on the
lender’s behalf, or (ii) require the borrower
liquidator (appointed for the company)
to establish an insurance proceeds account
and any creditor of the company. In
into which all insurance proceeds are paid,
other words, the risk of not registering
and then take security over that account.
any registrable security document is that
the security purported to be created in The National Insurance Commission
the document would be void against a prohibits the assignment of reinsurance
liquidator appointed for the chargor and policies generally.
any other creditor of the chargor. Also, the
registration of a charge with the CAC serves
as constructive notice to a third party that to the insurance provisions
intend to take security over an asset of a under the project financing
company. documentation, if any?
D. Insurance There are no other complications, concerns
15. Can local insurance policies be or other issues in relation to the insurance
governed by a foreign law? provisions under the project financing
documentation.
Similar to a simple contract, local insurance
policies may be governed by a foreign law E. Financing of Public-Private
if agreed by the parties and the law has Partnership (PPP) Projects
some form of connection with the local 18. Is PPP a permitted method of
policies. However, where policies have no
connection with any other country or law
(such as where the insurer and reinsurer is
a Nigerian company, the insurance product
is local and the contract is expected to Yes, PPP is a permitted method of
take effect in Nigeria), the policies shall be project development in Nigeria. PPP
governed by Nigerian law. has been adopted in developing several
164
projects in Nigeria including the recently providing any support. For instance,
commissioned Lekki Deep Sea Port, the ICRC Act mandates any Federal
the 30KM long Lekki-Epe Expressway, Government Ministry, agency, corporation
Lagos, the 614-kilometre Ajaokuta- or body seeking to give any guarantee,
Kaduna-Kano natural gas pipeline being comfort or undertaking in respect of any
developed by the Nigerian National concession agreement to obtain the prior
Petroleum Company Limited (NNPC approval of the Federal Executive Council.
Limited), the integrated refinery and
petrochemical complex being constructed
by Dangote Group in the Lekki Free Zone, public party or the private party
Build Operate and Transfer (BOT) Public under the PPP agreements?
Private Partnership arrangement with AJW
Consortium for the establishment of a Parties to PPP Agreements ensure that risks
Maintenance Repairs and Overhaul (MRO) are properly allocated to the parties that
centre on a 30-year concession, the Federal can best manage them. As such, political
risk events are usually allocated to the
Executive council approved project for
government (by extension, the public
the construction and management of 9
party).
highway corridors as part of the Highway
Development and Management Initiative 22. Are investors and lenders usually
(HDMI) for a concession period of 25 years protected against a change in
amongst others. law passing subsequent to the
19. Are direct agreements between the agreement?
permissible under the local law, and Yes, investors and lenders are protected
against change in law subsequent to the
execution of a concession agreement.
Situations such as this are referred to
Yes, there are direct agreements between as political force majeure events which
public authorities and the Lenders in are typically included in project finance
Nigeria and these forms of arrangements documents.
are commonly seen in the project finance 23. Is force majeure specifically
market, particularly where it relates to regulated under the local
public or social infrastructures. legislation?
20. Please indicate the types of host Force majeure is not specifically regulated
government supports (including by any legislation in Nigeria. Force majeure
treasury guarantee, debt is rather contractual terms which must be
assumption etc.) available in your expressly included in any agreements for
jurisdiction. them to be enforceable.
The types of government support available 24. What are the general environmental
in Nigeria under PPP include sovereign and social requirements in project
guarantees and a debt assumption which financings?
may be in the form of an irrevocable One of the social issues that have adverse
standing payment order amongst others. effect on investment and doing business
However, certain regulatory approval must in Nigeria is corruption. However, there
be obtained prior to the host government have been intentional steps in the
165
country to wage war against corruption. Yes, financing documents can expressly
New laws have been passed to combat provide for dispute resolution mechanisms
mismanagement of public funds, bribery, which may include arbitration and such
corruption, money laundering and aspects dispute resolution mechanisms are
of modern slavery; institutions are being enforceable.
revamped and there have been extensive
reforms in the administration of justice to
expedite the eradication of corruption. 27. What are the main current trends
Another notable initiative implemented
jurisdiction?
in Nigeria in line with the strategic public
sector transformation initiatives is the One of the main trends in project finance
Treasury Single Account Policy. This policy in Nigeria is infrastructural deficit and the
requires ministries and government need for more public-private partnership
agencies to consolidate and pay all funds to bridge the gap. There are also certain
due to them into a single account from fiscal policies (such as capital control and
which funds can be disbursed on demand taxation) which pose some challenges to
subject to certain rules and procedures. project finance. For example, all exporters
This policy has significantly strengthened are required to repatriate and credit all
the efforts against bribery and corruption export proceeds into their domiciliary
in Nigeria. account opened with a bank in Nigeria
within ninety (90) days (for oil and gas
Further, there are certain environmental
export) and one hundred and eighty (180)
considerations such as atmospheric
days (for non-oil export) from the date of
emission, air pollution and so on. The
export proceeds. Also, the tax environment
Environmental Impact Assessment Act (“EIA
in Nigeria is constantly evolving and new
Act”) is the principal legislation relating to
structuring challenges are sometimes
environmental issues in Nigeria. The EIA
triggered by changes in the tax regimes.
Act restricts both the public and private
sector from undertaking or embarking on 28. Are any significant development or
projects without considering the effect of change expected in the near future
the project on the environment. in the project finance market?
F. Jurisdiction, Waiver of Yes, ethical funds such as Islamic finance
Immunity are increasingly being utilized for project
financing.
the waiver of immunity provisions 29. What are the alternative reference
enforceable? interest rates which are being
Choice of law and waiver of immunity
provisions included in project finance
documents are generally enforceable and The Secured Overnight Financing Rate
the Nigerian court will give effect to the (SOFR) is now commonly used as an
provisions of any project finance document alternative to LIBOR.
except where such will lead to absurdity
and contravene public policy.
166
QATAR
SULTAN AL-ABDULLA & PARTNERS
Ribal Fattal
Senior Associate
rfattal@qatarlaw.com
A. Overview hosting the FIFA World Cup Qatar 2022™,

and which are currently being carried out
to achieve the Qatar National Vision 2030.
project financing in your jurisdiction? In Qatar, there is no official platform or
source that publishes reports pertaining to
There is no specific legislation and
project financings that have been closed.
international treaties that governs project
finance, per se. Provisions that deal with B. Security Interest
aspects of project finance arrangements
may be picked up from, inter alia, Law No. 3. What are the most commonly used
22 of 2004 (“Civil Code”), Law No. 11 of security types in project financings in
2015 (“Commercial Companies Law”), your jurisdiction?
Law No. 27 of 2006 (“Trade Law”), Law Based on our experience, the form of the
No. 13 of 2012 (“QCB Law”), and Law No. assignment of contractual rights such as
8 of 2012 (QFMA Law), Law No. 16 of 2021
receivables in favor of a lender is the most
(Movable Assets Security Law), Law No. 12
commonly used security type. Mortgages
of 2020 (“PPP Law”) along with the other
of real estate, bank account pledges, LCs,
legislations.
bank guarantees, PCGs are also common in
2. How mature is the project finance the Qatari market.
what are the most significant project 4. Can the shares of a company be
financings closed during the last 12 pledged as a security to the benefit
months? of lenders? If so, is there a specific
It is relatively mature considering the or procedure to be followed for
development of large-scale energy, oil and establishing or perfecting a share
gas, infrastructure, construction, leisure and
pledge?
hotels, etc. projects that have been carried
out in the past decade in preparation for Yes.
167
Pledge of Shares of Companies not Listed Second, the share pledge contract must be
on the Qatar Stock Exchange (“QSE”) attested before the Attestation Department
of the MOJ. The contract must include
We set out below the steps required for
registering a pledge of shares of a company provisions pertaining to dividends, voting
in the Commercial Register at the Ministry rights, etc.
of Commerce and Industry (“MOCI”): As per the guide issued by QCSD (“Guide”)
An application to pledge the shares of the that sets out the procedures to pledging of
company should be submitted to the MOCI. securities (including shares), a shareholder
Along with the application, a shareholder’s (pledgor) can submit to the pledgee a
resolution unanimously approving the pledge application of some or all of his
registration of the pledge, a letter from the securities. Such application shall include
chairman or vice-chairman or delegated the following documents:
member requesting the registration of the
· Pledge contract attested by the
pledge with the approval of the Corporate
Attestation Department at the MOJ.
Affairs Department at the MOCI should
be submitted for joint-stock companies, · In case of companies:
a letter from the pledgor consenting the
a- A true copy of valid Commercial
registration of the pledge, copies of IDs of
partners, authorised signatories and the Registration / Establishment Card.
applicant, should also be submitted. b- An approval of all the shareholders on
After obtaining MOCI’s approval, a request the securities pledge operation or an
to attest the shares pledge agreement authorization made by the shareholders
would need to be submitted online to one of them.
to the Attestation Department of the · The pledge contract should be signed
Ministry of Justice (“MOJ”) via SAK Portal by the chairman or all members of the
(an e-services platform of the MOJ that board of directors, or one of them shall
provides, among other things, registration be authorized to perform the pledge
and authentication services) (“SAK Portal”).
operation under the approval of the
Information including the relevant parties
chairman and board members.
(i.e., the pledgor and pledgee), contract
details (i.e., commercial registration The pledgee shall submit a letter to QCSD
number, company name, P.O Box number, requesting the pledge of securities subject
telephone number, expiry date, pledge to the pledge contract. Such letter shall
period from, pledge period to, pledge be signed by the authorized signatories,
value, MOCI’s approval, etc.), proof of shares stamped by the seal of the entity, and
ownership, is required. shall include the number of securities to
Pledge of Shares of Companies Listed on be pledged, company name if applicable,
the Qatar Stock Exchange and shareholder’s number. The application
shall be accompanied by the shareholder’s
First, the pledgee bank should register as (pledgor) approval of the pledge, a copy of
a member of the Qatar Central Securities his ID, and a copy of the pledge contract, if
Depository (“QCSD”) – an entity established applicable.
by the Qatar Central Bank. Subject to
registering as pledgee member with the QCSD will register the pledge details on
QCSD, any financial institution, including the electronic system of the company in
non-Qatari entities, can register pledges case the securities are sufficient upon the
over securities listed on the QSE. request of the pledgee and the approval of
168
the pledgor. The pledgee shall be informed against the debt, and the court may order
in writing thereof. that the mortgagee owns the mortgaged
property or part thereof in payment of
If the securities to be pledged are found in
the debt provided that its market value is
the shareholder (pledgor) accounts with
estimated by an expert.”
any of the members, this member shall be
contacted for transferring such securities 6. Can security interest be established
to the shareholder’s account with QCSD so over future assets, rights and
as to be pledged. In case that the securities receivables of the borrower?
subject to the pledge are offered for selling
Yes. This can be contractually arranged by
in the market, the system shall approve
entering into the assignment of rights legal
the pledge operation only if the member
instruments.
cancels the selling order.
QCSD administration will keep the
application and pledge documents in
the relevant file. QCSD shall notify the
pledgee in writing of registering the pledge becomes insolvent, is technically
operation on its system. insolvent and/or commences
Note: Under Article 24 of the PPP Law,
the shares of the project company (i.e., a As per Articles 606 et seq. of the Trade
company established by virtue of the PPP Law, any creditor, can request from the
Law) may not be pledged for any other than competent court to issue a judgement
the purpose of financing or refinancing declaring the debtor as bankrupt in
the partnership project, any action to the the event the latter ceases to pay its
contrary shall be null and void. commercial debts. The creditor may request
declaring the bankruptcy of the debtor by
5. Is private sale a recognized method the normal procedures of filing a lawsuit.
for the enforcement share pledge? Where urgency is called for, an order on
What are the endorsement types petition may be submitted to the President
typically used for the share of the Court containing evidence of the
certificates? failure to pay and the grounds for urgency.
No. In Qatar, enforcement of share pledge 8. Is security trustee concept
may only be carried out through court enforceable in your jurisdiction? If
proceedings. Article 247 of the Trade Law not, is an alternative mechanism,
prescribes that “any agreement concluded at such as a parallel debt, available?
the time of the mortgage decision or after the
decision shall be invalid. In the event of failure Yes. A security trustee concept is
to pay the debt at maturity, the mortgagee recognized and enforceable in Qatar.
shall have the right to own the mortgaged
property or sell the same without reference to
the procedures set out in Articles 241 to 243 9. What are the main incentives and
herein. exemptions for project financing in
your jurisdiction?
However, after the debt or an installment
thereof becomes payable the creditor may Pursuant to Article 36 of Law No. 24 of
agree with his debtor that the mortgaged 2018 (Income Tax Law), an application
property or part thereof may be credited for a tax exemption may be made for
169
certain projects that are considered to MOCI is considering applications on

be strategically significant to the Qatar an ad hoc basis and, accordingly, there
economy. The exemptions are generally remains uncertainty as to what commercial
granted for a period of five or ten years. activities the MOCI will permit to be
Applications for an exemption are assessed conducted by a 100% foreign owned Qatari
based on certain criteria set out in the Qatar company and whether any conditions or
tax law. restrictions might apply.
Other than the mainland, there are two Companies established in the Qatar
special jurisdictions in Qatar that provide Financial Centre, QSTP or the QFZ can be
for tax exemptions subject to fulfilling 100% foreign-owned.
certain criteria, these are the Qatar Science 13. Is there any minimum equity
and Technology Park (“QSTP”) and Qatar requirement, under the legislation
Free Zones (“QFZ”). For example, entities or in practice, for project financings
set up in the QFZ can benefit from 20-year in your jurisdiction?
tax holiday.
No. It depends on the requirements of the
10. Are there any incentives or bank (i.e., lender)
to foreign investors? and filing requirements which
Yes. Please see our response to question 9 are applicable for project finance
above. documents to be valid and
borrowing bank loans and Finance documents are not required to be
shareholder loans from abroad and/ registered or filed in Qatar in order to be
or in a foreign currency? valid and enforceable.
No. We do not foresee any legal D. Insurance

impediments in this regard. 15. Can local insurance policies be
foreign investments in your There is no specific legal provision that
jurisdiction? prescribes the obligation that local
insurance policies should be governed by
Yes. Law No. 1 of 2019 (“Foreign
local laws. However, the insurance sector
Investment Law”) and its Executive
is regulated in Qatar and insurance and
Regulations No. 44 of 2020 (“Executive reinsurance companies and transactions are
Regulations”) contemplate that foreign dealt with by the Civil Code, Trade Law and
investors can hold up to 100%, of the QCB Law. Under Article 95 of the QCB Law,
shareholdings in Qatari company. it is not permissible to insure outside the
Under the Foreign Investment Law and State on funds or properties located within
Executive Regulations, the following the State or on responsibilities arising
sectors are excluded: professional firms therein, and it is not permissible to mediate
(e.g., engineering and law firms), banks, insurance on these funds, properties or
insurance companies, commercial agents, responsibilities except with one of the
and any other industry as decided by the authorized and companies subject to this
Council of Ministers. law.
170
Further, Article 103 of the QCB prescribes PPP Law which stipulates that the project
that insurance and reinsurance companies company may, after the approval of the
are obligated to obtain QCB’s approval contracting party and the provision of
on the forms of insurance policies that sufficient guarantees, obtain a loan from
they wish to issue, as well as on every banks operating inside or outside the State
amendment that occurs to them. by guaranteeing its contractual rights and
In light of the foregoing, and based on assets.
our experience with the authorities and Further, quasi-governmental entities or
regulators in Qatar, we find it very difficult, companies that are mostly established
if not impossible, that the QCB approves by virtue of the Commercial Companies
that local insurance policies be governed Law can enter into direct agreements with
by a foreign law. lenders.
16. Can insurance proceeds under the 20. Please indicate the types of host
insurance and reinsurance policies government supports (including
be assigned to the benefit of the treasury guarantee, debt
lenders? assumption etc.) available in your
Yes. We do not foresee any issues in this jurisdiction.
regard. • Government Bonds are considered as
17. What are the other complications, one of the major government debt
concerns or other issues in relation instruments used by the government
to the insurance provisions to provide the necessary liquidity for
under the project financing project funding. They are considered
documentation, if any? one of the monetary policy instruments
and low-risk investment instruments as
We do not foresee any issues.
well. These are issued with medium to
E. Financing of Public-Private long-term maturities.
Partnership (PPP) Projects • Treasury Bills (T-Bills) are government
18. Is PPP a permitted method of debt instruments issued with maturities
developing projects, and if so, have ranging from 3 months to one year.
any PPP projects been developed to T-Bills are known as low-risk financial
date in your jurisdiction? instruments, i.e., they are easy to
operate without causing any capital
Yes. PPP is a permitted method of
loss to their holders. T-Bills are usually
developing projects and is regulated by
sold at discount, i.e., at lower price than
the PPP Law. In Qatar, there is no official
their nominal value. Upon maturity,
platform or source that publishes reports
the government is committed to pay
pertaining to PPP projects that have been
the nominal value of those T-Bills. They
developed to date in Qatar.
are considered as one of the monetary
19. Are direct agreements between the policy instruments for domestic
public authorities and the Lenders liquidity management.
• Sukuk is considered as one of the
major government debt instruments
used by the government to provide
No. However, indirect agreements can be the necessary liquidity for project
carried out pursuant to Article 20 of the funding. Sukuk is considered as one of
171
the monetary policy instruments and 23. Is force majeure specifically

low-risk investment instruments as regulated under the local
well. These instruments are issued with legislation?
medium to long-term maturities.
There is no expressly specific definition
• Debt assumption is also available of force majeure in the Qatari legislation,
in Qatar. For example, under Emiri however the force majeure principle is
Decree No. 61 of 2020, the Government recognized in the Civil Code. Article 188 of
of Qatar guaranteed the financial the Civil Code reads as follows:
obligations arising from the loans and “1. In the contracts which are binding on
financial facilities agreements executed both parties, if the performance of the
by Qatar Airways with banks and obligations of one of the contracting
financial institutions. parties becomes impossible for an
21. Are political risk events usually extraneous cause beyond his control,
under the responsibility of the this obligation shall extinguish together
public party or the private party with its corresponding obligations. The
under the PPP agreements? contract shall be per se dissolved.
It should be agreed to by the public party 2. If the impossibility is partial, the creditor
as per the circumstances may depend on
and the private party in the PPP agreement.
the contract with regard to the remaining
Article 17 of the PPP Law prescribes that
obligation which can be performed, or
the PPP agreement must include, inter alia,
request the dissolution of the contract.”
types and amounts of project insurance,
the risks of its operation or exploitation, Further, Article 402 of the Civil Code reads
execution guarantees issued in favor of as follows:
the contracting party, and provisions and
“The obligation shall be extinguished if the
procedures for recovering them. It should
debtor proves that its performance by him
also determine the bases for distributing
has become impossible for an extraneous
risks associated with amending laws, cause beyond his control.”
sudden accidents, or force majeure, and
the prescribed compensations, as the case 24. What are the general environmental
may be. and social requirements in project
financings?
protected against a change in In addition to the international treaties that
law passing subsequent to the relates to the environmental protection
signing of the relevant concession that Qatar is a party to, such as the United
agreement? Nation Framework Convention on Climate
Change (UNFCCC), Vienna Convention
Yes, provided that the provisions of the new for the Protection of the Ozone Layer
law relate to public policy. Article 3(2) of the (1985), etc., Article 6 of Law No. 3 of 2002
Civil Code prescribes that the effects of acts (Environment Protection Law) provides
shall remain subject to the law applicable that “all administrative and private agencies
at the time on which it was concluded, are obligated to include the condition of
unless the provisions of the new law relate protecting the environment and combating
to public policy, it shall then apply to such pollution in all local and foreign agreements
effects after the date on which it becomes and contracts whose implementation may
effective. result in harmful effects on the environment.
172
These contracts must include penalty G. Trends and Projections

clauses and undertakings to pay the costs
of removing environmental damage and 27. What are the main current trends
compensation therefor.”. in project financings in your
jurisdiction?
Qatar is expecting to host, amongst other
Immunity
events, AFC Asian Cup 2023, Formula 1
25. Are submission to a foreign law and Qatar Grand Prix 2023 Expo 2023 Doha;
the waiver of immunity provisions Category A1 International Horticultural
enforceable? Exhibition, and the 2030 Asian Games.
Yes. Qatari law upholds the general To accommodate the various upcoming
principle of the sanctity of contracts. Article events, PPP entities, governmental-owned
171 of the Civil Code describes the contract companies and private companies are
generally conducting studies and analyses,
as the law of the contracting parties. Qatari
and approaching local and international
law respects the will of the parties and
banks and other lenders to fund major
enforces their agreement to the extent that projects based on several project financing
it is neither prohibited by law nor conflicts structures.
with the public order in Qatar.
Project finance is currently being utilized
Additionally, Article 38 of the Civil Code for, amongst others, large-scale energy,
provides that for a court to apply a foreign oil and gas, infrastructure, construction,
law, the relevant law must not violate telecommunications, and more specifically,
public order and morals in Qatar. In such leisure and hotel projects.
case, the court will apply Qatari law. 28. Are any significant development or
26. Can financing documents provide change expected in the near future
for arbitration clauses? in the project finance market?
Yes. There is no legal impediment in We are not aware of any expected changes
in the project finance market in the near
the Qatari legislation that precludes
future.
incorporating arbitration clauses in
financing documentation. 29. What are the alternative reference
It is worth mentioning that the State of commonly used in your jurisdiction
Qatar is a party to the New York Convention during the LIBOR transition period?
and does recognize arbitral awards and
Secured Overnight Financing Rate (SOFR).
enforce them pursuant to the New York
Convention and the procedures set forth in
Law No. 13 of 1990 (Civil and Commercial
Procedures Law) as amended by Law No. 2
of 2017 (Civil and Commercial Arbitration
Law).
173
ROMANIA
ȚUCA ZBÂRCEA & ASOCIAȚII
Mihai DUDOIU
Partner
mihai.dudoiu@tuca.ro
A. Overview is mature and there are established

players lending by way of club lending
1. What is the main legislation and or syndicated lending. The financing
documentation is aligned, to a large extent,
with LMA standards.
The main local legislation for project
In the past 12 months, we have advised the
finance is the Romanian Civil Code
lenders (and in a few cases, the borrowers)
(which regulates the civil and commercial
in project financing in several fields, such
contracts, including loan agreements
as healthcare, energy, agriculture and real
and security agreements) and to some
estate.
extent, the banking legislation (including
professional lending and FX regulations, B. Security Interest
etc.). For cross-border financing
transactions, there are certain EU directives
and regulations which may apply, such as
your jurisdiction?
with regard to passporting baning licenses
across EU Member States, eldas (with The standard security package for a project
regard to using electronic signatures, etc.). finance transaction includes: (i) a pledge
on the shares of the project company; (ii)
a pledge on the accounts of the project
company; (iii) a pledge on the receivables,
insurances and other contractual rights
of the project company; (iv) a mortgage
months?
on the real estate owned by the project
The Romanian banks and the EU banks company; (v) a subordination agreement;
which are lending to Romania are financing and (vi) sponsors’ undertakings or
on a project finance basis for almost 20 guarantees, which may vary in scope and
years. From this perspective, the market coverage.
175
4. Can the shares of a company be 7. What are the steps to be taken by

pledged as a security to the benefit the lenders to enforce their security
of lenders? If so, is there a specific interest, in case the borrower
requirement in terms of formalities becomes insolvent, is technically
or procedure to be followed for insolvent and/or commences
establishing or perfecting a share composition process?
pledge?
Any enforcement proceedings are
Yes, the shares of the project company are suspended on the date when the
typically pledged in favor of the lenders. insolvency proceedings are opened
The share pledge must be signed as a against the security provider. Thus, the
private deed and then it must be registered secured creditors may only pursue their
with the shareholders’ register and with the rights within the insolvency proceedings,
National Register for Secured Transactions
by register their claim as a secured claim,
(a public electronic register which is
voting in the creditors assembly, etc..
used for publicity and security ranking
Prior to the opening of the insolvency
purposes).
proceedings, the creditors may enforce
5. Is private sale a recognized method their security according to the security
for the enforcement share pledge? agreements and the applicable legislation
What are the endorsement types (Civil Code, Civil Procedure Code, etc.).
certificates? 8. Is security trustee concept
Generally yes, the share pledge may be not, is an alternative mechanism,
enforced by way of a private sale, if the such as a parallel debt, available?
share pledge agreement gives the security
creditor such a right. The method for The concept of security agent is used in
transferring ownership over the shares of a our jurisdiction on a regular basis. The
company depends on the type of company. Romanian Civil Code regulates the “security
For example, for limited liability companies, agent” concept with regard to movable
the shares are transferred by way of a security rights but not with regard to
private agreement or an enforcement immovable security rights. The “trustee”
deed, which must be registered in the concept is also regulated but not used in
shareholders register and the Trade practice. We would not give a clean legal
Registry. However, in the case of a limited opinion on a parallel debt structure created
liability company, any shares transfer under Romanian law but we have worked
must be approved in advance by a certain in transactions where the parallel debt
majority of the existing shareholders. structure was created under a different
Bearer shares are not very common in law (such as English law) while the security
Romania. agreements were governed by Romanian
law (such a structure would work as long
6. Can security interest be established as the parallel debt is created under a law
over future assets, rights and which recognizes the concept).
Yes, the Romanian Civil Code expressly
allows the creation of security interests 9. What are the main incentives and
on future assets, including on future exemptions for project financing in
contractual rights and future receivables. your jurisdiction?
176
Romania provides certain incentives and Generally, there are no restrictions on

exemptions for businesses, such as: foreign investments in Romania. However,
Romania applies sanctions adopted at the
(i) tax exemption for reinvested profits
level of the European Union, as well as
- the profit invested in technological anti-money laundering procedures. The
equipment, computers, software foreign investment must comply with such
used for the purpose of pursuing the requirements.
economic activity of the company is tax
exempt under certain conditions; Moreover, the legal regime of foreign direct
investment (“FDI”) in Romania significantly
(ii) 50% deduction of eligible expenses for changed in 2022. A new commission was
R&D activities; created within the Competition Council –
which is aimed at examining the foreign
(iii) full exemption from profit tax for ten
direct investments. The elements taken
years for companies that exclusively
into consideration for the purpose of the
perform innovation and R&D activities
FDI screening are related to the national
on scientific research and technological
security (e.g., security of citizens, the
development; energy security, the security of critical
(iv) local tax exemption for immovable infrastructure, the security of information).
assets and lands related to industrial There is a fine of 10% of the total worldwide
parks. turnover if a transaction falling under the
FDI scope of application is implemented
10. Are there any incentives or without the FDI approval.
Exemptions specifically applicable to or in practice, for project financings
foreign investors are tax credits for taxes in your jurisdiction?
paid to a foreign state. Such tax credits may No, we are not aware of such a requirement.
be obtained only if the Double Taxation
Treaty concluded between Romania and 14. Please explain the registration
that foreign state is applicable. and filing requirements which
11. Are there any restrictions for documents to be valid and
borrowing bank loans and enforceable in your jurisdiction.
The security rights must be registered in
order to make that security enforceable
No, the Romanian law does not provide against third parties and for ranking
for such restrictions regarding loans and purposes.
movement of capital. Loans which are The movable security rights must be
borrowed by Romanian entities from registered with the electronic Publicity
foreign companies must only be notified to Register (the costs for such registration are
the National Bank of Romania, for statistical not high and they are not calculated by
purposes. Restrictions related to AML and reference to the amount secured by the
international sanctions do apply. hypothec).
12. Are there any restrictions for The immovable security rights must be
foreign investments in your registered with the relevant Land Book. The
jurisdiction? authentication and registration costs are
177
calculated by the notary who authenticates 19. Are direct agreements between the
the mortgage agreement and on average public authorities and the Lenders
are amounting to approximately 0.3% of permissible under the local law, and
the amount secured by the hypothec. if so, commonly seen in the Project
D. Insurance
Yes, direct agreements are permitted, and
such agreements have been used in PPP
and Project Finance. The international
Yes, there is no restriction with respect standards for direct agreements have been
to the law chosen by the parties for the generally observed, especially in Project
governing of the insurance policy. Finance which does not have a public
element.
insurance and reinsurance policies 20. Please indicate the types of host
be assigned to the benefit of the government supports (including
lenders? treasury guarantee, debt
Yes, the Romanian law allows for the
jurisdiction.
proceeds of the insurance and reinsurance
policies to be assigned to third parties, such There are various types of public support
as the lenders. This is a market practice in that may be used in PPP Projects. For
project financing transactions. instance, the public partner may contribute
to the financing of the development
phase of the project from public funds
(including EU funds) up to 25% of the value
of the investment. Also, another public
authority than the public partner (such as
the Ministry of Finances) may undertake
We are not aware of any complications or various forms of support (direct payment
concerns in relation to insurance provisions obligation to the project company, issuance
under project financing documentation in of sovereign guarantees or letters of
Romania. comfort etc.). This is subject to such other
public authority entering into the PPP
E. Financing of Public-Private agreement/an addendum to it, pursuant to
Partnership (PPP) Projects the terms of the tender documents for the
18. Is PPP a permitted method of award of the PPP agreement.
Yes, there is a PPP law in force, which sets under the PPP agreements?
out in detail the legal framework applicable
Usually, political risks are borne by the
to PPP projects. However, despite the
public partner under PPP agreements.
existing legal framework and the fact
that, at a political level, there have been 22. Are investors and lenders usually
numerous intentions expressed with protected against a change in
regard to PPP projects, in reality only a few law passing subsequent to the
projects have been actually approved and signing of the relevant concession
realized. agreement?
178
While, generally, the risk of specific changes entity. The security documents over assets
of law affecting projects of certain types or located in Romania (regardless of the
various sectors of economy is borne by the nationality of the parties) are also governed
public partner, the risk of general changes by Romanian law.
in law may be either taken by the private
The waiver of immunity provisions (which
partner (given that such change in law
are applicable in respect of the Romanian
would affect the private partner in the same
state and its authorities) is permissible to
manner as any other entity doing business
the extent the Romanian state is acting in
in the country) or by the public partner,
a commercial nature. In cases where the
depending on the particular features of Romanian state is acting in its sovereign
each PPP Project. capacity, the waiver of immunity provisions
23. Is force majeure specifically are not enforceable.
regulated under the local 26. Can financing documents provide
legislation? for arbitration clauses?
Yes, force majeure is regulated by the Yes, financing documents may provide for
Romanian Civil Code and it is customary arbitration clauses.
to have force majeure provisions in the
commercial contracts (but not so much in G. Trends and Projections
loan agreements). 27. What are the main current trends
24. What are the general environmental in project financings in your
and social requirements in project jurisdiction?
financings? In terms of PPP projects, Romania still
ESG standards are becoming more and lags behind other European countries.
more relevant, however there are numerous Efforts have been made on the legislative
steps to be made until such ESG standards level in order to offer a proper legal basis
are consistently applied. In terms of for project-financed PPP projects, but
environmental requirements, depending on such efforts should be completed by the
the project, general legal obligations apply preparation of a robust project of a medium
in terms of permitting and monitoring of size which, if successful, will pave the
projects. way for the implementation of additional
project-financed PPP projects.
Immunity 28. Are any significant development or
25. Are submission to a foreign law and in the project finance market?
Following the crisis generated by the
enforceable?
2020 pandemic, Romania adopted its
The submission of an agreement to a National Recovery and Resilience Plan
foreign law is permissible and enforceable. consisting of 107 investment measures
Typically, the agreements concluded and 64 reforms. They will be supported
between Romanian entities are governed by an estimated €14.24 billion in grants
by Romanian law, while the foreign law and €14.94 billion in loans. 41% of the
(such as English law) is most commonly plan will support the green transition
used for transactions involving a foreign and 20.5% of the plan will support the
179
digital transition. It is expected that this will

also have an effect on project financing,
given that the PPP eligible sectors are all
included in the National Recovery and
Resilience Plan.
The most commonly used reference
interest rates in Romania are EURIBOR and
ROBOR, both of which are not affected by
the LIBOR transition. In instances where
parties were using the LIBOR reference rate,
the parties are switching to risk-free rates,
such as SOFR.
180
SENEGAL
GENI & KEBE
Mame Ngoné Sow Fodé SARR Mbaye Seck

Senior Associate Senior Associate Senior Associate
mn.sow@gsklaw.sn f.sarr@gsklaw.sn m.seck@gsklaw.sn
A. Overview  Uniform Act on Commercial Companies

and Economic Interest Groups, 2014
international treaties governing the  PPP Law no 2021-23 dated 2 March
project financing in your jurisdiction? 2021
There is no main legislation or international  Senegalese Investment Code Law No
treaties governing the project financing in
2004-06 of February 6, 2004
Senegal.
 Regulation No. 09/2010/CM/UEMOA/
Usually referring to the financing of assets,
the development or exploitation of natural on external financial relations for
resources, project financing applies to Member States of the West African
different sectors like the energy, telecom, Economic and Monetary Union, entered
agricultural, Transportation / infrastructure into force on October 1st, 2010
& public private partnerships, mining, oil &
gas…sectors.  Senegalese Investment Code
The laws applicable to different sectors will  Anti-money laundering Law

apply, it is sector based.
 Uniform Act on Securities
Project financing in Senegal is governed by
 Uniform Act on Bankruptcy
the following legislation and international
treaties: Proceedings, 25 September 2015
 Senegalese Banking Law No. 2008-26  The new General Tax Code (GTC) was
of 28 July 2008 on banking regulation published under Law No. 2012/31 of 31
(Law of 2008). December 2012
181
2. How mature is the project finance for one or more existing or future debts on
market in your jurisdiction, and condition that the said debts are certain or
what are the most significant project ascertainable.
Such pledge may be by agreement or
months?
imposed by the court.
The project finance market in Senegal is at
The following may be pledged:
its infancy. It’s not really a mature market.
- Debts;
The most significant project financings
closed during the last 12 months are: - Bank accounts;
- Partnership rights, transferable
the Dakar - Diamniadio toll motorway, the securities, Portfolios
Taïba Ndiaye Wind Farm (“PETN”) and the
- Business property;
Blaise Diagne International Airport.
- Intellectual property rights.
Preferential rights consist of general and
3. What are the most commonly used special liens.
your jurisdiction? A general lien shall confer on the holder a
right of preference in accordance with the
The most commonly used security types in provisions of articles 225 and 226 of the
project financings in Senegal are personal Uniform Act.
securities, transferable securities and
The special law creating general liens shall
mortgages.
specify their ranks while classifying them in
- Personal securities as they apply to relation
project finance consist of autonomous
to the dispositions of article 180 of this
guarantees.
Uniform Act. Failing that, these liens shall
- Transferable securities consisting be ranked lowest following the said article
of possessory lien, assets held or 180 of this Uniform Act.
transferred as security, pledge of real As for special liens, any creditor who holds a
property, pledge of intangible assets special lien shall have a right of preference
and privileges. over any asset legally transferred to him as
Transferable securities refer to title a base which he shall exercise upon distrain
retention and property transferred as in conformity with the measures provided
Security consisting of an assignment of a for in article 226 below.
debt as security and the fiduciary transfer As long as the insured amount of the asset
of money. is unpaid the right of preference may also
They also consist of pledge of tangible be exercised
property and intangible property. by subrogation of that amount where the
Pledge of tangible property may consist asset has perished or disappeared (ARTICLE
182).
of pledge of professional equipment and
motor vehicles and pledge of stocks – Mortgages
The pledge of intangible property shall There are two main types of mortgages:
mean a contract whereby existing or future contractual mortgages and forcible
intangible property is allocated as security mortgages.
182
A mortgage is the transfer of any to proceed to the forceful sale of the

determined or determinable real property collateral eight days after notice has been
belonging to a settlor to secure one or duly served on the debtor and, where
more existing or future debts provided said necessary, on the third party settlor under
debts are certain or ascertainable. the conditions laid down by the provisions
organizing measures of execution from
A mortgage may be legal, conventional or
which no pledge may derogate. Under such
judicial.
a situation, he can exercise his preference
4. Can the shares of a company be right on the price of the collateral sold
pledged as a security to the benefit based on article 226 of this Uniform Act.
of lenders?
The endorsement types typically used
YES. The shares of a company be pledged as for the share certificates are the bearer or
a security to the benefit of lenders. registered forms.
If so, is there a specific requirement in terms Shares and bonds shall be in the form
of formalities or procedure to be followed of bearer bonds or registered securities
for establishing or perfecting a share irrespective of whether they are issued
pledge? against non-cash contributions or cash
The transferee shall consent to the transfer contributions. However, registered
of shares in case of the compulsory securities may be the exclusive form
liquidation of regularly pledged company imposed by the provisions of this Uniform
shares. Act or by the Articles of Association
(ARTICLE 745).
Instead, the company may prefer, after the
transfer, to immediately redeem said shares The owner of securities which are part of an
in order to reduce its capital. issue comprising bearer bonds shall have
the option, notwithstanding any clause to
In order to render the share pledge the contrary, to convert his bearer bonds
binding on third parties, the pledging into registered securities and vice-versa
of shares may be established by notarial (ARTICLE 746).
deed or by private deed notified to the
company and published in the Trade and 6. Can security interest be established
Personal Property Rights Register (ARTICLE over future assets, rights and
322 of the Uniform Act on Commercial receivables of the borrower?
Companies). YES. This is reflected in the definition
5. Is private sale a recognized method of mortgage where the possibility to
for the enforcement share pledge? transfer any determined or determinable
What are the endorsement types real property belonging to a settlor to
typically used for the share secure one or more existing or future
certificates? debts provided said debts are certain or
ascertainable has been provided for.
Yes, a private sale is a recognized method
for the enforcement share pledge. Such a 7. What are the steps to be taken by
possibility is provided for under, among the lenders to enforce their security
others, article 104 of the UAS which interest, in case the borrower
provides that the lack of payment by the becomes insolvent, is technically
due date allows the pledgee-creditor, insolvent and/or commences
in possession of a writ of execution, composition process?
183
Security interests are registered against Where a business property is sold or

third parties by filing at the appropriate liquidated, any unsecured creditor may
RCCM and for mortgages in accordance obtain, through a court, the foreclosure of
with local laws. To enforce their security the debt and obtain the distribution of the
interest, lenders may take the following proceeds from said liquidation (ARTICLE.
steps: 174).
Where there is a default, non-payment by The registered creditor shall be entitled to:
a pledgor, a secured creditor can resort
to forced sale at a public auction or can - A right to pursue in accordance with
request the judicial attribution of the article 97(2) of this Uniform Act;
pledged assets up to the amount of the - A right to liquidate in accordance with
secured obligations. article 104(1) of this Uniform Act;
The pledge being binding on third parties - A right of preference in accordance with
either by its registration in the Trade and article 226 of this Uniform Act (ARTICLE
Personal Property Rights Register or by 178).
the handing over of the collateral to the
pledgee creditor or any third party agreed 8. Is security trustee concept
upon by the parties, the pledgee-creditor enforceable in your jurisdiction? If
may pursue the collateral in their hands for not, is an alternative mechanism,
the enforcement of its claim. such as a parallel debt, available?
Moreover, in the case of a financial bond The security trustee concept is not, per se,
and any sum of money appearing in the enforceable in Senegal, under OHADA.
pledged account, a secured creditor, holder
The concept of security agent is used
of an unquestionable liquid and due claim
instead. That security agent’s function is
may liquidate the security within eight
provided for under article 5 of the U.A.S as
days or at the expiration of any other time
limit it and the holder of the account had follows: “Any security or other guarantee
beforehand agreed upon. to secure the discharge of an obligation
may be made, registered, managed and
The secured creditor may do so after notice executed by a financial institution or a
is served personally or by registered mail on national or foreign credit company acting
the debtor. in its own name and as surety agent
Said notice shall also be served on the appointed for that purpose by the creditor
settlor of the pledge where it is not the of the secured debt”.
debtor and to the keeper of the account A parallel debt concept exists as an
where the latter is the secured creditor of alternative mechanism. It produces, pretty
the pledged debt. much, the same result.
Where not being the keeper of the pledged C. Incentives and Restrictions
account the secured creditor considers that
all the 9. What are the main incentives and
requirements have been met for the your jurisdiction?
liquidation of the security, he shall in
writing ask the keeper of the account to The Investment Code provides for
proceed with the liquidation as provided exemptions from customs duties, value
for in article 154 of this Uniform Act added tax (VAT) exoneration for a three
(ARTICLE 155). (3) year period. The General Tax Code also
184
provides for tax benefits subject to a certain unless specifically decided by the Minister
number of conditions. in charge of finance, be carried out through
approved intermediaries in all cases where
Incentives and exemptions can be also
the borrowed sums are made available to
sector-based. The Free Export Enterprise
the borrower in the country. The approved
Status is granted to certain specific entities.
intermediaries, who are thus called upon to
Companies in the agricultural, telecoms
intervene, will ensure the regularity of the
industry sectors can benefit from incentives
operations.
and/or exemptions when they export at
least 80% of their production. However, some minor restrictions for
borrowing bank loans from abroad, that
That status also allows those companies to
may be characterized as procedural include:
benefit from a reduction of corporate tax
(15%), an exemption from registration fees, -the mandatory declaration to the External
stamp duty and subscription to business Finance Directorate (Ministry of Finance)
licenses, and an exemption from the duties and the BCEAO (the Waemu Central Bank).
and taxes levied on production equipment
All foreign loans are subject to a mandatory
and raw materials. An exemption from
declaration to the External Finance
wage tax is also granted.
Directorate and the BCEAO, for statistical
10. Are there any incentives or purposes as provided for under Article
exemptions specifically applicable 11: Loan transactions (Regulation No.
to foreign investors? 09/2010/CM/WAEMU/ on External Financial
Relations of the Member States of the West
The main incentives and exemptions for
African Economic and Monetary Union
project financing in Senegal are mainly tax
(“WAEMU”).
incentives and exemptions. They can be
sector specific or usually granted through The repayment of any foreign loan, either
Double Tax Treaties (DTTs) that Senegal may by purchase and transfer of foreign
have signed with foreign partners. Please currencies or by crediting foreign accounts
also refer to the answer to question 9. in Francs or in Euros, must be declared for
statistical purposes to the External Finance
Directorate and the BCEAO and said
transactions must be carried out through
a licensed intermediary. (Article 11: Loan
transactions (Regulation No. 09/2010/Cm/
We have not identified any general WAEMU/ on External Financial Relations of
provision of the law which prevents a Member States of the WAEMU.
company incorporated under Senegalese
There are no restrictions for borrowing in
law from contracting debts abroad.
a foreign currency except as provided for
Moreover, this possibility of contracting under Regulation No. 09/2010.
is even indirectly provided for under
Receivables and debts denominated in
Regulation No. 09/2010/CM/UEMOA/ on
foreign currencies are converted into the
External Financial Relations of the Member
monetary unit having legal tender in the
States of the West African Economic and
State party, on the basis of the exchange
Monetary Union, in its article 12.
rate on the date of formalization of the
This article stipulates that: “loans contracted agreement by the parties on the operation,
by residents from non-residents must when it’s about commercial transactions,
185
or on the date on which the currencies are or more national public or private persons.
made available when it’s about financial Moreover, the foreign company may not
transactions (Article 52, Uniform Act directly or indirectly hold more than 20% of
relating to Accounting Law and Financial the capital of a printing media company.
Reporting).
12. Are there any restrictions for requirement, under the legislation
foreign investments in your or in practice, for project financings
jurisdiction? in your jurisdiction?
The Senegalese Investment Code provides There is no minimum equity requirement

for equal treatment of foreign investors. for project financings in Senegal.
Foreign investors are granted equal access 14. Please explain the registration
to ownership of property and no general and filing requirements which
limits on foreign control of investments are applicable for project finance
exist. documents to be valid and
In principle, there is no problem with a
100% ownership by foreign investors. The registration and filing requirements
applicable for project finance documents to
There are, however, some exceptions for
be valid and enforceable in Senegal depend
a limited number of sectors such as the on the types of projects.
electricity distribution, port and water
services. It is necessary to have a legal status, to
create a local entity.
There are some restrictions on foreign
capital applicable to specific sectors. The most commonly created forms of
company are the Limited Liability Company
The Oil and Gas sector provides for some (SARL) and the Limited Company (SA).
main limitations on foreign participation
in the capital of an oil or gas company. The statutes of the company to be created
are signed before a notary to whom the
There is, for example, a 10% free carried
capital is paid.
interest to the national oil company,
Petrosen, during the exploration phase of The notary carries out the registration
projects and up to 30 percent interest in of the company and proceeds to the
the development and exploitation stage publication of the notice of creation
projects. after the withdrawal of the registration
documents.
Restrictions do also apply for certain
aspects, areas such as local content The investor will open a bank account
requirements. as soon as he receives the registered
documents from the notary.
Oil companies have to use local labor and
materials and provide training funds for In land acquisitions, for example, foreign
local workers. A local content requirement investors may have to deal with property
does exist, however, the regulating decrees titles and registration systems that exist in
Senegal.
are yet to be promulgated.
The participation percentage in the capital
D. Insurance
of a printing media company is set at 51% 15. Can local insurance policies be
by one governed by a foreign law?
186
Some aspects of local insurance policies are in Senegal to the benefit of the African
governed by the Code of the Inter African Reinsurance Corporation (Africa-Re), the
Insurance Market Conference (“CIMA”). regional reinsurance company (CICA-RE)
and the SENRE. The mandatory cessions
Some re-insurance aspects can be
with the state-owned insurer apply in
governed by a foreign law.
Senegal to the benefit of SEN-RE.
lenders? 18. Is PPP a permitted method of
Yes, insurance proceeds under the developing projects, and if so, have
insurance and reinsurance policies be any PPP projects been developed to
assigned to the benefit of the lenders. date in your jurisdiction?
17. What are the other complications, Yes, PPP is a permitted method of
concerns or other issues in relation developing projects.
Some PPP projects have been developed
documentation, if any? in Senegal, among which we can name
projects such as the Dakar - Diamniadio
There is a minimum percentage that must toll motorway, PETN and the Blaise Diagne
be insured within the CIMA Zone. International Airport.
There are obligatory cessions with 19. Are direct agreements between the
state owned insurers that apply in
Senegal provided for during the FINAL
COMMUNIQUÉ OF THE 10th GENERAL
ASSEMBLY OF THE MEMBER STATES OF THE if so, commonly seen in the Project
COMMON REINSURANCE COMPANY OF THE Finance market in your jurisdiction?
MEMBER STATES OF CIMA (“CICA-RE”)” Yes, a direct agreement procedure is
They reorganized the legal transfer to provided for in the PPP law (provisions of
the CICA-RE, as proposed by the Board article 28 of Law 2021-23 on public-private
and consisting of the reduction of the partnership contracts). It is one of the
transfer rate on the treaty from 15% to 10% derogatory procedures, the conditions and
combined with the institution of a transfer modalities of which are set by decree.
on the first franc at the rate of 5% for all
insurance companies, with the exception 20. Please indicate the types of host
of the health branch and savings premiums government supports (including
in life insurance. Final statement from the treasury guarantee, debt
member states of CICA-RE. assumption etc.) available in your
jurisdiction.
In Senegal, there is an obligatory cession
on the premiums and treaties of insurance The types of host government supports
companies under Senegalese national law available in Senegal are:
and on the premiums of foreign companies,
in favor of the Senegalese reinsurance - Sovereign guarantees exist mainly
company (“SENRE”). under articles 39 to 49 of the Uniform
Act on Securities (U.A.S.).
The mandatory cessions with the state-
owned (and /or sub-regional) insurer apply - Host Government Agreement (HGA)
187
An agreement between a foreign investor The legislator may expressly provide

and a local or host government governing that the new law will be of immediate
the rights and obligations of the foreign application.
investor and the host government with
The judge can also rule out the survival of
respect to the development, construction,
and operation of a project by the foreign the old law in contractual matters when he
investor. considers that:
A public-private partnership support - the particularly imperative nature of

fund has been created to support and public order of the new law justifies its
finance the preparation, procurement and immediate application to the future effects
implementation of PPP projects. of the contract.
Also, the holder may, with the authorization - or that the content of the contract is so
of the contracting authority and in imperatively fixed by law, that the contract
compliance with the legal provisions in must be assimilated to a legal situation
force, grant securities to the financing justifying that its effects are governed by
organizations on the assets acquired or the new law.
realized in the context of the execution of Investors and lenders may seek
the PPP contract, by pledging the proceeds compensation if the change of law is
and receivables arising from the contract applied against them.
or by constituting any other appropriate
security, without prejudice to any legislative 23. Is force majeure specifically
provision prohibiting the constitution of regulated under the local
a security on a public asset or part of the legislation?
public domain (art. 16 of the law on PPPs).
Yes, force majeure is expressly provided for
21. Are political risk events usually by law. It is defined as an extraneous cause
under the responsibility of the that led to the occurrence of the damage. It
public party or the private party may be due to a third party or any situation.
In any event, force majeure must be
In general, it is the contract that sets an unforeseeable, insurmountable and
out the conditions under which the irresistible event. It constitutes a cause of
sharing and transfer of risk between the total exemption.
contracting authority and the contractor
are established.
22. Are investors and lenders usually financings?
The environmental requirements are that
in accordance with the provisions of the
Environmental Code: “any development
agreement?
project or activity, likely to harm the
The change of law has no effect on the environment, as well as policies, plans,
contract which continues under the same programs, regional and sectoral studies
conditions and according to the legislation must be subject to an environmental
in force at the time of its conclusion. assessment.
Changes in law will not have retrospective In its provisions relating to health also, Law
effect unless stated expressly in the law No. 97-17 of 1 December 1997 establishing
itself. the Labor Code sets working conditions,
188
in particular with regard to working hours, authority entrusts, to an economic

which must not exceed 40 hours per operator, whose remuneration comes
week, working of night, the contract of the mainly from payments from the contracting
women and children and the weekly rest authority throughout the duration of the
which is obligatory. The text also deals with contract, all or part of the missions having
Hygiene and Safety in the workplace and for the object, the design, the construction
indicates the measures that any activity or the transformation, the upkeep, the
must take to ensure hygiene and safety maintenance, the exploitation or the
guaranteeing a healthy environment and management of works, services, equipment
safe working conditions. or immaterial goods necessary for the
F. Jurisdiction, Waiver of general interest of which the contracting
Immunity authority is responsible for, as well as all or
part of their financing.
25. Are submissions to a foreign
law and the waiver of immunity A public-private partnership contract
provisions enforceable? payable by users is a public-private
partnership contract by which a contracting
Yes, subjection to foreign law and waiver authority entrusts the management of
of immunity provisions are enforceable
a service of general interest for which it
subject to compliance with public order.
is responsible, or the design, financing,
26. Can financing documents provide implementation, rehabilitation, operation,
for arbitration clauses? upkeep and maintenance of works,
equipment or intangible assets to an
Yes, financing contracts may include
economic operator whose remuneration
arbitration clauses.
comes mainly from user payments. The
G. Trends and Projections concession, leasing and management
concerned are public-private partnership
contracts paid for by users.
jurisdiction? A concession is a contract by which
Public-private partnership contracts are the a contracting authority entrusts the
main trend in project financing by the State concessionaire with the mission either
and other public entities. to carry out a public work or to make
investments relating to such a work and
A public-private partnership contract to operate it with a view to providing a
is a written contract concluded for service of general interest. In all cases, the
consideration for a fixed period between concessionaire operates the service in
a contracting authority and an economic its name and at its own risk and peril by
operator, which is, according to its purpose, collecting remuneration from the users
the terms of remuneration of the holder of the structure or the beneficiaries of
and the risks transferred, qualified as the service granted. (Law n°2021-23 of
a public partnership contract ‐private March 02, 2021, relating to Public‐Private
with public payment or public‐private
Partnership contracts - Decree n° 2021-
partnership contract with payment by
1443 of October 27, 2021, implementing
users.
Law n°2021-23 of March 02, 2021 - Decree
A public-private partnership contract n°2014-1212 of September 22, 2014, on
with public payment is a public-private the public procurement code – Code of
partnership contract by which a contracting Administration obligations).
189
The transfer methods are as follows: 28. Are any significant development or
- Common law procedures:
Q Open tender procedure in 1 stage,
No, to our knowledge an evolution or a
preceded or not by prequalification;
significant change is not expected in the
Q Open bidding procedure in 2 stages, near future on the market for financing
preceded by prequalification. the projects of the State and other public
persons.
- Exceptional procedures:
Q Restricted tender procedure;
Q Tender procedure with competition; commonly used in your jurisdiction
Q Competitive dialogue procedure;
As a country previously covered by LIBOR,
Q Direct agreement procedure.
alternative rates like ESTER, SARON, SONIA
and SOFR are used.
190
TAJIKISTAN
GRATA
Bahodur Nurov
Senior Associate
bnurov@gratanet.com
A. Overview at http://ppp.tj/ppp-database/ and http://

www.eprocurement.gov.tj/en/searchanno.
1. What is the main legislation and The majority of these financing options
international treaties governing the are tied to the infrastructure or energy
project financing in your jurisdiction? industries.
The most relevant act is the (i) Civil B. Security Interest
Code (Part 1, 2 and 3), (ii) Tax Code, (iii)
Registration of Legal Entities and Individual 3. What are the most commonly used
Entrepreneurs Act, (iv) Public Private security types in project financings in
Partnership Act, (v) Limited Liability your jurisdiction?
Companies Act, (vi) Joint Stock Companies Depending on the particulars of the project
Act. and the interests of the parties involved,
Tajikistan has entered into a number of different methods of security may be
bilateral treaties related to investment utilized. In project financings, common
protection. That said, international treaty security types that might be employed
applicability for the time being is left to be include:
desired. Mortgage: This type of security entails the
sale of a property interest to the lender in
exchange for loan collateral. The lender
may foreclose on the property and sell it
to recoup its investment if the borrower
defaults on the loan.
months?
Pledge: This type of security entails giving
In Tajikistan, the market for project
the lender possession of a moveable
financing is continually growing but is still
item, such as equipment or stock in a
quite small.
corporation, in exchange for a loan. The
Yet, there are a number of project funding lender may sell the pledged asset to recoup
options accessible to those who are its investment if the borrower fails on the
interested; additional details may be found loan.
191
Guarantee: This type of security entails 5. Is private sale a recognized method

a third party (like a parent business or a for the enforcement share pledge?
government body) assuring the lender that What are the endorsement types
the borrower will pay back the loan. The typically used for the share
guarantor is responsible for repaying the certificates?
loan in the event that the borrower misses Yes, private sale is a legitimate way to
a payment. enforce a share agreement.The terms of
Assignment of rights: A rights assignment is the private sale can be agreed upon by
the transfer of a party’s contractual rights to the pledgor and pledgee in the pledge
another party. agreement.
It is important to note that the use of The pledgee may enforce the pledge by
security in project financings can be selling the pledged shares in the event of
complicated and may require the blending the pledgor’s default. The pledgee must
of many types of protection. It will depend notify the pledgor of the planned sale,
on the nature of the project and the including the date, location, and manner of
lender’s criteria as to which specific security sale as well as the minimum selling price,
types are employed in a project financing which must be equal to or higher than
the total amount of the debt that is being
transaction. To preserve their investment
pledged as security.
in the project, lenders often attempt to get
the highest level of security. The surplus proceeds from the sale of the
pledged shares must be given back to the
pledgor if they exceed the amount of the
outstanding obligation. The pledgor is still
responsible for paying the balance of the
obligation even if the shares are sold for
less than the whole amount owed.
pledge? 6. Can security interest be established
Shares can be pledged under an receivables of the borrower?
agreement. A written agreement between
the pledgor and the pledgee is required Tajik law permits the inclusion of clauses
under Tajik law. The number and kind establishing security interests over future
of shares being pledged, the size of the assets, rights, and receivables.
secured debt, how long the pledge will last, 7. What are the steps to be taken by
and other terms must all be specified in the the lenders to enforce their security
agreement. interest, in case the borrower
The pledge agreement must be registered becomes insolvent, is technically
with the Ministry of Justice of Tajikistan for insolvent and/or commences
the share commitment to be perfected. composition process?
Getting a login and password and filling Any claims in the event of insolvency must
out the necessary information online is be made through an external manager.
required for the registration procedure. Additional measures and steps are
If the pledge is not registered, it would decided upon and disclosed by an external
not provide for priority over unregistered management on a case-by-case basis and
pledge. are not governed by laws.
192
8. Is security trustee concept investment activities are restricted or

enforceable in your jurisdiction? If forbidden due to the necessity to protect
not, is an alternative mechanism, national interests, investors have the
such as a parallel debt, available? freedom to invest in objects and types of
business activities. The law does go into
Tajik law does not envision a security
more detail about this, and there is no
trustee. However, lenders (pledgees)
information on public sources. Therefore,
have the option of designating a pledge
an investor must personally communicate
manager to act on their behalf while
with the state agencies about a specific
exercising all of their rights to the pledged
investment project.
property.
Tajikistan legal system does not clearly requirement, under the legislation
permit the implementation of a parallel or in practice, for project financings
debt mechanism. in your jurisdiction?
C. Incentives and Restrictions There is no minimum equity requirement.
9. What are the main incentives and 14. Please explain the registration
exemptions for project financing in and filing requirements which
your jurisdiction? are applicable for project finance
Tax, customs and other benefits are documents to be valid and
provided to investors in the manner and on enforceable in your jurisdiction.
the terms established by laws, investment Project finance documentation may need
agreements, treaties and international legal to be registered with or submitted to
acts recognized by Tajikistan. several government agencies in order to
It must be noted that specific incentives be enforceable and valid. The nature and
and exemptions will depend on the sector, structure of the project, as well as the type
size and project location. of document in question, will determine
the registration and filing procedures that
That said, in some cases, obtaining such apply. Regrettably, because the laws are
incentives can be challenging. vague, it is necessary to discuss specifics
10. Are there any incentives or with the state agencies for each individual
exemptions specifically applicable project.
to foreign investors? It must be noted that depending on the
Please refer to the answer to question 9. type of project and the legal structure of
the transaction, different registration and
11. Are there any restrictions for filing procedures may apply to project
borrowing bank loans and finance documents.
or in a foreign currency? D. Insurance
There are no limitations on taking out 15. Can local insurance policies be
shareholder loans and bank loans from governed by a foreign law?
abroad or in a foreign currency. The Civil Code gives the parties the choice
to choose the applicable law, but because
of the nature of the Insurance Activities Act,
we infer that the policies must be governed
jurisdiction?
by Tajik law despite the fact that the law is
With the exception of activities where silent on the subject.
193
16. Can insurance proceeds under the caused this urgent need could not be
insurance and reinsurance policies foreseen by the contracting authority,
be assigned to the benefit of the and these circumstances are not the
lenders? result of slowness of the contracting
In general, insurance law does not authority;
restrict the assignment of insurance and • for a short term partnership project and
reinsurance proceeds under an insurance when the expected initial investment
or reinsurance policies to the benefit of amount does not exceed the specified
lenders. It’s important to keep in mind that amount;
there can be limitations and restrictions on • when the partnership project affects
this. Reviewing the terms and conditions of issues of national defense or public
any insurance contract is crucial. safety;
17. What are the other complications, • if there is only one source capable
concerns or other issues in relation of providing the required service,
to the insurance provisions including the use of intellectual
under the project financing property, trade secrets or other
documentation, if any? exclusive rights that are owned or
We do not foresee any complications or controlled by a certain person(s);
issues. The parties must carefully review • when pre-qualification tender
and consider the insurance provisions in documents or a request for proposals
project financing documents. have been issued but no responses
E. Financing of Public-Private have been received, or when all
Partnership (PPP) Projects proposals have failed to meet the
evaluation criteria specified in the
request for proposals, and if, in the
opinion of the contracting authority,
the issuance of new preliminary tender
documents selection and a new request
The PPP method is permitted and governed for proposals will not result in a contract
by the Private Public Partnership act. being awarded within the required time
There are numerous PPP projects, however, frame;
information about the completed projects • in other cases where the PPP council
is not published and is not available for approves such an exception for
third parties. PPP Authority’s official website compelling reasons of national or
is available at http://ppp.tj/homepageen. public interest or in cases of recognition
19. Are direct agreements between the in the interests of a local public
public authorities and the Lenders authority.
permissible under the local law, and 20. Please indicate the types of host
if so, commonly seen in the Project government supports (including
Finance market in your jurisdiction? treasury guarantee, debt
Direct agreements are permissible: assumption etc.) available in your
jurisdiction.
• if there is an urgent need for the
continuous provision of services, as well The PPP list can be found at http://ppp.tj/
as in the case when the implementation ppp-database/.
of the norms established by chapter Some of the government guarantees:
3 of the PPP Act is inappropriate,
provided that the circumstances that • equality of investor rights;
194
• investor legal protection; 22. Are investors and lenders usually

• right to use profits; protected against a change in
• investor’s participation in the
privatization of state property; agreement?
• investor’s rights in case of expropriation
and requisition; PPP Act provides for that the agreement
specifies the private partner’s right to
• investor’s right to export property and compensation in the event that, compared
information abroad; to the originally estimated costs, the costs
• additional guarantees and protection of the private partner’s performance
measures may be provided for under the agreement have significantly
investments, the total amount of which increased or the value of such performance
is the equivalent of $5 mil in national has substantially decreased due to
currency. changes in legislation or other measures
of state regulation directly related to the
21. Are political risk events usually partnership project.
public party or the private party Likewise, the PPP Act provides for re-review
under the PPP agreements? (revision) of the agreement in the event
of changes in law or regulation that are
One of the most important measures to
not directly applicable to the ongoing
guarantee the proper implementation of
project, provided that economic, financial,
a PPP arrangement is the distribution of
legislative or regulatory changes:
risk among parties. The PPP Act’s Article 9
guarantees the principle of equitable risk a. take place after the conclusion of the
distribution. A PPP agreement must include Agreement;
provisions for the division of risks between
the public and private parties in accordance b. are outside the control of the private
with Article 29 of the PPP Act. partner;
The distribution of political risk in PPP c. are of such a nature that the private
agreements is based on both the nature partner is not able to reasonably
of the risk and the agreement’s specific assume and take them into account
conditions. Political risks are typically at the time of concluding the
shared by public and private partners. In Agreement or avoid or overcome their
some circumstances, the public party may consequences.
take on a larger portion of the political 23. Is force majeure specifically
risk, especially when the project includes regulated under the local
a public asset or function that is crucial legislation?
to the government. On the other hand, in
some circumstances, the private party may Generally, this issue is defined and
be required to take on greater political regulated by a clause of an agreement.
risk as a condition of receiving funding That said, paragraph 3 of article 356 of
for the project or in exchange for bigger the Civil Code establishes a foundation
potential gains. As a result, how political for responsibility exclusion in the
risk is distributed in PPP agreements will event of a force majeure. According to
vary depending on the project’s unique the aforementioned legal definition,
conditions as well as the interests and force majeure refers to unusual and
preferences of the public and private unavoidable events that happen under
parties involved. specified circumstances. These conditions
195
do not, however, include the debtor’s Tajikistan’s economy and overall project
counterparties breaching their duties, the funding are currently in the process of
lack of sufficient finances for the debtor development. The following are some of
to fulfill its obligations or the absence of the major trends in project financing:
necessary commodities from the market.
• PPPs: In Tajikistan, PPP initiatives
24. What are the general environmental have emerged as one of the most
and social requirements in project widely used forms of project finance.
financings? PPPs are particularly common in the
infrastructure, transportation, and
Tajik legislation states that it is forbidden
energy industries. Renewably sourced
to fund and carry out initiatives involving
energy should be noted as a distinct
the utilization of natural resources without
category of PPP projects that is now
first receiving approval from the state’s
being examined and elevated to the
ecological experts. In particular, projects
top of the priority list.
should go through the assessment
procedure in accordance with the • Mining: The mining industry makes
Environmental Impact Assessment up a significant portion of the Tajik
Procedure to take potential environmental economy, however project financing in
impacts into consideration. this industry is typically conducted on
a one-on-one basis, discreetly, and with
There are general obligations to interact
little access to information.
with local stakeholders and communities
and to guarantee that labor laws are We anticipate further projects and
followed when it comes to social criteria for favorable future changes to the investment
project finance. climate because Tajikistan’s government,
and particularly its president, is a strong
supporter of foreign investment.
Immunity
enforceable?
As mentioned above, the project financing
Yes, according to civil laws, foreign law,
is actively developing and further
arbitration provisions are enforceable.
development and implementation of PPP
The generally accepted action of waiving projects in Tajikistan remain an important
immunity is subject to some restrictions item on the Government’s agenda.
under Tajik law. Likewise, renewable energy is gaining
traction and is most likely to be a crucial
item on the agenda and will gain the most
attention in the future.
Yes, according to civil laws, financing
documents can provide an arbitration
clause.
G. Trends and Projections during the LIBOR transition period?
27. What are the main current trends During the LIBOR transition period, the
in project financings in your Secured Overnight Financing Rate (SOFR)
jurisdiction? rates are commonly used in Tajikistan.
196
TÜRKİYE
ERGÜN AVUKATLIK BÜROSU
Çağdaş Evrim Ergün Burcu Baltacıoğlu Pelin Ecevit Tuğba Aksoy Bozkurt
Partner Partner Partner Senior Associate
c.ergun@cergun.av.tr b.baltacioglu@ p.ecevit@cergun.av.tr t.aksoy@cergun.av.tr
cergun.av.tr
A. Overview 6750 on Pledge over Movable Assets in

Commercial Transactions38 (“Movable
1. What is the main legislation and Pledge Law”).
project financing in your jurisdiction? Any borrower or security provider which
is a “public company” (halka açık anonim
Project financing matters under Turkish ortaklık) or any project financing through
law are mainly governed by the Turkish capital markets instruments, are governed
Civil Code numbered 472134 (“Turkish by the Capital Markets Law numbered
Civil Code”), Turkish Code of Obligations 636239 (“Capital Markets Law”) and its
numbered 609835 (“TCO”) and Turkish secondary legislation issued by the Capital
Commercial Code numbered 610236 Market Board.
(“TCC”). In addition, the establishment Banks and lending institutions are
and enforcement of security interests governed by the Banking Law numbered
are governed by the provisions of the 541140 and its secondary legislation issued
Enforcement and Bankruptcy Law by the Banking Regulation and Supervision
numbered 200437 (“Enforcement and Agency (Bankacılık Düzenleme ve Denetleme
Bankruptcy Law”) and the Law numbered Kurulu).
34 Published in the Official Gazette dated December 8, 2001 and numbered 24607.
35 Published in the Official Gazette dated February 4, 2011 and numbered 27836.
36 Published in the Official Gazette dated February 14, 2011 and numbered 27846.
37 Published in the Official Gazette dated June 19, 1932 and numbered 2128.
38 Published in the Official Gazette dated October 28, 2016 and numbered 29871.
40 Published in the Official Gazette dated November 1, 2005 and numbered 25983 (Duplicate).
197
Further to the above, borrowers or security and started gaining experience in that
providers which operate in certain sectors field. Therefore, Türkiye may currently be
are subject to sector-specific laws, such as considered as a developed project finance
in the energy sector, where the financing market.
is subject to the restrictions imposed by
Some of the significant project financings
the Law numbered 6446 on Electricity in Türkiye, which achieved financial closing
Market (“Electricity Market Law”) and over last 12 months include the followings:
the Law numbered 5346 on the Utilization
of Renewable Energy Sources for the • Financing of the Aydın-Denizli Build-
Purposes of Generating Electrical Energy Operate-Transfer Motorway Project;
(“Renewable Energy Law”). • Restructuring of the Gaziantep
Project financing in Türkiye is also subject Integrated Health Campus PPP Project;
to some international treaties, including • Financing of the Kütahya Integrated
mainly: Health Campus PPP Project;
(i) Convention on the Settlement of • Financing of construction of Sasa
Investment Disputes between States petrochemical plant for the production
and Nationals of Other States (ICSID of purified terephthalic acid in Adana,
Convention); Türkiye; and
(ii) New York Convention on the • Financing of Mersin-Gaziantep High

Recognition and Enforcement of Speed Railway Project.
Foreign Arbitral Awards; and B. Security Interest
(iii) Bilateral investment treaties (BITs), 3. What are the most commonly used
double tax treaties (DTTs) and trade security types in project financings in
facilitation agreements (TFAs) with your jurisdiction?
various jurisdictions.
The most commonly used security types
2. How mature is the project finance in project financings in Türkiye include the
market in your jurisdiction, and followings:
financings closed during the last 12 • Assignment of the project receivables
months? of the project company;
• Assignment of insurance proceeds of
The Turkish project finance market
the project company;
started to evolve following the long-term
delegation of public infrastructure services • Assignment of subordinated receivables
to the private sector, as a result of economic of the shareholders of the project
liberalization movements in the late company;
1980s. Especially following the adoption of • Assignment of the receivables of
various public-private partnership (“PPP”) the insurance companies under the
models around 1990s and introduction reinsurance policies;
of PPP projects in the transportation,
healthcare and energy sectors after 2000s, • Mortgage on immovables and usufruct
the number of foreign investments and rights of the project company related to
project financings swiftly increased in the immovables;
Türkiye. Accordingly, both Turkish banks • Movable asset pledge on the movables
and the investor companies established which are owned by the project
their internal project finance departments company;
198
• Pledge on the project accounts of the sale mechanism is not expressly regulated
project company; under the Turkish law and may not be
enforceable in practice.
• Pledge on the shares of the project
company; On the other hand, with the new
amendments in the Enforcement and
• Usufruct right establishment on the
Bankruptcy Law, published on 30
shares of the project company;
November 2021, the concept of “private
• Guarantee and/or suretyship given sale though court approval” was introduced
by the shareholders, the parent as another foreclosure method . According
companies, or the host government. to this new mechanism, as opposed to
public auction, the debtor may request
the authorization of the court for the sale
of a pledged asset within seven days from
the notification of valuation. If there is no
valuation, then the debtor may request
a valuation from the court. It is worth
noting that, although these changes aimed
pledge?
to enable the sale of seized goods with
Yes, the shares of a company can be the least cost and the highest price, this
pledged as a security to the benefit of cannot be deemed as a private sale in the
lenders with the execution of a “share most classical sense, given that the person
pledge agreement”. If the borrower has initiating the private sale process can only
physical share certificates, then following be the debtor.
the execution of the share pledge
agreement, the relevant share certificates
are endorsed by recording a blank or
pledge endorsement and delivered to the
lenders. The pledge shall also be recorded Yes. It is possible to establish a security
in the share ledger of the company. In interest over future assets, rights
limited liability companies (limited şirket), and receivables, as long as these are
the share pledge shall be established with determinable.
the execution of a share pledge agreement
before a notary public.
5. Is private sale a recognized method interest, in case the borrower
for the enforcement of share becomes insolvent, is technically
pledge? What are the endorsement insolvent and/or commences
types typically used for the share composition process?
certificates?
The enforceability of the finance
Some of the security agreements provide documents and/or judgment from the
the option for private sale, in which case, foreign courts and/or of the securities
the pledged asset is offered to an individual provided under the finance documents
or group of individuals by the pledgee, may be limited by insolvency or technical
instead of an execution office conducting insolvency of the Borrower, its affiliates or
a public auction to the general public. its shareholders and/or commencement of
However, the implementation of private composition process.
199
If a borrower is declared insolvent/ the commercial court or to the bankruptcy

technically insolvent or if a borrower is administration (iflas idaresi); (ii) notification
undergoing a composition process (even to the land registries to prevent the transfer
though it would typically be an event of of the debtor’s immovable property to third
default under the finance documents), the parties, etc.
lenders may not be able to enforce their
There are also several other considerations
security interests and collect their debts by
that the finance parties should be aware of,
themselves.
such as the followings:
If the borrower becomes insolvent before
• there is a total block on creditors
fully performing its secured obligations,
enforcing their security, during
then all the movable and immovable assets
bankruptcy proceedings; and
of the borrower, which can be seized, will
form the bankruptcy estate (iflas masası). • there is a mandatory statutory
The bankruptcy estate will be liquidated, preference to certain categories of
for the payment of creditors’ receivables, creditors.
through a sale by the execution office. The 8. Is security trustee concept
lenders will be entitled to enforce their enforceable in your jurisdiction? If
security interest through the insolvency not, is an alternative mechanism,
estate. Since the pledgee lenders have such as a parallel debt, available?
pre-emptive rights as the secured creditors,
The security trustee concept is not
they will be entitled to receive their
recognized under Turkish law. The security
receivables from the foreclosure of the
agent and parallel debt mechanisms
pledged assets before other creditors. are frequently used in project finance
Article 376 of the TCC regulates technical documents which are governed by a law
insolvency, which is a balance sheet other than Turkish law. However, these
insolvency. If the borrower is technically concepts are not expressly regulated
insolvent, under certain circumstances it under the legislation and neither of
these concepts have been previously
may be required to apply to a competent
tested before Turkish courts. Eventually,
court for declaration of its bankruptcy.
if there is a dispute about either of these
Moreover, pursuant to Article 296 of the concepts before Turkish courts, there may
Enforcement and Bankruptcy Law, which be questions on the applicability of both
is a mandatory provision under the Turkish the security agent and the parallel debt
law, contractual provisions stating that mechanisms. Moreover, it is worth noting
submission to concordat (i.e., composition) that in the event of bankruptcy of the
security/collateral agent, the securities
is a ground for breach, acceleration or
created under the finance documents and
termination of a contract, are void.
the proceeds thereunder could fall under
In the foregoing scenarios, a competent the security agent’s bankruptcy estate and
court may, at its sole discretion, order the lenders’ remedy against the security
protective measures to protect creditors agent or its bankruptcy estate would be the
until a finalized bankruptcy decision. remedies available to the other contracting
Such protective measures may include: (i) parties.
notification to the bankrupt’s debtors to the In order to avoid such risks, the lenders
effect that they should not pay due debts generally prefer to establish a joint creditor
directly to the debtor, but instead either to mechanism, in Turkish law governed
200
project financing projects, as such component, and accessories) listed in a

mechanism is accepted under the Turkish certain customs tariff statistics position.
legislation. As per the provisions of the
Additionally, according to the Stamp Tax
joint creditorship between the finance
parties and the security agent, the security Law numbered 48841, all loan and security
agent is authorized to claim and collect documentation in relation to the loans
all the secured obligations in the name granted by banks, foreign credit institutions
and account of the finance parties and or international finance institutions are
commence the liquidation procedure for exempt from stamp tax.
the security interests for the full amount;
Finally, there is a specific provision in the
and the security agent is authorized to
Moveable Pledge Law numbered 675042,
exercise the clearing/set-off rights on
setting forth that the pledge agreements
account of all the finance parties.
and transactions conducted before the
C. Incentives and Restrictions movable pledge registry are exempt from
taxes, duties, fees and valuable paper fees.
exemptions for project financing in 10. Are there any incentives or
your jurisdiction? exemptions specifically applicable
The Ministry of Industry and Technology of to foreign investors?
the Republic of Türkiye provides investment As the incentives are not granted based
incentives with various elements such as on the nationality of the investors, foreign
VAT exemption, customs duty exemption or investors may also benefit from the
tax discount, depending on the region and incentives. Please see further explanation
sector and/or the subject of the investment on the incentive regime on Answer 9 above.
type.
The Priority Investment Incentive Program
includes some incentives regardless of the
region, for companies operating in the
natural resources and the energy sectors
such as mining and mineral exploration, Turkish Government took various steps
natural gas storage, nuclear power plant in the recent years, for the purposes
investments, investments in turbine and of procuring that Turkish Lira gains its
generator for renewable energy production strength and enforced some additional
and blade manufacturing used in wind restrictions for such purposes. The
energy production. government implemented additional
The requirement for foreign currency foreign currency borrowing restrictions,
earnings shall not be applicable for foreign- with recent amendments on the Decree
currency loans extended to persons numbered 32 on Protection of the Value of
residing in Türkiye and borrowing loans in Turkish Currency (“Decree numbered 32”)
accordance with its investment incentive and the Turkish Capital Movements Circular.
certificate and for loans extended for These amendments, in principle, prohibit
purchase of machinery and equipment legal entities from obtaining foreign
(excluding the used ones, appurtenance, currency loans from abroad or domestically
41 Published in the Official Gazette dated July 11, 1964 and numbered 11751.
201
if they are not generating any foreign 13. Is there any minimum equity
currency income. However, there are also requirement, under the legislation
several exemptions for this prohibition, or in practice, for project financings
such as having more than USD 15 million in your jurisdiction?
credit balance, or the utilization of the loan
There is a 20% minimum equity
for the financing of a PPP project.
contribution requirement for the Build-
Under the foreign exchange legislation, all Operate-Transfer projects developed in
loans borrowed from abroad by a Turkish accordance with the BOT Law numbered
borrower must be utilized through a Turkish 399644 and the healthcare PPP projects
bank acting as an intermediary. developed in accordance with the
Healthcare PPP Law numbered 642845.
Additionally, pursuant to the Communiqué
Other than those, we are not aware of any
numbered 2008-32/34 on Decree
minimum equity requirement for project
numbered 32, the banks must notify Turkish financings. However, the general practice in
Central Bank within 30 days on any wire Turkish market is to maintain a maximum
transfers to abroad in relation to import/ debt (70-80%) to equity (20-30%) ratio.
export activities and invisible transactions,
with a balance equal to USD 50,000. 14. Please explain the registration
It should also be noted that the foreign are applicable for project finance
currency loans, which the project documents to be valid and
companies obtain from abroad, are subject enforceable in your jurisdiction.
to payment of a fee called Resource
Turkish law provides for certain filing
Utilisation Utilization Support Fund
or registration requirements for project
(“RUSF”) if the average term of the loan is
finance documents, including, among
less than three years. In addition, TRY loans others:
obtained by the project companies outside
the Republic of Türkiye are also subject to • Pledge on movable assets is perfected
the RUSF, if the average term of the loan with the registration of the pledge
is less than one year. The applicable RUSF agreement in the movable asset pledge
rate depends on the average term of such registry, which is an online database
named TARES. The pledge agreement
loans.
must be either (i) in written form
12. Are there any restrictions for and signed before a TARES official or
foreign investments in your certified before the notary public; or
jurisdiction? (ii) in electronic form and signed with
a secured electronic signature. This
According to the Direct Foreign registration through TARES is required
Investments Law numbered 487543, the for (i) the perfection, monitoring and
equal treatment principle applies to the the public disclosure of pledged assets;
foreign investors. Therefore, there is no (ii) the determination of the priority
extra restriction for the foreign investors among the pledgees; and (iii) the
based on their nationality. registration of disposals of the pledged
45 Published in the Official Gazette dated March 9, 2013 and numbered 28582.
202
movable assets. Establishment of a need for an additional foreign element

pledge on motor vehicles, aircrafts, other than the choice of foreign law,
ships and mining rights requires a which itself provides this foreign element.
written agreement and registration Therefore, according to the prevailing view,
of the pledge with the relevant the parties should be free to determine
authorities. the law applicable to insurance and/or
reinsurance policies, such as English law.
• Mortgage on immovables / usufruct
rights is perfected with the execution As a general observation, while reinsurance
of a mortgage deed before the land policies used to be more subject to English
registry office and making a record of law in the past, they are more and more
such mortgage in the relevant land subject to Turkish law over the recent years.
registry. 16. Can insurance proceeds under the
• If a Turkish resident issues a guarantee/ insurance and reinsurance policies
surety in favor of foreign person be assigned to the benefit of the
residing abroad, that person should lenders?
notify the Ministry of Treasury Insurance proceeds under the insurance
and Finance. This is a notification and reinsurance policies can be assigned
requirement solely for information to the benefit of the lenders through the
purposes; there is no requirement to execution of an assignment of receivables
obtain any permits and/or approvals agreement in accordance with the
therefrom. provisions of the TCO. In addition, the
D. Insurance lenders usually expect the project company
to annotate the lenders as co-insured and
15. Can local insurance policies be loss payee under the insurance/reinsurance
governed by a foreign law? policies.
According to Article 15 of the Insurance 17. What are the other complications,
Law No. 568446, local insurance policies concerns or other issues in relation
which secure insurable interests of the to the insurance provisions
Turkish residents in Türkiye are to be under the project financing
provided by local insurence companies. documentation, if any?
There is no restriction under the Insurance From a lenders’ perspective, insurance
Law regarding the applicable law for is one of the key elements of a security
insurance and/or reinsurance policies. package. The responsible party for
However, in line with the above-mentioned arranging and maintaining the insurance
Article 15, when both parties are Turkish differs in construction and operation
companies and the insured property is phases of a project. During the construction
located in Türkiye, some argue that the phase, all risks are generally insured by
choice of law to be applied to these policies the contractor with the contractor’s all
should be Turkish law, since there is no risk insurance policy, whereas during the
foreign element in the relevant insurance operation phase, operational risks such as
policies. Although this is debatable in business interruption or physical damage to
doctrine and Court of Appeal decisions, project assets are insured by the operation
according to prevailing views, there is no company or the project company itself.
203
Please be informed that in large-scale reasonable terms from a number of

projects the preference is to re-insure the insurance companies in respect of the
insurance policies in Türkiye, as in some insurances under limb (i).
circumstances the local insurers may not
Both concepts are commonly seen in
meet the credit ratings of international
Turkish PPP projects, such as the Build-
financiers or the parties prefer double
Lease-Transfer (“BLT”) model healthcare
protection against any risks in the project.
projects and the Build-Operate-Transfer
Another important consideration in (“BOT”) model motorway projects.
relation to the insurance provisions are the
“reinstatement test” and “uninsurability” E. Financing of Public-Private
provisions included in some PPP Partnership (PPP) Projects
agreements to increase the bankability of 18. Is PPP a permitted method of
the projects. developing projects, and if so, have
The reinstatement test provision provides any PPP projects been developed to
a mechanism whereby the proceeds of date in your jurisdiction?
insurance policies are used to reinstate PPP model is a permitted and preferred
the project facilities provided that (a) method for developing transportation,
such damaged part(s) of the project healthcare, and energy sectors. Under
assets/facilities can be duly repaired and Turkish Law, there is no single PPP model
reinstated in accordance with the project or a PPP framework law which is applicable
documents and relevant legislation, (b) to all PPP projects operating in all industry
the project company has duly performed sectors. Instead, there are various pieces
all of its obligations (including payment of legislation which envisage different PPP
obligations) until that date and has the models (i.e., BOT, BLT, Transfer of Operation
ability to repay the loan on the repayment Rights (TOR) and Build-Operate (BO)) in
dates in full until the final maturity date and different industry sectors. As of the date of
(c) the project company receives enough this questionnaire, Türkiye has invested in
insurance proceeds to make the necessary more than 260 PPP projects as also stated
payments mentioned under limb (a) above. in Answer 20 below.
The non-insurability provision increases the 19. Are direct agreements between the
bankability of the projects by providing a public authorities and the Lenders
mechanism whereby an non-insurability permissible under the local law, and
event is accepted as a force majeure event if so, commonly seen in the Project
by the relevant administration in PPP Finance market in your jurisdiction?
projects. In circumstances where (i) the
project company is unable to obtain, to Direct agreements are permissible under
maintain or to renew insurances (which it the Turkish law. In most of the PPP projects,
is required to obtain, to maintain and/or the project company, the lenders and
to renew under the financing documents the relevant third party (which may be
or pursuant to the project agreements) an administrative body in the case of
in the international insurance market on implementation contract direct agreements
commercially reasonable terms; (ii) the or private company in the case of EPC/O&M
premia in respect of the insurance under direct Agreements) sign direct agreements
limb (i) are, or have become, economically to have control over certain actions of such
unreasonable, or (iii) the project company third parties which may impact the project,
is unable to obtain offers on commercially through the step-in and substitution rights.
204
20. Please indicate the types of host • Healthcare Projects:

In healthcare projects, the Ministry of
Health, which is the relevant public
assumption etc.) available in your institution, guarantees the availability
jurisdiction. payments and the service payments, and a
The PPP projects in Türkiye are supported termination compensation, which includes
by the relevant public institutions through both the equity and the senior debt as
different types of government guarantees well as all financing costs in all termination
scenarios including project company
or debt assumption mechanism. As per
default termination.
the data published on the website of the
Presidency of the Republic of Türkiye • Energy Projects:
Presidency of Strategy and Budget47, more
Renewable energy generation companies
than 260 PPP projects, using four different
(wind power, solar power, biomass) benefit
PPP models, were completed in Türkiye from a specific support mechanism, called
since 1986. Among these models, the most as YEKDEM (Renewable Energy Sources
frequently used model is Build-Operate- Support Mechanism – Yenilenebilir Enerji
Transfer (BOT) model with 123 projects, Kaynakları Destekleme Mekanizması). Under
followed by the Transfer of Operation the YEKDEM scheme, EPİAŞ (Energy Market
Rights (TOR) model with 116 projects, the Operations Co.) acts as the market operator
Build-Lease-Transfer (BLT) model with 18 and organizes the balance between the
projects and the Build-Operate (BO) model supply and demand in the electricity
with five projects. market. Any company which is an actor
in the electricity market (as a generator,
• Transportation Projects: supplier, buyer, distributor etc.), may be
In motorway projects which are structured registered with this mechanism, which
through the BOT model, the project provides comfort for (i) the sellers by means
companies are granted with minimum of a guaranteed market price and (ii) for
traffic guarantee by the General Directorate the buyers by means of sufficient energy to
of Highways (KGM) of Türkiye. continue their business without enfacing
any energy shortages.
The details of such guarantee are included
in the project agreement between the YEKDEM has helped the energy market
project company and the relevant public become more stabilized and predictable.
institution. In addition to the traffic The payments made to the generation
guarantee, the project company executes companies were denominated in USD
a debt assumption agreement with the until recently, nevertheless it is now
lenders and the relevant public institution denominated in Turkish Liras.
(i.e., the Ministry of Treasury and Finance In addition to the YEKDEM mechanism,
and/or the Ministry of Transportation and Türkiye also adopted the “Regulation
Infrastructure) for the purposes of setting on Renewable Energy Resource Area”
forth the terms and conditions in relation to scheme (Yenilenebilir Enerji Kaynak Alanları
public institution’s debt assumption or debt or “YEKA Regulation”) in 2016 to further
payment undertaking upon termination of incentivise the renewable energy and
the underlying project agreement. to encourage the development and use
47 Available at https://koi.sbb.gov.tr/, updated as of November 2022.
205
of domestic manufacture of equipment As such risks are mostly related to the

required for large scale renewable energy competence of the public party and the
generation facilities. While the YEKDEM public party is more capable of minimizing
scheme has encouraged local of equipment such risks rather than the private party,
manufacturing by offering an increase these risks are generally undertaken by the
in feed-in tariffs for projects that utilise public party under the PPP agreements
local equipment, the YEKA scheme goes (or the direct agreements to such PPP
one step further by mandating the use agreement) and the private party is
of local equipment in projects that are protected. Political risks are also sometimes
tendered under the YEKA regulation. The named as non-natural force majeure event.
YEKA regulation introduced two types of
YEKA models: (a) the YUKT (“Allocation in
Exchange for Domestic Production”) model,
in which the investor is granted with the
right to construct and operate renewable
agreement?
energy generation facilities and to sell, at a
guaranteed price, the electricity produced The lenders and investors are usually
by such generation facilities provided protected against the risk in change in law,
that the equipment used in the facilities falling within the scope of political risk,
is also manufactured by the investor, and which is more likely to be attributable to
(b) the YMKT (“Allocation in Exchange the public party, as explained under Answer
for Use of Domestic Products”) model, 21.
in which the investor is granted with the
right to construct and operate renewable
energy generation facilities and to sell, at a
legislation?
guaranteed price, the electricity produced
by the generation facilities provided that Force majeure is not specifically regulated
the equipment used in the facilities is under the Turkish legislation (other than
domestically sourced (not manufactured by some sector specific regulations such
the investor). as the Renewable Energy Resource Area
(YEKA) Regulation48). However, the concept
is defined within the framework of the
doctrine and decisions of the Supreme
Court. A force majeure event may be
described as an event which cannot be
Political risks arise from events, such prevented or avoided by a party exercising
as governmental actions which may reasonable and prudent care. Force majeure
jeopardize the bankability or commercial events refer to the events which occur due
viability of the projects (e.g., expropriation, to a natural cause or human act or omission
nationalization or restrictions on foreign beyond control on a non-exhaustive basis.
currency income or change in law which The most common force majeure event
prevents the project to continue with the examples listed in Turkish law governed
agreed terms or causes an increase in the project financing documents are acts of
project costs), or political force majeure God, pandemics and epidemics, wars, legal
events such as wars, riots, civil disturbances, strikes, public uprisings, declaration of
terrorist attacks or nationwide strikes. mobilization and sabotage.
206
24. What are the general environmental the obligations of the employers, arising
and social requirements in project from the Occupational Health and Safety
financings? Law.
Pursuant to Article 10 of the Environmental Other than these general provisions, there
Law numbered 2872 (the “Environmental are secondary legislation with special
Law”), “institutions, organizations requirements as well which is applicable to
and establishments which may cause specific type of the project financings.
environmental issues because of their F. Jurisdiction, Waiver of
scope of activity, are under the obligation Immunity
to prepare an Environmental Impact
Assessment (EIA) Report or a project 25. Are submission to a foreign law and
information file. Unless an EIA Affirmative the waiver of immunity provisions
Decision or EIA Not Required Decision is enforceable?
obtained, then other approval, consent, Pursuant to the International Private
incentive, construction and use permits and Procedural Law numbered 571849,
are not granted for the projects and parties may agree on a foreign law as the
investment cannot be commenced or governing law, as long as the relevant
tendered”. Therefore, the project companies agreement embodies a “foreign element”
cannot commence construction until the and unless the subject matter of the
EIA process is finalized. The Environmental dispute is within the exclusive jurisdiction
Impact Assessment Regulation regulates of the courts of Türkiye.
the administrative and technical
procedures and principles to be followed According to prevailing opinion in
in the EIA process. The Environmental Law the doctrine and the Court of Appeals
stipulates certain measures and penalties (Yargıtay), the selection of a foreign law
for the projects of which construction and/ by the parties of a contract, is deemed as
or operation phase commences before the a foreign element and there is no need
finalization of the EIA process. Pursuant for other (objective) foreign elements
to Article 15 of the Environmental Law, such as foreign party, foreign location,
the activities initiated without conducting etc. However, there are exceptional court
EIA inspection or preparing the project precedents suggesting the opposite too.
information file, shall be suspended. Therefore, if there are no objective foreign
elements in an agreement, but nevertheless
The project companies should also act in foreign courts’ jurisdiction is stated, it is still
accordance with occupational health and allegeable that there is foreign element
safety provisions under Law numbered based on the selection of foreign law.
6331 on Occupational Health and Safety However, it is worth putting a qualification
(the “Occupational Health and Safety saying that there are exceptional court
Law”). Preventing occupational risks, taking precedents on the opposite view as well.
all kinds of measures, (such as training of
its employees, monitoring whether the Waiver from immunity clauses is valid
occupational health and safety measures under Turkish law. However, there is a
are taken in the workplace), adapting certain restriction regarding the seizure of
health and safety measures to the changing public assets under the Enforcement and
conditions in the workplace, are some of Bankruptcy Law, which are considered as
207
related with public order, and therefore, G. Trends and Projections

cannot be waived. In very broad terms,
assets of the public entities which are
allocated to the performance of a public
jurisdiction?
service (as opposed to commercial assets)
cannot be seized. In order to reduce the nation’s greenhouse
gas emissions, Türkiye is highly focused on
increasing the renewable energy supply.
for arbitration clauses? The renewables are expected to supply
Yes. The validity of arbitration clauses in almost a quarter of the nation’s energy
finance documents shall be interpreted in by 2035 according to the Government’s
accordance with the governing law of the expectation. In particular, sustainability and
relevant finance document. Turkish law other environmental and social concerns
shall only become applicable if there is a are expected to be the driving factors in the
public policy concern. project financing over the coming years in
Türkiye.
Türkiye is a party to the 1958 New York
Convention on the Recognition and 28. Are any significant development or
Enforcement of Foreign Arbitral Awards,
which provides that an arbitral award
issued outside Türkiye and within the Currently, there are ongoing discussions in
territory of a state which is a party to relation to the alternative project financing
such convention, will be recognized and sources, such as the project finance funds
enforced by the Turkish courts, without introduced under the Capital Markets Law
re-examination of the merits of the case, and the Communiqué on Project Finance
subject to the criteria and the procedures Funds and Bonds issued by the Capital
set forth in the said Convention. Markets Board, in order to differentiate
the available funding sources for project
The Turkish Court of Appeals (Yargıtay), financings in Türkiye.
in its reviews of Turkish law governed
arbitration clauses, previously indicated 29. What are the alternative reference
that the choice of arbitration in an interest rates which are being
agreement shall be exclusive, not an commonly used in your jurisdiction
alternative. during the LIBOR transition period?
SOFR is considered as the main alternative
reference rate during the LIBOR transition
period.
208
TURKMENISTAN
CENTIL
Kamilla Khamraeva Zamira Mullyadjanova

Senior Associate Junior Associate
kamilla.k@centil.law zamira.mullyadjanova@centil.law
A. Overview Foreign Economic Relations” No.230-IV

dated 1 October 2011;
international treaties governing the − Law of Turkmenistan “On Investment
project financing in your jurisdiction? Activity” No.698 dated 19 May 1992.
The legislation of Turkmenistan does not 2. How mature is the project finance
provide for a single specific legislative act market in your jurisdiction, and
which regulates the project financing in what are the most significant project
the country. Turkmen legislation contains financings closed during the last 12
several legal acts that regulate the main months?
aspects of project financing. The project finance market of Turkmenistan
− Civil Code of Turkmenistan; remains at a very low level among
other Central Asian countries. General
− Law of Turkmenistan “On Public – political and investment environment of
Private Partnership No. 379-VI dated 5 Turkmenistan is still underdeveloped and
June 2021; need more consistency and stability.
− Law of Turkmenistan “On Foreign Most significant projects closed over the
Investments’’ No. 184-III dated 3 March past 12 months are green energy and
2008; manufacturing projects.
− Law of Turkmenistan “On Pledge” No. B. Security Interest
862-XII dated 1 October 1993;
− Law of Turkmenistan “On Currency security types in project financings in
Regulation and Currency Control in your jurisdiction?
209
The most commonly used security types in Yes, Turkmen legislation allows to establish
project financing in Turkmenistan are: security interest over future assets, rights
and receivables in case if such future
− Mortgage;
assets, rights and receivables can be clearly
− Pledge of movable property (vehicles, identified and categorized (type of the
equipment); rights/property, location, serial/inventory
number, number of the contract and etc.).
− Pledge of Contractual Rights;
4. Can the shares of a company be the lenders to enforce their security
pledged as a security to the benefit interest, in case the borrower
of lenders? If so, is there a specific becomes insolvent, is technically
requirement in terms of formalities insolvent and/or commences
or procedure to be followed for composition process?
pledge? The concept of technical insolvency is not
defined and recognized under Turkmen
Yes, in accordance with the Law of laws. Thereby, enforcement of security in
Turkmenistan “On pledge” shares of a such cases should be agreed by the parties
company can be pledged as a security to under the security documents.
the benefit of lenders.
Enforcement of security interest in case of
The following registration procedures insolvency of the borrower.
shall be executed for establishing and/or
Under Turkmen laws, the legal entity
perfecting a share pledge:
can be declared as bankrupt (insolvent)
− Pledge of shares agreement should be only upon the decision of a court. After
notarized; the bankruptcy procedures have been
commenced by the court, all further actions
− Registration of pledge agreement with
on behalf of the creditors are carried out
the Tax Department of the Ministry of only by the winding-up commission50. The
Finance and Economy of Turkmenistan; creditors shall register themselves in the
5. Is private sale a recognized method registry of creditors, where all claims of the
for the enforcement share pledge? creditors are reflected.
What are the endorsement types The process of enforcement of the security
typically used for the share interest shall begin upon the relevant
certificates? decision of the court has been issued.
Private sale is not recognised as a method Settlements with the creditors are
for the enforcement of share pledge under conducted by the winding-up commission
Turkmen law. Enforcement of the share in accordance with the register of creditors
pledge is executed only through the public in the order, established under the Law of
online-auction, via stock exchange. Turkmenistan “On Insolvency”.
6. Can security interest be established Claims of secured creditors are satisfied
over future assets, rights and from the funds received after the sale of the
receivables of the borrower? secured property.
50 Law of Turkmenistan “On Enterprises” No. 28-II dated 15 June 2000.
210
8. Is security trustee concept Economic Zones;

− Exemptions from several types of
registration and certification fees/state
duties;
The concept of the security trustee is not
recognized under Turkmen legislation. borrowing bank loans and
Turkmen law requires that only the shareholder loans from abroad and/
lender (creditor) can act as a pledgee. In or in a foreign currency?
case if there are several creditors under
the same facility agreement, one of the There are no restrictions for borrowing
creditors (agent) can act as a security bank loans and shareholder loans from
agent (pledgee) on behalf of other secured abroad and/or in a foreign currency.
creditors. 12. Are there any restrictions for
C. Incentives and Restrictions foreign investments in your
jurisdiction?
exemptions for project financing in Yes, Turkmen law establishes the limits
your jurisdiction? on foreign investments in certain areas
of economy, which are considered as
Incentives and exemptions depend on strategically and economically significant
the types of the projects which are being areas.
financed. There are several government
Such limitations apply to the amount of
support programs which provide incentives
equity participation of foreign investors/
in different areas, such as agriculture,
citizens. In addition, foreign investors/
textile, green energy and etc. Mainly, the
citizens are not allowed to privatize the
incentives are provided in the form of tax
land plots located in the territory of
and customs exceptions. Turkmenistan.
10. Are there any incentives or 13. Is there any minimum equity
exemptions specifically applicable requirement, under the legislation
to foreign investors? or in practice, for project financings
Yes, the Law of Turkmenistan “On foreign in your jurisdiction?
Investments”51 provides for the incentives Turkmen laws do not provide for the
and exemptions specifically applicable to minimum equity requirement for project
foreign investors: finance.
− Customs exemptions; 14. Please explain the registration
− Tax exemptions; and filing requirements which
− Exemption for obtaining the license on documents to be valid and
importing goods/services for their own enforceable in your jurisdiction.
needs, and exporting goods/services of
Following registration and filing
their own production;
requirements are applicable for project
− Land lease incentives on land plots, finance documents to be valid and
located on the territories of Free enforceable in Turkmenistan:
51 Law of Turkmenistan “On Foreign Investments”.
211
− Registration of loan agreement with (reinsurance broker) is obliged to offer

Central Bank of Turkmenistan; proposals to conclude reinsurance
contracts in the amount of at least
− Depending on the type of security –
50 percent of the obligations to local
registration with the relevant authority
insurance companies.
and register;
− Registration of onshore export and
import contracts under the project with
the State Commodity Exchange. 18. Is PPP a permitted method of
D. Insurance any PPP projects been developed to
15. Can local insurance policies be date in your jurisdiction?
governed by a foreign law? Yes, PPP is a permitted method of
No, local insurance policies may not be developing projects in Turkmenistan.
governed by a foreign law. However, the PPP is a relatively new
concept under Turkmen law, since the law
16. Can insurance proceeds under the defining and regulating the PPP projects
insurance and reinsurance policies has been adopted only in 2021.
lenders? In 2021 PPP project for development of
solar and wind power stations with capacity
Yes, insurance proceeds under the of 10 MW between the government of
insurance and reinsurance policies be Turkmenistan and private foreign investor
assigned to the benefit of the lenders if has been implemented.
such assignment clause is provided under
the insurance. 19. Are direct agreements between the
17. What are the other complications, permissible under the local law, and
concerns or other issues in relation if so, commonly seen in the Project
to the insurance provisions Finance market in your jurisdiction?
Turkmen laws do not explicitly provide for
possibility of direct agreements between
Following requirements of local legislation the public authorities and the Lenders.
should be considered: However, the Law of Turkmenistan “On
Public-Private Partnership” allows the
- Insurance of the property interests of a
direct PPP agreements between the public
legal entity - resident of Turkmenistan
authorities and private parties.
located on the territory of Turkmenistan
can be insured only by an insurance 20. Please indicate the types of host
company - resident of Turkmenistan, government supports (including
except otherwise explicitly provided treasury guarantee, debt
under the law; assumption etc.) available in your
jurisdiction.
- Authorized state authority has a right
to provide minimum requirements and The following types of host government
conditions to insurance contracts; support are available under PPP:
- Prior to the assignment of insurance − subsidies to insure a guaranteed
obligations for reinsurance to foreign minimum income of a private partner
insurance companies, the reinsurer from implementation of PPP project;
212
− contributions in the forms of assets 23. Is force majeure specifically

and property necessary for the regulated under the local
implementation of PPP project; legislation?
− provision of financial support in form of Force majeure is not specifically regulated

loans, subsidies; under the local legislation. Turkmen
legislation provides only for the general
− provision on guarantees; reservation, which states that the party
− tax, customs preferences/exemptions52; has a right to terminate the long-term
agreement prior its expiration date in case
Local legislation does not provide for of force-majeure circumstances if such
exhaustible list of host governmental affected party is not able to performs its
support for private parties under PPP. Host contractual obligations54.
government support can also be provided
in other forms, which are not prohibited
under Turkmen laws.
financings?
Investment projects with foreign
under the responsibility of the investments are subject to mandatory state
public party or the private party environmental expertise55.
In addition, under the Law of Turkmenistan
Political risk events under the PPP “On environmental safety”56 certain types
agreements are usually under the of activities established by the regulatory
responsibility of the public party. authorities require the positive conclusion
22. Are investors and lenders usually of state environmental expertise on the
environmental impact assessment.
law passing subsequent to the Turkmenistan has no specific legislation
signing of the relevant concession governing social matters under project
agreement? financings. Social requirements are
mainly provided under the relevant PPP
Investors and lenders under PPP projects
agreements. Usually, such requirements
are protected against the changes in include creation of new workplaces for
law passing subsequent to the signing local citizens, training/educating the
of the relevant PPP agreement if such local personnel, development of local
amendments worsen the investment infrastructure and etc.
conditions for the private party. In such
cases, the legislation of Turkmenistan which F. Jurisdiction, Waiver of
was in force at the moment of signing of Immunity
the PPP agreement shall be applicable for 25. Are submission to a foreign law and
ten years from the date of signing of the the waiver of immunity provisions
PPP agreement53. enforceable?
52 Law of Turkmenistan “On Public-Private Partnership”.

53 Law of Turkmenistan “On Public-Private Partnership”.
54 Civil Code of Turkmenistan.
55 Law of Turkmenistan “On Foreign Investments”.
56 Law of Turkmenistan “On environmental safety” No. 569 – V dated 3 June 2017.
213
Yes, submission to a foreign law and The Turkmenistan government never

the waiver of immunity provisions are publicly discloses its programs and
enforceable under Turkmen law. roadmaps on development of certain
industries and regulatory areas.
However, there are several mandatory
provisions mainly provided under the Civil 29. What are the alternative reference
Procedural Code of Turkmenistan and interest rates which are being
other legislative acts, which may not be commonly used in your jurisdiction
governed by foreign laws. In such cases, during the LIBOR transition period?
only provisions of Turkmen laws shall be Alternative reference interest rate is the
applied. refinancing rate of the Central Bank of
For example, enforcement procedure Turkmenistan.
of the pledge, bankruptcy procedures,
mandatory requirements for registrations/
fillings, form of agreements, issues related
to land, immovable property located on the
territory of Turkmenistan and etc.
Yes, the Law of Turkmenistan “On
International Commercial Arbitration”57
allows to provide for arbitration clauses in
financing documents in case if one of the
parties to the agreement is a non-resident
of Turkmenistan.
Turkmenistan is a party to several
international conventions on recognition
and enforcement of foreign arbitral awards,
including the ICSID Convention and New
York Convention (1958).
jurisdiction?
The main current trends in project
financing in Turkmenistan are concentrated
on agriculture, manufacturing and green
energy projects.
57 Law of Turkmenistan “On international Commercial Arbitration” No. 101-V dated 16 August 2014.
214
UNITED ARAB EMIRATES

GREENBERG TRAURIG, LLP
Shibeer Ahmed Luke Robinson

Shareholder Senior Associate
shibeer.ahmed@gtlaw.com luke.robinson@gtlaw.com

The main legislation governing project The project finance market in the UAE is
financing in the United Arab Emirates (the considered to be well-established and
“UAE”) is the Federal Law No. 50 of 2022 mature. The UAE has a well-developed
regarding the Commercial Transactions infrastructure, a stable legal and regulatory
Law. framework, and a thriving economy, which
make it an attractive destination for project
There are no international treaties finance. Over the years, the country has
specifically dealing with project financing attracted significant investment in various
transactions, although various treaties (i.e., sectors, including energy, real estate,
such as bilateral investment treaties and transportation, and healthcare, among
free trade agreements that the UAE has others.
signed with other countries) cover general Some of the most significant project
areas that may be of relevance. In particular, financings in the UAE in the last 12 months
the UAE is a signatory to the UN Convention include:
on the Recognition and Enforcement of • the financing of the Dubai Electricity
Foreign Arbitral Awards 1958 (New York and Water Authority’s (DEWA) solar
Convention), which can be of relevance to projects expected to power 270,000
project financing transactions as it allows homes and offset carbon emissions
the enforcement of international arbitral amounting to 1.18 million tons per year
awards in the UAE. in Dubai
215
• the financing of Zayed City Schools lender in the event of default by the
PPP project in Abu Dhabi relating to borrower.
the design, build, finance, maintenance
and transfer of three school campuses • Assignment of Contracts: assignment
with a capacity of over 5,000 students, of contracts is a common security type
the first social infrastructure project in project financing in the UAE, in which
in the UAE to achieve financial close the borrower assigns certain contracts
under Abu Dhabi’s new PPP regulatory or revenues (such as insurance
framework proceeds) to the lender as collateral for
the loan.
• the financing of a high voltage direct
current offshore power transmission These security types are not mutually
project involved the construction, exclusive and may be used in combination
ownership and operation of a system in a project financing transaction to provide
linking two offshore production the lender with a comprehensive package
facilities owned by the Abu Dhabi of security. The type and extent of security
National Oil Company (ADNOC) with required for a project financing will depend
the Abu Dhabi onshore power grid on various factors, including the nature
B. Security Interest of the project, the creditworthiness of the
borrower, and the lender’s risk tolerance.
security types in project financings in 4. Can the shares of a company be
your jurisdiction? pledged as a security to the benefit
In the UAE, the most used security types in requirement in terms of formalities
project financings are: or procedure to be followed for
• Mortgage: a mortgage is a common establishing or perfecting a share
form of security in project financing in pledge?
the UAE. It is typically used to secure a Yes, shares of a company can be pledged
loan by granting the lender a lien on as security to the benefit of lenders in the
the property that is being financed. UAE. A pledge of shares is a common form
• Pledge: a pledge is a security interest of security in project finance transaction. In
in specific assets, such as inventory, terms of formalities and procedure, specific
accounts receivable, or equipment, that formalities and procedure vary based on
is granted to the lender to secure a loan. the jurisdiction within the UAE and the
specific requirements of the lender.
• Guarantee: a guarantee is a promise
by a third party to repay the loan if the To establish and perfect a share pledge in
borrower defaults. In project financing, the UAE, the following steps are typically
a guarantee is often provided by a followed:
parent company or a wealthy individual
1) The pledgor (i.e., the owner of the
to support the project.
shares in the company) and the
• Escrow: an escrow arrangement is a lender must enter into a share pledge
contract between the lender and the agreement, setting out the terms and
borrower that requires the borrower to conditions of the pledge, including
deposit funds into an escrow account the obligations of the pledgor and the
to secure the loan, and released to the rights of the lender.
216
2) The pledgor must execute and deliver a This type of endorsement is often used in
pledge certificate to the lender, which project finance transactions, as it allows for
evidences the pledge of the shares and the quick and easy transfer of ownership of
the transfer of the right to vote and the shares.
receive dividends to the lender.
In the case of a “registered” endorsement,
3) The pledge certificate must be the share certificate must be registered
registered with the relevant regulatory with the relevant regulatory authority, such
authority, such as the Dubai Financial as the DFSA or the FSRA, and any transfer
Services Authority (the “DFSA”) in the of ownership must be recorded in the
Dubai International Financial Centre register of shareholders maintained by the
(the “DIFC”) or the Financial Services
company. This type of endorsement is often
Regulatory Authority (the “FSRA”) in the
used for more complex transactions, as it
Abu Dhabi Global Market (the “ADGM”).
provides greater protection to the lender
4) The pledge must be noted in the and increases the transparency of the
register of shareholders maintained by transaction.
the company.
5) In some cases, the pledge agreement over future assets, rights and
may also require the pledgor to provide receivables of the borrower?
additional documentation (such as
proof of ownership of the shares and Yes, security interests can be established
evidence of the compliance with any over future assets, rights, and receivables
regulatory requirements). of a borrower in the UAE. In a project
financing context, a security interest in
future assets, rights, and receivables of the
borrower can be a useful tool for lenders,
as it allows them to secure their interests in
the project and protect their loan against
certificates?
the risks associated with the borrower’s
In the UAE, private sale is a recognized operations.
method for the enforcement of a share
pledge. If the borrower defaults on its To establish a security interest in future
obligations, the lender can enforce its rights assets, rights, and receivables of the
under the pledge agreement by selling the borrower, the following steps are typically
shares pledged by the pledgor in a private followed:
sale to a third party. • the borrower and the lender must enter
The endorsement types typically used for into a security agreement that sets out
share certificates in the UAE depend on the the terms and conditions of the security
jurisdiction within the UAE and the specific interest, including the scope of the
requirements of the lender. In Dubai, for assets, rights, and receivables that are
example, share certificates can be endorsed subject to the security interest
either in “bearer” or “registered” form. • the security agreement must be
In the case of a “bearer” endorsement, registered with the relevant regulatory
the share certificate can be transferred authority, such as the DFSA or the FSRA,
by delivery alone, without the need for to ensure that it is legally binding and
any further endorsement or registration. enforceable
217
• the borrower must take all necessary process, the lender may commence
steps to ensure that the security interest legal proceedings to enforce its security
is reflected in its books and records interest. The specific legal proceedings
and that it does not take any actions will depend on the jurisdiction within
that would undermine the validity or the UAE and the specific terms of the
enforceability of the security interest security agreement.
The specific requirements and procedure It is important to note that the process for
for establishing a security interest in enforcing a security interest in the UAE
future assets, rights, and receivables of may be complex and may take a significant
the borrower may vary based on the amount of time.
jurisdiction within the UAE and the specific
requirements of the lender.
7. What are the steps to be taken by not, is an alternative mechanism,
the lenders to enforce their security such as a parallel debt, available?
The common law concept of trust is not
legally recognised in the UAE, and an
instrument purporting to create a trust
might be construed by the UAE courts as
In general, the following steps may be giving rise to an agency, bailment, or other
taken by the lenders to enforce their relationship. The concept of a local security
security interest: agent (i.e., an agent holding security for
the benefit of third parties), however, is
• Notification: in the event of a borrower
recognised (as the equivalent to a security
default, the lender will typically send
trustee in another jurisdiction) and
a notice of default to the borrower,
enforceable.
outlining the breach and, if applicable,
giving the borrower a specified period As an alternative, paralegal debt structures
of time to cure the breach. may be used in the UAE, although they may
be subject to regulatory approval and may
• Enforcement: if the breach is not cured be subject to specific legal requirements. In
within the specified time period (if a parallel debt structure, multiple lenders
applicable), the lender may enforce its provide financing to the borrower, and
security interest by selling the collateral each lender takes a separate security
to a third party. In some cases, the interest in the same assets. This structure
lender may also have the right to take provides each lender with its own separate
possession of the collateral and sell it and distinct security interest and allows the
without the need for a court order. lenders to enforce their security interests in
• Receiver: in some cases, the lender the event of a borrower default.
may appoint a receiver to manage C. Incentives and Restrictions
the collateral and sell it on its behalf.
The receiver will be appointed by the 9. What are the main incentives and
lender and will have the power to take exemptions for project financing in
possession of the collateral and sell it to your jurisdiction?
a third party.
The main incentives and exemptions
• Legal proceedings: if the borrower for project financing in the UAE vary
becomes insolvent, is technically by jurisdiction within the country, but
insolvent, or commences a composition generally include the following:
218
• Tax exemptions: the UAE offers tax • Bank loans from abroad: borrowing
exemptions on corporate income and bank loans from abroad are generally
personal income for a specified period permitted in the UAE, but may be
of time for certain types of projects and subject to regulatory requirements and
investors. restrictions, including the need for prior
approval from the CBUAE.
• Infrastructure support: the UAE
government provides infrastructure • Shareholder loans: borrowing
support to help companies and shareholder loans from abroad may be
investors establish and operate their subject to restrictions and regulatory
businesses in the country, including requirements, including restrictions
access to transportation, energy, and on the amount that can be borrowed,
other essential services. the use of the loan proceeds, and the
requirement to provide security or
• Guaranteed returns: in some cases, collateral.
the UAE government may guarantee
a minimum return on investment for 12. Are there any restrictions for
certain projects or investors. foreign investments in your
jurisdiction?
• Loan Guarantees: the UAE government
The UAE generally has a welcoming
may also provide loan guarantees to
attitude towards foreign investment and
help investors secure financing for their
provides a supportive environment for
projects.
foreign investors. However, there may be
10. Are there any incentives or some restrictions on foreign investment in
exemptions specifically applicable certain sectors, including:
• Strategic sectors: foreign investment
Foreign investors are eligible for most of the in certain strategic sectors, such as
same incentives and exemptions as local military equipment, may be restricted.
investors in the UAE, although the specifics • Ownership restrictions: in some cases,
may vary by jurisdiction. foreign ownership of businesses may
11. Are there any restrictions for be limited to a specified percentage,
borrowing bank loans and depending on the sector and the
shareholder loans from abroad and/ jurisdiction within the UAE.
or in a foreign currency? • Capital requirements: certain sectors
In the UAE, borrowing bank loans and may require foreign investors to meet
shareholder loans from abroad and/or minimum capital requirements.
in a foreign currency may be subject to • Approvals: foreign investment in some
restrictions and regulatory requirements. sectors may require prior approval from
• Foreign currency loans: borrowing in the relevant authorities, such as the
a foreign currency is generally allowed Department of Economic Development
or the CBUAE.
in the UAE, but the Central Bank of the
UAE (the “CBUAE”) regulates the foreign 13. Is there any minimum equity
currency transactions, and there may requirement, under the legislation
be restrictions on the amount of foreign or in practice, for project financings
currency that can be borrowed. in your jurisdiction?
219
In the UAE, there is no specific minimum • Security documents: security

equity requirement under the legislation documents, such as mortgage or
for project financings. However, in pledge agreements, must be registered
practice, most project financings involve with the relevant authorities in order to
a certain level of equity participation from be enforceable against third parties.
the project sponsors or developers. The • Notarization: certain project finance
amount of equity required for a particular documents, such as power of attorney
project financing will depend on various or security documents, may need to be
factors, such as the size and complexity notarized by a public notary in order to
of the project, the creditworthiness of the be recognized and enforceable in the
sponsors, and market conditions. UAE.
In general project financiers and • Translation: if the project finance
lenders will require some level of equity documents are executed in a language
participation from the project sponsors other than Arabic, they may need to be
to demonstrate their commitment to translated into Arabic and notarized by
the project and to provide a cushion a public notary to be recognized and
against potential losses. This equity enforceable in the UAE.
participation can take the form of cash
equity, shareholder loans, or other forms of D. Insurance
contributions to the project. 15. Can local insurance policies be
and filing requirements which In the UAE, the law applicable to insurance
are applicable for project finance policies is determined by the law of the
documents to be valid and jurisdiction in which the policy is issued.
enforceable in your jurisdiction. If the policy is issued by a local insurance
company, it will typically be governed
In the UAE, project finance documents are
by the laws of the UAE. However, if the
subject to various registration and filing policy is issued by a foreign insurance
requirements in order to be valid and company, it may be governed by the laws
enforceable. Some of the key requirements of the jurisdiction in which the insurance
are as follows: company is located.
• Offshore: if the project is located within In practice, insurance policies issued by
the DIFC or the ADGM, the project foreign insurance companies are typically
finance documents must be executed in governed by the laws of the jurisdiction
accordance with the DIFC or ADGM law in which the insurance company is
(as applicable) and must be registered located, regardless of the location of the
with the DIFC Companies Registrar of policyholder or the insured property. The
the ADGM Companies Registrar (as governing law will be specified in the
applicable). policy terms and conditions and may be
• Onshore: the project finance subject to change if the policyholder and
the insurance company agree to a different
documents must be executed in
governing law.
accordance with the applicable laws
and regulations of the relevant Emirate, 16. Can insurance proceeds under the
and may need to be registered with insurance and reinsurance policies
the relevant authorities, such as the be assigned to the benefit of the
Department of Economic Development. lenders?
220
Yes, insurance proceeds under insurance the interpretation and enforcement

and reinsurance policies can be assigned of the insurance provisions. It is
to the benefit of lenders in certain important to consider the choice of
circumstances. The assignment of insurance law and jurisdiction carefully in order
proceeds is generally governed by the to minimize the risk of disputes and
terms and conditions of the policy and may ensure that the insurance provisions are
also be subject to any applicable laws and enforceable.
regulations.
• Insurance coverage: there may be
If the assignment of insurance proceeds limitations on the type and amount
is permitted under the policy, it of insurance coverage that is available
typically requires the consent of both for a particular project. It is important
the policyholder and the insurer. The to review the policy and ensure the
assignment may also require the execution coverage is adequate for the risks
of a written agreement between the involved.
policyholder, the insurer, and the lender,
• Claims handling and payment:
and the agreement may need to be
the process for handling and paying
registered with the relevant authorities to
insurance claims may vary depending
be enforceable.
on the policy and jurisdiction, and
Assignment of insurance proceeds is it is important to understand the
a common feature in project finance process and ensure that the insurance
transactions and is used to provide provisions provide for an efficient and
additional security for the lenders by effective claims handling and payment
allowing them to receive the insurance process.
proceeds in the event of a loss or damage
• Premium payment and renewal: The
to the insured property.
payment of insurance premiums and
17. What are the other complications, the renewal of insurance policies are
concerns or other issues in relation critical to ensuring that the insurance
to the insurance provisions coverage remains in force. It is
under the project financing important to ensure that the insurance
documentation, if any? provisions provide for the payment of
premiums and the renewal of policies in
In the UAE, there are several complications,
a timely and efficient manner.
concerns, and other issues that may arise
in relation to insurance provisions under • Assignment of insurance proceeds:
project financing documentation. Some of the assignment of insurance proceeds
these include: may be subject to restrictions under
the laws of the jurisdiction in which the
• Regulatory compliance: insurance
policy is issued, and it is important to
policies and the assignment of
ensure that the assignment of insurance
insurance proceeds may be subject
proceeds is valid and enforceable.
to regulation by the local insurance
authorities, and it is important to ensure E. Financing of Public-Private
that the insurance provisions comply Partnership (PPP) Projects
with all applicable regulations and laws.
• Choice of law and jurisdiction: the developing projects, and if so, have
laws of the jurisdiction in which the any PPP projects been developed to
insurance policy is issued may govern date in your jurisdiction?
221
Yes, Public-Private Partnerships (“PPPs”) Direct agreements between public

are permitted as a method of developing authorities and lenders are generally
projects in the UAE, and the UAE has a permissible under UAE law, and they are
long-standing commitment to promoting not uncommon in the project finance
PPPs as a means of delivering high-quality market in the UAE. These types of
infrastructure and services to its citizens agreements are used to provide lenders
and businesses. with additional comfort and security in
relation to the project and the public
Several PPP projects have been developed
in the country in recent years. Some of the authority’s obligations.
key sectors in which PPPs have been used Direct agreements typically set out the
in the UAE include: terms and conditions under which the
• Energy: the UAE has implemented a public authority will provide support to
number of PPPs in the energy sector, the project and may include provisions
including the development of power relating to the project’s revenue streams,
plants, renewable energy projects, and the public authority’s obligations to
energy transmission and distribution maintain the infrastructure and services
networks. provided by the project, and the public
authority’s guarantees and indemnities to
• Transportation: PPPs have been used the lenders. In some cases, they may also
to develop transportation infrastructure include provisions that allow the public
in the UAE, including highways, bridges, authority to take certain actions in the
ports, and airports. event of the borrower’s default, such as the
• Healthcare: the UAE has implemented appointment of a receiver or the transfer
a number of PPPs in the healthcare of the project assets to a new operator,
sector, including the development of however the terms of the agreements are
medical facilities, hospitals, and clinics. subject to negotiation between the public
authority and the lenders, and dependent
• Education: PPPs have been used to on the circumstances of the project.
develop educational facilities in the
UAE, including schools and universities. 20. Please indicate the types of host
• Tourism: the UAE has implemented a treasury guarantee, debt
number of PPPs in the tourism sector, assumption etc.) available in your
including the development of hotels, jurisdiction.
resorts, and theme parks.
In the UAE, the types of host government
The UAE continues to promote PPPs support available for project financing may
as a means of delivering high-quality include:
infrastructure and services, and it is
expected that PPPs will play an important • Treasury Guarantees: the government
role in the development of the country’s may provide a guarantee in support of
infrastructure and services in the years to the project’s debt, which means that
come. the government agrees to repay the
debt if the borrower is unable to do so.
public authorities and the lenders • Debt Assumption: the government
permissible under the local law, and may take on the project’s debt as its
if so, commonly seen in the Project own, which means that the government
Finance market in your jurisdiction? is responsible for repaying the debt.
222
• Revenue Sharing Agreements: financial viability of a PPP project, and

the government may agree to share careful consideration should be given to
a portion of the project’s revenue this issue during the negotiation process.
with the lenders, which can provide
additional security for the lenders.
• Off-take Agreements: the government law passing subsequent to the
may agree to purchase a portion of the signing of the relevant concession
project’s output, which can provide agreement?
additional security for the lenders and
In the UAE, the protection of investors
help to ensure that the project has a
and lenders against a change in law is
steady source of revenue.
typically addressed in the concession
• Tax Incentives: the government agreement between the public authority
may provide tax incentives, such as and the private party, however the terms
tax holidays or reduced tax rates, to and conditions of the change in law clause
encourage investment in the project. can vary widely between concession
agreements, and the specific provisions
• Land Concession Agreements: the
will depend on the circumstances of
government may provide land to the
each project. Such a clause may include
project developers, either through
provisions for compensation, termination
a lease agreement or a concession
or amendment of the agreement, or other
agreement.
remedies.
• Other: the government may provide
In general, the UAE has a stable and
other forms of support, such as
predictable legal and regulatory
infrastructure improvements or
framework, and changes in law are
regulatory changes, to support the
relatively rare. However, it is still important
development and operation of the
for investors and lenders to consider the
project.
risk of changes in law as part of their due
21. Are political risk events usually diligence and risk assessment process
under the responsibility of the when evaluating potential investment
public party or the private party opportunities in the UAE.
In the UAE, the allocation of responsibility regulated under the local
for political risk events under Public-Private legislation?
Partnership (PPP) agreements is typically
Yes, the UAE Civil Code includes provisions
subject to negotiation between the public
for force majeure, which are generally
party and the private party. In some cases,
applicable to contracts governed by
the public party may assume the majority
UAE law. Force majeure is defined as an
of the risk for political events, such as
extraordinary event or circumstance that
changes in laws or regulations that impact
is beyond the control of the parties and
the project. In other cases, the private party
that makes it impossible for one or both
may assume a significant portion of the
parties to fulfill their obligations under the
risk and be responsible for managing and
contract. In practice, force majeure clauses
mitigating the effects of political risks.
are included in many contracts in the UAE,
The allocation of political risk can have a including project financing agreements, to
significant impact on the structure and address the risk of events such as natural
223
disasters, epidemics, or other events In the UAE, it is possible for parties to a

that may disrupt the performance of the contract to agree to have their agreement
contract. governed by a foreign law and to submit to
the jurisdiction of foreign courts, provided
The application of force majeure provisions
that the foreign law does not conflict
will vary depending on the specific terms
with the laws of the UAE. It is, however,
of the contract and the circumstances
important to note that the UAE’s courts will
of the case. Parties to a contract should
apply UAE law in the event of any disputes,
carefully consider the specific language
and that any foreign judgments or arbitral
used in the force majeure clause and the
awards must be recognized and enforced
relevant provisions in the UAE Civil Code to
by the UAE courts.
ensure that their rights and obligations are
protected in the event of a force majeure With regard to waiver of immunity
event. provisions, sovereign states and state-
owned entities are generally immune from
the jurisdiction of foreign courts, except in
limited circumstances. Waiver of immunity
financings?
provisions can be enforceable in the UAE,
In the UAE, there are limited environmental but they are subject to the principles of
and social requirements applicable sovereign immunity under UAE law and
to project financings, although these must not be contrary to public policy.
requirements may vary depending on the
specific nature of the project. In general,
project sponsors and developers are
required to comply with relevant local and Yes, financing documents in the UAE can
federal environmental laws and regulations, provide for arbitration clauses. The UAE is
including those related to waste a signatory to the New York Convention
management, air and water pollution, on the Recognition and Enforcement of
and the protection of wildlife and natural Foreign Arbitral Awards, which means that
resources. arbitration awards made in other signatory
countries will be recognized and enforced
In terms of social requirements, project
in the UAE. The UAE has also enacted its
sponsors and developers are expected
own arbitration law, known as the UAE
to comply with local labor laws and
Federal Law No. 6 of 2018 on Arbitration
regulations, including those related to the
(the “Arbitration Law”), which governs
employment of workers, safety and health
arbitration in the UAE and is based on
conditions, and working hours. They are
the UNCITRAL Model Law. The arbitration
also expected to respect the rights of local
clause should be drafted in compliance
communities, including the right to land,
with the Arbitration Law, and that the
water, and other resources, and to avoid
arbitration clause should be clear, specific
causing harm to the environment or local
and should indicate the rules of arbitration
communities.
that will be followed.
Arbitration is a commonly used dispute
Immunity
resolution mechanism in the UAE, and
25. Are submission to a foreign law and parties to financing documents are free
the waiver of immunity provisions to agree to resolve disputes through
enforceable? arbitration, either in the UAE or in another
224
jurisdiction. The inclusion of an arbitration • increased emphasis on risk

clause in a financing document is often management and due diligence, as
seen as a way of avoiding lengthy and investors seek to minimize exposure to
costly court proceedings and ensuring a uncertainties and fluctuations
more efficient and effective resolution of
• growing interest in cross-border
disputes.
investment, as the UAE aims to position
G. Trends and Projections itself as a hub for global trade and
investment
in project financings in your These trends are expected to shape the
jurisdiction? future of project finance in the UAE and
influence the financing and investment
In the UAE, some of the current trends in
landscape in the region.
project financing include:
• increased focus on sustainability and
environmentally friendly initiatives
• increased use of alternative financing during the LIBOR transition period?
sources, such as Islamic finance and
In the UAE, the alternative reference
private equity
interest rates most used during the LIBOR
• shift towards public-private transition period are:
partnerships (PPPs) and concession
• Emirates Interbank Offered Rate
agreements
(EIBOR): a benchmark rate set by the
• expansion into new sectors, such as Central Bank of the UAE and used by
healthcare and renewable energy banks in the country for interbank
lending.
• increasing interest in infrastructure
development projects • Secured Overnight Financing Rate
(SOFR): a benchmark rate developed
It is worth noting that the COVID-19
by the Federal Reserve Bank of New
pandemic has had an impact on the project
York as an alternative to LIBOR, based
finance industry, causing some delays and
on the cost of borrowing or lending
adjustments in funding and investment.
collateralized by Treasury securities.
The transition away from LIBOR is a global
effort and financial institutions in the UAE
are being encouraged to adopt alternative
Yes, some significant developments and reference rates in line with international
changes are expected in the near future best practices.
in the project finance market in the UAE,
being:
• continued growth in alternative
financing sources, including green
financing and impact investing
• expansion into new sectors, such as
technology and innovation, with a
focus on digitization and automation
225
UNITED KINGDOM
ASHURST LLP
Matthew Wood Adrian Lawrence Katie Williams Grahame Fischer Ffion Cooksammy
Partner Partner Partner Senior Associate Senior Associate
Matthew.Wood@ Adrian.Lawren- Katie.Williams@ Grahame.Fischer@ Ffion.Cooksammy@
ashurst.com ce@ashurst.com ashurst.com ashurst.com ashurst.com
A. Overview two classes: first, procedures which are

designed for a reorganisation or rescue,
1. What is the main legislation and and, secondly, those which are designed
international treaties governing the to liquidate the company, sell the business
project financing in your jurisdiction? or assets, and return the proceeds to the
There is no specific legislation governing company’s creditors. There are a number of
project finance. Laws relating to finance procedures that fall into the first category,
and insolvency are generally applicable, including schemes of arrangement,
although there are some project finance restructuring plans, and company voluntary
arrangements. Administration can be used
specific provisions that apply some
for either rescue, or (as is often the case)
modifications to the more general
liquidation. Winding-up is a procedure
legislation, for example in relation to the
for liquidation. Finally, administrative
insolvency of project finance companies.
receivership is an enforcement process
In terms of insolvency, the core corporate enabling the holder of security over the
insolvency procedures are found in the whole or substantially the whole of the
Insolvency Act 1986 (as amended), which company’s assets which includes a floating
is supplemented by a set of detailed charge to appoint an administrative
rules (the Insolvency (England and Wales) receiver to realise the company’s business
Rules 2016) and the Companies Act 2006. and assets to repay the secured debt.
English law restructuring and insolvency Administrative receivership is considered to
procedures may be divided, broadly, into be an attractive enforcement mechanism
227
for lenders since it is straightforward 2. How mature is the project finance

to initiate (through an out of court market in your jurisdiction, and
appointment). Administrative receivers what are the most significant project
have similar powers to administrators but financings closed during the last 12
owe their primary duties to their appointing months?
creditors rather than to creditors as a whole The project finance market in Great Britain
(as is the case in administration). However, is very mature and continues to be able
there is a restriction on floating charge to draw on over 40 years of experience
holders appointing an administrative since it was first used to finance oil and
receiver under the Insolvency Act, unless gas developments in the North Sea.
one of the limited statutory exemptions The sophisticated nature of this market
applies. One of these is for project finance has enabled banks, funds, advisers, and
transactions where the project company developers in England and Wales to use
incurs a debt of at least £50 million for the the tools across various asset classes and
purposes of carrying out the project and also help develop other markets and
where the financiers have step-in rights. jurisdictions using the same principles.
There is also a special administration The busiest sectors for project finance
regime which applies in respect of energy within England and Wales are focused on
assets; this was established through the renewables and energy transition projects.
Energy Act 2004. A special administration PPPs have dwindled over recent years given
regime is a procedure based on the changing Government policies and subsidy
ordinary administration regime, but with regimes.
a special purpose in line with the relevant Whilst project finance principles apply
public policy objective. The aim of the across many sectors, the terms offered by
energy administration regime is to ensure banks will vary depending on the perceived
that essential services to consumers risk profile of the underlying technology
remain secure and uninterrupted if a and revenue streams. For example, offshore
protected energy company (which notably electricity transmission assets (OFTOs) are
includes offshore transmission licensees) perceived as a low risk technology with a
becomes insolvent. The regime provides stable, availability based revenue stream
the Secretary of State (or Ofgem with the and therefore can obtain a leverage of up
consent of the Secretary of State) power to to 90:10. Batteries on the other hand have
appoint a special administrator. Notably, a highly merchant revenue stream and
the special administrator has an obligation therefore leverage on battery projects is
to consider consumers’ interests as well as lower at 50/60:50/40.
those of the energy company’s creditors. Notable deals Ashurst has advised on in the
past year are as follows:
The Energy Act 2004 also requires that
the Secretary of State be given at least 14 • Advising lenders on the 882MW Moray
days notice of any security enforcement West offshore wind project, which is
against a protected energy company. In expected to provide 30% of Scotland’s
practice, this means that, even if one of the power.
administrative receivership exemptions • Advising Fortum on the c.45Mwe gross
applies, the Secretary of State will be South Clyde Energy from Waste Plant
able to pre-empt the appointment of in Glasgow, Scotland. When built it
administrative receivers by applying for a is expected to process up to 350,000
special administration order. tonnes per annum of residual waste.
228
• Advising Conrad Energy on the £85m assets to be bought and sold without
financing of a portfolio of eight battery reference to the chargeholder, until the
storage sites across the UK. floating charge is crystallised, which
will occur if there is an event of default
• Advising lenders on the refinancing
or enforcement event. At that stage,
of the 50MWe Rookery South energy
the floating charge is expressed to be
from waste facility, which is expected
converted to a fixed charge over the
to process over 545,000 tonnes of non-
assets which it covers at that time.
recyclable residual waste into baseload
Note, however, that the primary finance
electricity which powers local homes
documents will govern to what extent
and businesses.
the borrower is allowed to deal with
• Advising Low Carbon on the £230 the assets which are the subject of
flexible financing facility to construct the debenture, and the procedures (if
1GW of solar PV capacity in the UK. applicable) for the same.
The senior debt facility will enable the
2. the borrower’s shareholder(s) grant a
construction of large-scale renewable
share pledge over the shares in the SPV
energy projects in the UK and the
borrower and an assignment of any
Netherlands. It is anticipated that the
shareholder loans.
projects will result in the creation
of at least 1GW of capacity, with the Guarantees are also commonly used where
potential to provide clean, affordable the borrower is part of a broader group
power to more than 360,000 homes and (for example if subsidiaries hold specific
avoid 308,000 tonnes of CO2e. licences), with the borrower and any project
companies granting guarantees in favour of
B. Security Interest the finance parties.
your jurisdiction?
Typically, project financings are structured requirement in terms of formalities
as follows: or procedure to be followed for
1. a special purpose vehicle (“SPV”) establishing or perfecting a share
borrower grants all asset security to the pledge?
finance parties. The all asset security Yes. A share pledge (and any other form of
will typically be taken by way of a security document) must be executed as
debenture, which grants a fixed and a deed. For an English company formed
floating charge over all (or substantially under the Companies Act 2006, this
all) of the assets of that entity and an involves execution by way of either (a) a
assignment of any contractual and director and a witness, (b) two directors
other rights (including insurances) (to or (c) a director and a company secretary,
the extent possible). A fixed charge subject to any specific requirements set
will be taken over specific assets, such out in the company’s articles of association.
as shares, investments, land (which For overseas companies, pursuant to
is often also charged by way of legal the Overseas Companies (Execution of
mortgage) and any fixed assets such Documents and Registration of Charges)
as heavy machinery. A floating charge Regulations 2009/1917, the method of
is taken over all of the assets of the execution of a deed is determined by the
company. A key feature of the floating law of the territory in which the overseas
charge is that it allows the charged company is incorporated.
229
The share certificates for the shares proceedings, it would typically be an event
pledged are typically delivered to the of default under an English law facility
lender/security trustee for the duration of agreement (which normally includes both
the pledge, and the company that holds cashflow and balance sheet insolvency
the pledged shares will execute a stock triggers), entitling the finance parties to
transfer form (with transferee details left demand repayment of all sums due and to
blank) which is also delivered to the lender/ enforce the security.
security trustee, to enable the security
In a syndicated facility, certain of the
trustee to take possession of and sell the
finance parties will vote as to whether
shares in an enforcement scenario. For
they wish to demand repayment of the
English listed entities, the share certificates
outstanding amounts and enforce the
must also be endorsed and the security
security. If such vote is passed, typically
registered at Companies House.
a facility agent serves a notice on the
5. Is private sale a recognized method borrower demanding that all amounts are
for the enforcement share pledge? immediately repaid in full.
typically used for the share The question of how the finance parties
certificates? must enforce security is normally
determined by the terms of the relevant
A share pledge permits the Security Trustee security document. If the security
to take ownership of the pledged shares document is silent on enforcement (which
and transfer those shares, which may be would, in practice, be rare), there are
by private sale if the shares are in a private various common law and statutory rights
company (i.e., a company that is not listed
that confer enforcement rights depending
on a stock exchange). Special rules apply for
on the type of security involved. Even if a
sales of listed shares, including the relevant
security document sets out enforcement
listing rules.
rights, it will be subject to any mandatory
6. Can security interest be established overriding rules of law.
In addition, there may be various factors
that restrict or limit the finance parties’
Yes, with the exception of legal mortgages ability to enforce the security such as
which can only be granted over property intercreditor arrangements, the statutory
that the security provider currently owns moratorium in administration and the
(an equitable mortgage can however be existence of a standstill agreement.
created over future property).
The main methods of enforcing security are
7. What are the steps to be taken by the following:
interest, in case the borrower • appointing a receiver to take possession
becomes insolvent, is technically of, and sell, assets secured by a fixed
insolvent and/or commences a charge; and
composition process with creditors?
• appointing an administrator or (in
If the borrower becomes insolvent but certain limited circumstances) an
has not yet commenced insolvency administrative receiver.
230
It is worth noting that a lender is only likely which involve a competitive process for the
to consider enforcing security after it has allocation of CfDs to successful projects.
exhausted other options, particularly if A CfD is a bilateral private law contract
the event of default in question is only a for a 15 year term, between a low-carbon
minor one or is capable of being cured generator and the CfD counterparty. The
easily (unlike the scenario where the CfD counterparty is a limited company
borrower is already insolvent or subject to wholly owned by Government (though
insolvency proceedings). Even if the event not, in most respects, financially supported
of default is more serious, a lender is still by it). Under a CfD, the generator is paid
likely to explore other avenues, such as the difference (intended to be a price “top
restructuring the debt, before enforcing its up”) between a “strike price” – a price for
security. electricity intended to reflect the cost
8. Is security trustee concept of investing in a particular low-carbon
enforceable in your jurisdiction? If energy technology – and the “reference
not, is an alternative mechanism, price” – a measure of the average market
such as a parallel debt, available? price for electricity in the UK wholesale
market. Significantly, under the CfD, where
Yes, a security trust as a structure can be the reference price is higher than the strike
used under English law. This is a common price, the generator is required to pay the
feature of project finance transactions difference back to the CfD counterparty.
(the security trustee holds security for the
benefit of a group of lenders). The Capacity Market regime, introduced
at the same time as the CfD regime,
C. Incentives and Restrictions as part of the Government’s Electricity
9. What are the main incentives and Market Reform initiative, is designed to
exemptions for project financing in ensure that there is sufficient electricity
your jurisdiction? capacity available to meet customer
demand. The Capacity Market is seen as
There are no incentives and exemptions playing a particularly important role in
targeted specifically at foreign investors the context of an electricity generation
in the energy and infrastructure sectors. mix involving an increasing proportion
However, historically various incentive of intermittent generation such as wind
schemes have been made available to and solar. It involves annual auctions (1
incentivise investment in renewable energy year ahead and 4 year ahead auctions)
and decarbonisation technologies. In the under which capacity agreements are
past, the Renewables Obligation regime, awarded to successful capacity providers.
the small-scale Feed-in Tariff scheme and A wide variety of projects can participate
the Renewables Heat Incentive were the in these auctions, including existing and
main forms of incentives available to prospective or refurbishing generators,
investors in low-carbon projects. These battery storage projects and demand side-
schemes have now closed to new projects, response. Existing projects are only eligible
although they still offer support to projects
to apply for a capacity agreement for a 1
previously accredited pursuant to them.
year term, but new build projects can apply
Currently, for low-carbon energy projects, for a 15 year term if they meet the relevant
the Contracts for Difference (“CfD”) regime criteria. Under the agreements, capacity
is the main form of support available. providers are paid to ensure they are
Under the CfD regime, eligible projects can available to respond when called upon to
participate in annual allocation rounds, do so when there is a “system stress event”.
231
The Government is currently implementing developed, which will be similar to the

various other policy initiatives, involving CfDs currently being offered to low-
incentives, to achieve two objectives: carbon generators (which are discussed
increasing energy security, while achieving above).
the UK’s net carbon zero objectives. In
• The Government is also developing a
particular, the following initiatives are being
regime for the support of investment in
taken forward to encourage investment:
low-carbon and renewable hydrogen.
• For new-build nuclear projects, a
nuclear regulated asset base (“RAB”)
model is in the process of being
implemented under the Nuclear Energy to foreign investors?
(Financing) Act 2022. Nuclear projects In terms of exemptions and incentives
are seen as key to the Government’s specifically applicable to foreign
energy strategy as their benefits are investors, there are currently no tax, or
two-fold: (a) they can assist the UK to other incentives, which are provided
reach its targets for reducing carbon preferentially to foreign investors or
emissions, and (b) they support energy creditors.
security and independence in the UK
by reducing reliance on fossil fuels. 11. Are there any restrictions for
Under the RAB model, a company borrowing bank loans and
receives a licence from an economic shareholder loans from abroad and/
regulator to charge a regulated price to or in a foreign currency?
consumers in exchange for providing There are currently no exchange controls
the infrastructure in question. or restrictions in England and Wales which
• A new regulatory regime is currently lead to restrictions on borrowing in foreign
being developed for carbon capture currencies or from abroad.
and storage. The Energy Bill 2022- 12. Are there any restrictions for
23 will provide for a new licensing foreign investments in your
regime for carbon dioxide transport jurisdiction?
and storage networks, which will be
regulated in a way similar to gas and In terms of exemptions and incentives
electricity networks. A combination of especially applicable to foreign
an economic licence, which will allow investors, there are currently no taxes
the networks to recover their allowed or other incentives, which are provided
revenue from users (carbon dioxide preferentially to foreign investors or
emitters), as well as a government creditors.
support package, are intended to make While there are no blanket restrictions on
carbon dioxide transport and storage foreign ownership of a project in England
networks economically viable. The and Wales, there are nuances or additional
carbon dioxide emitters who are
requirements within industry specific
expected to connect to these networks
legislation or regulations that apply to
include gas-fired power generators,
companies under foreign ownership.
low-carbon hydrogen producers and
industry (e.g., cement or fertilizer For example, the introduction of the
manufacturers). These carbon dioxide National Security and Investment Bill in
emitters will also be incentivized, under May 2021 provides the UK government
support contracts currently being with stronger ability to investigate and
232
intervene in mergers, acquisitions and to completion of relevant procedural

other deals which could threaten national formalities, be able to receive interest
security. The Act applies to 17 areas of the without suffering any withholding tax. Any
economy, notably including energy and withholding risks (particularly change of
transport. law risks) would generally be addressed
through appropriate “gross-up” provisions
Further, the Electricity Directive and the in the relevant loan facility agreement.
Gas Directive required Member States to
implement a special certification process 13. Is there any minimum equity
for transmission system owners and requirement, under the legislation
transmission system operators controlled or in practice, for project financings
by a person from a non-EU country. in your jurisdiction?
These directives have, following Brexit, There are no general minimum equity
been retained in the UK under domestic requirements under legislation for project
legislation. As part of the certification financings in England and Wales, however,
process in Great Britain, Ofgem must make lenders will typically expect 15 – 30% of the
an assessment, about whether foreign equity for a project to be contributed by
ownership or control of the transmission its sponsors, depending on the risk profile
system would give rise to any risk to of the asset being financed. For projects
security of supply. with merchant revenues (such as battery
UK withholding tax (currently with a rate storage), we have seen as much as 50%
of 20 per cent) may be imposed on interest equity required.
payments to parties in other jurisdictions, 14. Please explain the registration
though the application and rate of any and filing requirements which
withholding tax will depend on whether are applicable for project finance
there is a double taxation treaty with the documents to be valid and
other jurisdiction. The UK has double enforceable in your jurisdiction.
taxation treaties with over 100 countries.
Generally, there are no special filings
Where a suitable double taxation treaty
required for project finance documents,
is available, a foreign investor would
and typically the filings required are those
often seek to apply for a so-called double
required for the security documents.
tax treaty passport to allow it to receive
without suffering withholding (https:// With very limited exceptions, charges
www.gov.uk/guidance/double-taxation- (and mortgages) created by a company or
treaty-passport-scheme). limited liability partnership incorporated
in England and Wales (regardless of the
It should be noted that withholding tax governing law of that charge) must be
does not apply in a number of scenarios, registered with the jurisdiction’s registrar
mainly (subject to certain conditions) of companies, Companies House, within 21
interest paid to or by a ‘bank’ (as defined days from the date of the creation of the
in the Finance Act 2008, a wide definition
security interest. Otherwise, the security
including many UK banks, European banks
interest will be void against a liquidator,
permanently established in the UK and
administrator or creditor, and the debt
non-EU banks operating in the UK with
secured by that charge becomes payable
permission to accept deposits).
immediately. Security interests over some
The availability of those exemptions assets (such as land, intellectual property
means that many lenders will, subject rights, ships and aircraft) are registrable in
233
specialist registers (where registration fees undertaking to be given by the borrower’s

apply), and priority is generally established insurance broker, who will give certain
by the order of such registration. Security undertakings in favour of the lenders.
assignments must be perfected by
Some of the commonly requested
providing the third party with notice.
insurance conditions and provisions are set
D. Insurance out below:
15. Can local insurance policies be • Co-insurance - Lenders generally require
governed by a foreign law? to be co-insured under the construction
all risks insurance, delay in start-up
Yes as a general rule, although in practice
insurance, property all risks insurance,
policies taken out in England will be
business interruption insurance and
governed by English law.
third-party and products liability
16. Can insurance proceeds under the insurance. This means the lenders are
insurance and reinsurance policies directly insured, as well as the project
be assigned to the benefit of the company.
lenders?
• Waiver of subrogation – Lenders
Yes and it is typical for insurance policies generally require insurers to waive any
to be assigned by way of security for the rights of subrogation which they may
benefit of the finance parties in project have or may acquire against any of the
finance transactions. lenders.
Facility agreements will also often include • Non-vitiation – Lenders often wish to
provisions requiring insurance proceeds protect themselves against the risk that
(with some exceptions, including the any insurance policy could be avoided
proceeds of third party liability insurances by a non-disclosure on the part of
which are required to be paid to a third the project company. This is typically
party) to be applied in reinstatement of achieved by way of the inclusion of a
the secured project asset if reinstatement “non-vitiation” clause in an insurance
is possible, and otherwise applied in policy.
prepayment of the outstanding debt.
• Loss Payment clause – Lenders typically
17. What are the other complications, request that insurance proceeds are
concerns or other issues in relation paid to the borrower unless the security
to the insurance provisions trustee has notified the insurer that
under the project financing an event of default has occurred, in
documentation, if any? which case the insurer should pay the
proceeds as directed by the security
Typically, the lenders to a project will
trustee.
appoint an insurance advisor who will
advise them as to which insurances are • Payment of Premium/Termination –
required for a project, the duration of Lenders do not want the insurances to
those insurances, the policy limits for those expire due to non-payment of premium
insurances, the scope of any deductibles or or otherwise and accordingly may
exclusions and also any specific conditions require the insurer (or the insurance
which should apply to the insurance. broker pursuant to the broker’s letter)
The lenders will also typically request an to notify them before the policy is
234
cancelled. Often, a condition is included and sectors. One example of this is the
in the insurance policy noting that Welsh Government’s mutual investment
the lenders may (but are not obliged model (MIM), which was used to finance
to) pay the premium on behalf of the the A465 ‘Heads of the Valleys’ Road project
borrower. that Ashurst advised on.
• Amendments – Typically lenders 19. Are direct agreements between the

will seek to include protections in public authorities and the Lenders
the facility agreement to restrict permissible under the local law, and
amendments to the insurance policy if so, commonly seen in the Project
without their consent. The broker may Finance market in your jurisdiction?
also undertake in the brokers’ letter to While permitted by law, UK public
notify the lenders of any amendments authorities do not typically enter into direct
or changes in the scope of the
agreements to support project financings.
coverage.
• Compliance with policy terms – Lenders
will likely include provisions in the
facility agreement requiring the
borrower to comply with the terms of
jurisdiction.
the insurance policy. Again, the broker
may also undertake in the brokers’ letter Other than with respect to subsidies and
to notify the lenders of any breach of incentives (see further above), the role
the policy by the borrower. of the UK Government in most project
financings is limited to matters of planning
• Claim management – The facility
and environmental and regulatory
agreement will typically include
compliance of the project company, since
provisions regarding claims
the United Kingdom no longer uses PFI/
management and obligations on the
borrower to notify the lenders of any PPP as a means to procure infrastructure for
potential claims. public services.
E. Financing of Public-Private 21. Are political risk events usually

Partnership (PPP) Projects under the responsibility of the
18. Is PPP a permitted method of under the PPP agreements?
any PPP projects been developed to Not applicable in light of our answer above
date in your jurisdiction? regarding the status of the PPP in the UK.
The UK was one of the pioneers of 22. Are investors and lenders usually
public–private partnerships (“PPPs”) in protected against a change in
the early 1990s. However, the use of the law passing subsequent to the
PPP (or PFI/PF2) has been heavily affected signing of the relevant concession
by changing political sentiments over agreement?
the years. In the 2018 Budget, the then Not applicable in light of our answer above
Chancellor of the Exchequer announced regarding the status of the PPP in the UK.
that PFI/PF2 would no longer be used to
deliver new infrastructure. This remains 23. Is force majeure specifically
the government’s position, but alternative regulated under the local
models continue to be used in certain areas legislation?
235
Force majeure is not a standalone Project finance lenders may also wish
concept in English law. Under English law, to incorporate green loan principles
contractual performance will be excused or sustainability-linked or social loan
due to unexpected circumstances only principles as published by the Loan
if they fall within the relatively narrow Market Association (LMA), into the facility
doctrine of frustration. This doctrine will agreement.
apply by default unless the parties agree
something else in their contract.
Immunity
Parties who wish to define a wider set of
circumstances when failure to perform the waiver of immunity provisions
a contract will be excused and the enforceable?
consequences of failure are generally free
to do so. Clauses which deal with these There is generally no requirement for an
matters are commonly called force majeure English company to only enter into English
clauses and will be negotiated by the law contracts. If an English company
parties to the relevant agreement. enters into a contract that is only governed
by foreign law and is subject to foreign
24. What are the general environmental jurisdiction, the validity or enforceability
and social requirements in project of that contract will be a matter for the
financings? applicable foreign jurisdiction.
Borrowers and project companies will EU Regulation 593/2008 (‘Rome I’)
typically give a number of representations continues to apply following the United
and undertakings in relation to their Kingdom’s departure from the European
compliance with environmental law, Union, with amendments, in the United
obtaining required environmental permits Kingdom as retained EU law. Rome I
and the management of environmental provides that the applicable law of a
claims. Lenders may appoint a specialist contract is without prejudice to the
environmental advisor who will provide a overriding mandatory provisions of the
report to the lenders on the environmental law of the forum (i.e., the place where the
impact of the project and opine on the dispute is heard). ‘Overriding mandatory
environmental permits and authorisations provisions’ are defined as “provisions the
which should be required (which will respect for which is regarded as crucial
depend on the type and location of the by a country for safeguarding its public
project). interests, such as political, social and
Environmental law in the UK is economic organisation, to such an extent
that they are applicable to any situation
comprehensive, however many project
falling within their scope, irrespective of the
finance lenders, in addition to the above,
law otherwise applicable”.
include an obligation for borrowers to
comply with requirements known as Courts in England will give effect to
the Equator Principles in their finance the consensual waiver of immunity
documents to help manage environmental by a state. Where a state entity enters
and social risks. Other lenders (particularly into a commercial arrangement, it will
development banks or ECAs) have their not generally be entitled to sovereign
own environmental policies which they immunity. Under the State Immunity Act
require the borrower to comply with. 1978, there are a number of exceptions
236
to the general proposition that UK courts the energy price cap of 54% (being the
have no jurisdiction to adjudicate disputes maximum price suppliers can charge their
against sovereign states, as follows: customers) in April 2022, resulting in high
energy bills for consumers and a need
• the state has submitted to the for Government intervention through
jurisdiction of the UK courts; the Energy Price Guarantee. Accordingly,
• the proceedings relate to a commercial there is an increased focus on increasing
transaction entered into by the state; the UK›s domestic energy supply and
storage capabilities. Therefore, we expect
• the proceedings relate to a contractual most project finance activity in the United
obligation on the state to be performed Kingdom to be in the energy space,
in the United Kingdom; and particularly in offshore wind (in light of the
• the state has agreed to submit the separate offshore wind only pot included in
dispute to arbitration. the CfD Allocation Round 4), interconnector
projects and battery storage financings.
26. Can financing documents provide Hydrogen and Carbon Capture Utilisation
for arbitration clauses? and Storage (CCUS) are also key areas of
Yes, the United Kingdom has been a focus in Great Britain, driven particularly by
signatory to the Convention on the the Government’s «Clean Growth Strategy».
Recognition and Enforcement of Foreign Discussions in respect of these assets
Arbitral Awards, also known as the New remain ongoing to ensure that projects will
York Convention, since 1975. The New be commercially viable.
York Convention provides a regime for In light of high inflation in the UK (being
the enforcement of arbitral awards in 10.1% as at January 2023), interest rates
contracting states. Over 157 states are have risen rapidly. In certain projects, we
signatories to the New York Convention. have seen lenders look to renegotiate
Arbitration is commonly used in cross- and increase their rates if financial close
border project financings following is not achieved by the period set out
Brexit as the UK no longer benefits from in their commitment letter. The project
the streamlined process for enforcing finance market is still busy, however,
EU judgments in the Recast Brussels notwithstanding the increased interest
Regulation. The UK has acceded to the rates that UK lenders are looking to charge
Hague Convention on Choice of Court to borrowers.
Agreements which provides for reciprocal 28. Are any significant developments or
recognition of judgments in certain changes expected in the near future
circumstances, however. in the project finance market?
G. Trends and Projections Generators will need to consider the
impact of the Electricity Generator Levy
on their business models for existing
portfolios and also for new projects in
jurisdiction?
planning. The Electrical Generator Levy is
From mid- 2021 the UK energy market a temporary 45% charge on exceptional
has been dominated by high power receipts generated from the production of
prices due to global supply issues. Ofgem wholesale electricity. Exceptional receipts
(the gas and electricity regulator in are defined as wholesale electricity sold at
Great Britain) announced an increase in an average price in excess of £75 per MWh
237
over an accounting period. The levy will For GBP transactions, the commercial bank
be limited to generators whose in-scope market is typically using Compounded
generation output of electricity exceeds SONIA. Whilst Term SONIA is published, it is
50GWh across a period of a year. The levy less commonly used.
will only apply to exceptional receipts
exceeding £10 million in an accounting For USD transactions, we are typically
period. This ‘temporary’ tax will run from 1 seeing Compounded SOFR being preferred
January 2023 through to 31 March 2028, so by the commercial bank market, however
the impact will be long-lasting. there has been an increase in requests for
29. What are the alternative reference reference to Term SOFR.
238
UKRAINE
INTEGRITES
Igor Krasovskiy Olena Savchuk Yuriy Korchev

Partner Counsel Senior Associate
Igor.Krasovskiy@ Olena.Savchuk@ Yuriy.Korchev@
integrites.com integrites.com integrites.com
Disclaimer: As a result of martial law the key piece of legislation governing

currently in force in Ukraine (which is foreign investment is the Law of Ukraine
likely to be extended if the hostilities from “On the Foreign Investment Regime,” which
Russia continue) and force majeure events regulates the conditions for investment, the
being triggered in the jurisdiction, activity rights and obligations of foreign investors,
with Ukrainian clients may be subject to and the procedure for investing in Ukraine.
restrictions which are not addressed in It is important to note that there are
these guidelines e.g., the National Bank of other laws and regulations that apply to
Ukraine has significantly limited cross-border specific investment projects. For example,
FX payments (repayment of cross-border environmental and construction laws may
loans, performance of guaranty (suretyship) be relevant to certain projects.
obligations, dividends repatriation and
acceleration of loans are not permitted, etc.). Apart from the domestic legal framework,
Ukraine has also signed various
A. Overview international treaties and agreements
1. What is the main legislation and that play a significant role in project
international treaties governing the financing in Ukraine. Ukraine has ratified
project financing in your jurisdiction? the Convention on the Procedure for the
Resolution of Investment Disputes between
Ukraine has a complex legal system, which States and Foreign Persons in 2000, which is
includes an extensive range of laws and commonly known as the ICSID Convention.
regulations governing investment activity. This Convention provides for the settlement
In addition to the general legal framework, of investment disputes between investors
239
and states through arbitration. It offers a - EUR 1,5 billion financing (a mixture of
neutral and transparent mechanism for green bond and syndicate financing)
resolving disputes that arise between for the construction of 800MW Zophia
foreign investors and the state of Ukraine. wind farm;
Moreover, Ukraine has concluded over - EUR 372 mln non-recourse financing for
70 bilateral investment agreements with the construction of the 250 MW Syvash
other countries, which provide favorable wind farm near the Azov Sea;
conditions for foreign investors and govern
- USD 150 mln limited recourse financing
the investment process between Ukraine
for the constructions of the first 98
and the signatory state. These agreements
MW phase of the 500 MW wind farm in
typically provide for the protection of
Zaporizhia region;
investors’ rights, including the protection
of investments from expropriation, fair and - Over EUR 135 mln limited recourse
equitable treatment of investors, and the financing for the development and
free transfer of funds. The agreements also construction of solar PV plants in the
contain provisions for the resolution of Central and South parts of Ukraine
investment disputes through arbitration.
In addition, other projects include the
2. How mature is the project finance construction of a new runway at Boryspil
market in your jurisdiction, and International Airport in Kyiv and the
what are the most significant project construction of a new terminal at Lviv
financings closed during the last 12 International Airport.
months?
The project finance market in Ukraine
is relatively undeveloped but it has
significantly grown and evolved over
your jurisdiction?
recent years. Restrictive exchange and
capital controls make it challenging for the In Ukraine, the most commonly used
parties to implement traditional project security types in project financings include:
finance structures. In addition, a high level
Mortgage: A mortgage is a common type
of corruption adds an uncertainty over
of security interest in Ukraine, whereby a
judicial independence and protection of
lender takes a security interest over the
creditor’s rights. However, the Government
borrower’s existing or future immovable
is implementing major judicial reforms to
property or assets (including, but not
tackle the corruption.
limited to, real estate under construction).
Against all the odds, quite a few Mortgages are typically used to secure
breakthrough energy and renewables loans for the financing of real estate
projects were supported by international projects. Unlike most of the other types
financial institutions, development banks of security interests, mortgages require
and private lenders through project finance notarization and state registration.
before the outbreak of the war. The project
Pledge: A pledge is another common type
finance was also driven by infrastructure
of security interest in Ukraine, whereby a
and transportation projects but to a lesser
pledgor (e.g., borrower or a third party)
degree.
pledges its movable assets (such as
The most notable renewables projects accounts receivables, inventory, or shares)
include: to secure a loan.
240
Assignment of rights: By this type of Yes, the shares of a company can be

security an obligor assigns its rights and pledged as security to the benefit of
interest (often, in project agreements) in lenders. The procedure for establishing
favour of the lenders. Assignment of rights and perfecting a share pledge is regulated
in project financing would normally be by the Civil Code of Ukraine, the Law of
conditional on occurrence of a default. Ukraine “On Pledges”, the Law of Ukraine
Assignment is also different from a “On capital markets and organized
novation which under Ukrainian laws is a commodity markets” and the Law of
substitution of an existing obligation with a Ukraine “On protection of creditors’ rights
new obligation between the same parties. and registration of encumbrances”. The
Suretyship: This is an agreement by most common types of shares are the stock
which a surety undertakes to a creditor in the joint stock companies and the shares
to perform the obligation of the principal in limited liability companies.
debtor if it fails to perform the obligation. A pledge of shares must be made in writing
The suretyship is a secondary (ancillary) and signed by the parties. The pledge
obligation and does not usually survive agreement must include a description of
termination or cancellation of a principal the pledged shares, the main terms of the
obligation. principal obligation, and usually contains
Guarantees: A guarantee, as opposed to a the rights and obligations of the parties.
suretyship, is considered a financial service Notarization and state registration of a
pursuant to the laws of Ukraine and it can share pledge is not mandatory, but in many
be issued by financial institutions such cases are advisable, particularly, to ensure
as banks and credit unions. Guarantee the first priority of the pledge over security
is usually independent of the secured interests or other creditors. Note that if the
obligation and can survive its termination securities (stock) in a joint stock company
or cancellation. are subject to pledge such agreement shall
Liens: Liens are another type of security usually involve a depositary institution and
interest in Ukraine, whereby a creditor has perfection (as well as enforcement) would
the right to retain possession of a debtor’s include making respective entries in the
property until the debt is paid. Liens are depository system.
commonly used in the context of secured 5. Is private sale a recognized method
transactions, such as for the purchase of for the enforcement share pledge?
goods or equipment. What are the endorsement types
It is worth noting that the security types typically used for the share
used in project financings in Ukraine certificates?
may vary depending on the nature and
Under Ukrainian law, private sale is a
complexity of the project, as well as the
recognized method for the enforcement
preferences of the lenders and borrowers
of a share pledge. If the borrower defaults
involved.
on the principal obligation, the lender
4. Can the shares of a company be may enforce the share pledge by selling
pledged as a security to the benefit the pledged shares privately or through
of lenders? If so, is there a specific a public auction. The specific method
requirement in terms of formalities for enforcing a share pledge will depend
or procedure to be followed for on the terms of the pledge agreement,
establishing or perfecting a share the type of collateral and the lender’s
pledge? preference.
241
Note that in Ukraine stock in a joint 7. What are the steps to be taken by
stock company exists in electronic form the lenders to enforce their security
only. Share certificates in a paper form interest, in case the borrower
are not usually issued and are rarely becomes insolvent, is technically
required in security transactions. Title to insolvent and/or commences
stock is evidenced by a statement from composition process?
the depository system and a depository
That would depend on the type of security
institution plays an important role in the
interest that has been established.
process of enforcement of such security
interests. If the security interest is a mortgage
or a pledge, the lender can either take
It should be noted that in practice, the
possession of the collateral or sell it
enforcement of a share pledge can be
in accordance with the procedures
a complex process, especially if there
established by the agreement and the law.
are disputes or litigation involved. It is
The law provides for specific procedures
recommended that parties seek legal
and timelines for taking possession and
advice and follow the appropriate
sale of the pledged assets. Note that during
procedures for the enforcement of a share
insolvency proceedings the claims of a
pledge.
creditor secured by pledge or mortgage
6. Can security interest be established can only be satisfied out of the value of
over future assets, rights and respective collateral. Once the insolvency
receivables of the borrower? proceedings commence the collateral
can only be sold within the supervision of
Yes, security interest can be established
respective court dealing with the case.
over future assets, rights, and receivables
of the borrower in Ukraine. The Civil Code In all other cases, for example when
of Ukraine provides for the possibility security interest is constituted pursuant
of creating security over future assets, to a suretyship or guarantee, respective
including future property rights and claims creditor’s claims will be considered
(receivables). together with all other (unsecured)
creditors and, in case of their satisfaction,
In order to create a pledge over future
such creditor will receive a payment directly
assets, it is necessary to specify the
from the debtor.
subject matter of the pledge in the pledge
agreement in sufficient detail to ensure its If the borrower enters into a composition
identification in the future. Note that no process, the lender may be required to
full equivalent of an English law ‘debenture’ participate in the process and negotiate
is available in Ukraine, meaning that each with other creditors to reach a compromise
collateral must be identified in every agreement. If a compromise agreement
security instrument quite thoroughly. It is is reached, the lender will receive a
also possible to secure the claims which the share of the proceeds from the sale of
lender will hold in the future. the borrower’s assets. If a compromise
agreement cannot be reached, the lender
In general, the creation of security over
may be entitled to file a claim in the
future assets and receivables requires
bankruptcy proceedings.
careful drafting of the pledge agreement
to ensure that the security interest is In any case, the lender must follow the
enforceable and that the pledged assets or procedures established by the law to
receivables can be identified in the future. enforce its security interest.
242
8. Is security trustee concept • Stable legislation guarantees:

enforceable in your jurisdiction? If Investment projects can receive state
not, is an alternative mechanism, guarantees on stable legislation for
such as a parallel debt, available? 15 years and compensation for losses
caused by state bodies.
The Civil Code of Ukraine does not provide
for a distinct concept of a security trustee, • State support: Investment projects can
however in the recent years steps have receive state support of up to 30% of
been taken to approximate Ukrainian the amount of significant investments
legislation to the commonly spread legal in the form of exemptions and other
practices in this regard. The concept of ‘trust benefits.
ownership’ has been introduced, however,
court precedents enforcing it remains quite • Tax incentives: Investment projects
scarce. can benefit from a corporate income
tax exemption for five years from
A parallel debt structure can be used as an the moment of filing the application
alternative mechanism to a security trustee. (except for projects in the sphere of
In this structure, the borrower creates a extraction for further processing and/or
parallel debt to the lenders that is equal enrichment of minerals). They can also
to the amount of the debt owed to them. be exempted from land tax and receive
The parallel debt is secured by the same
reduced rates of rent payments for land
collateral as the original debt and is treated
of state and communal property.
as a separate debt owed to the lenders.
This structure allows the lenders to take • Customs and Value Added Tax (“VAT”)
enforcement actions on their own behalf exemptions: Investment projects can
without the need for a security trustee. benefit from exemptions from customs
duties and VAT payments for the import
More often in project financings in Ukraine
of new equipment and components,
the lenders act as co-pledgees within the
same mortgage or pledge agreement; subject to certain conditions.
further relations between them in case of • Infrastructure support: Investment
enforcement should then be governed by projects can benefit from the
a separate intercreditor agreement (usually construction of related infrastructure
governed by foreign law). (such as highways, communication
C. Incentives and Restrictions lines, and utilities) necessary for the
realization of the project.
exemptions for project financing in • Land use rights: Investment projects
your jurisdiction? can benefit from a simplified procedure
for granting the right to use (lease)
Ukraine offers various incentives and of land plots of state or communal
exemptions to support investment projects property with the pre-emptive right
with significant investments. Some of these for acquisition of such a land plot to
incentives are provided under the Law of the property after the expiration of a
Ukraine “On State Support for Investment
special investment agreement.
Projects with Significant Investments
in Ukraine” and related regulations. Network connection assistance: If an
Investment projects that meet the criteria investment project requires connection
established by the Law can benefit from the to the networks of heat, gas, water and
following incentives: electricity supply, utilities, etc., the state
243
may assist the investor with significant by foreign shareholders, subject to certain
investments in the process of such restrictions. For example, the amount of
connection within the framework of a the loan cannot exceed the amount of the
special investment agreement. shareholder’s equity investment in the
borrower, and the loan must be provided
It is important to note that the availability
on an arm’s length basis.
and applicability of these incentives and
exemptions may vary depending on the Overall, while it is possible to borrow bank
specific project and circumstances, and loans and shareholder loans from abroad
investors should consult with legal and and/or in a foreign currency in Ukraine,
financial advisors to determine the most there are restrictions and requirements that
advantageous financing structure and must be followed in order to do so.
incentives for their project.
10. Are there any incentives or foreign investments in your
exemptions specifically applicable jurisdiction?
Foreign investments in Ukraine are
Please refer to the answer to question 9. generally allowed and welcome. However,
11. Are there any restrictions for there are certain restrictions and limitations
borrowing bank loans and that apply to certain types of activities
shareholder loans from abroad and/ and industries, including strategic
or in a foreign currency? industries, such as defense, aerospace, and
telecommunications.
Legal entities that are residents of Ukraine
may receive loans from non-residents On top of that, investments in objects
in foreign currency, including revolving whose creation and use do not meet the
financial assistance, under contracts. The requirements of sanitary and hygienic,
loan agreement should be serviced only radiation, environmental, architectural
through one authorized bank, which is and other standards established by the
indicated in the extract from the National legislation of Ukraine, as well as violates
Bank of Ukraine’s automated information the rights and interests of citizens, legal
system “Loan agreements with non- entities, and the state that is protected by
residents.” law, are prohibited
Before conducting foreign exchange In addition, foreign investors may face

transactions under the agreement through certain restrictions related to land
this bank, the legal entity should contact ownership, natural resources, and other
the bank chosen by them if the National areas. For example, foreign natural persons
Bank is informed about the agreement are generally not allowed to acquire
for the first time or to change the resident agricultural land in Ukraine, and foreign
bank in which the account for money legal entities are required to obtain a
settlements (payments) under the special permit to acquire ownership or use
agreement is opened, as well as to make rights over agricultural land.
changes to the information about the
Furthermore, foreign investors may
agreement contained in the Information
face certain restrictions related to the
System.
registration and operation of their
In terms of shareholder loans, Ukrainian businesses in Ukraine, including licensing
law allows for the provision of such loans requirements and limitations on foreign
244
ownership in certain sectors. It is therefore may vary depending on the type of

advisable for foreign investors to seek legal document and the underlying asset or
advice before investing in Ukraine. transaction.
After the full-scale Russian invasion in For security interests, including pledges
Ukraine in 2022, investments from Russia and mortgages, the relevant security
and Belarus are no longer tolerated. As documents must be registered with the
a result, any investment proposals from State Register of Encumbrances on Property
Russian or Belarusian companies are will be Rights. Failure to register may result in the
rejected by the Ukrainian authorities. This invalidity of the security interest.
policy reflects the Ukrainian government’s
In addition, the registration of the security
commitment to defend its sovereignty
interest should be accompanied by
and territorial integrity, and to promote
payment of a state fee. The amount of the
economic ties with countries that respect fee depends on the value of the collateral,
Ukraine’s independence and territorial and the fee must be paid within ten days of
integrity. registration.
13. Is there any minimum equity Other project finance documents, such as
requirement, under the legislation loan agreements, joint venture agreements
or in practice, for project financings or shareholder agreements, do not need to
in your jurisdiction? be registered or filed with any government
There is no specific minimum equity authority. However, parties may choose to
requirement for project financings in have these agreements notarized in order
Ukraine under the legislation. However, in to provide greater certainty and evidentiary
practice, lenders may require a certain level weight.
of equity contribution from the borrower D. Insurance
as a condition for providing financing. This
equity contribution can vary depending 15. Can local insurance policies be
on the size and risk profile of the project, governed by a foreign law?
as well as the overall financial strength of In general, local insurance policies must
the borrower. The equity contribution is comply with the laws and regulations of the
usually determined based on the project’s jurisdiction where they are issued.
capital expenditure, and may range from
10% to 30% of the total project cost. It is In Ukraine, the statute provides that
also common for lenders to require that foreign law may be chosen to govern
the equity contribution be provided by the insurance contracts if the contract has a
sponsor or a group of sponsors, rather than foreign element, such as the nationality
the borrower itself. or residence of one of the parties, the
location of the subject matter insured, or
14. Please explain the registration the place of performance. However, the
and filing requirements which choice of foreign law cannot conflict with
are applicable for project finance mandatory provisions of Ukrainian law, and
documents to be valid and local regulatory requirements for insurance
enforceable in your jurisdiction. policies must still be complied with.
In Ukraine, there are certain registration 16. Can insurance proceeds under the
and filing requirements that must be met in insurance and reinsurance policies
order for project finance documents to be be assigned to the benefit of the
valid and enforceable. These requirements lenders?
245
Assuming that the policy is issued by a Payment of insurance indemnification

local insurer (and reinsured by a foreign abroad may be protracted. Please seek a
reinsurance company), there are no specific advice.
restrictions from insurance legislation
As a matter of law, foreign licensed
standpoint for a local insurer to transfer an
insurance companies are not allowed to
insurance indemnity in favour of a foreign
perform insurance activities in Ukraine,
designated beneficiary, provided that all
except for (i) insuring and rendering
supporting documents are presented to
brokerage services with respect to cargo
the insurer and the bank processing the
and vessels property, and liability insurance
payment. Depending on the type of policy under marine, aviation, and space coverage;
and loss occurred the required documents (ii) reinsurance, and (iii) ancillary services
might consist of: the insurance policy, relating to insurance (e.g., consulting). The
certificates from state bodies confirming following requirements apply to foreign
natural hazards, a loss adjuster’s report, the insurers carrying out activities in Ukraine:
insurer’s decision to pay under the policy,
the relevant lender’s bank account details, • they shall be from a country which
etc. However, the currency control rules is a World Trade Organization (WTO)
may prevent (currently they do prohibit) an member, is not Financial Action Task
insurer transferring indemnification abroad. Force (FATF) blacklisted, and is a non-
offshore zone;
If the policy is not issued by a local insurer
and reinsured by a foreign reinsurance • the Ukrainian regulator and the
company, the payment procedure shall be insurance regulator of such country
regulated by the FX rules applicable in the where the foreign insurer is based must
home jurisdiction of the insurer. have entered into a treaty on data
exchange and a treaty on preventing
Note that, although security assignments tax evasion and avoiding double
are not expressly prohibited, local insurers taxation (a list of relevant agreements is
are usually reluctant to enter into such available here); and
agreements due to the fact that it is not
clear that such security assignments are • such foreign insurer is under state
permitted under Ukrainian law. supervision, has been properly licensed
in its country and complies with the
17. What are the other complications, financial stability requirements of the
concerns or other issues in relation Ukrainian regulator.
under the project financing Foreign licensed insurance companies
documentation, if any? may operate in Ukraine following the
registration of a permanent establishment
Currency restrictions: following enaction in Ukraine and obtaining the relevant
of the martial law in Ukraine, Ukrainian respective licence.
entities and individuals are limited in their
Insurance payments (payout or premium)
ability to purchase foreign currency and
originating from Ukraine are considered as
make cross-border payments outside of
Ukraine sourced income for non-residents
Ukraine. Ukrainian insurers are allowed,
of Ukraine; and accordingly such payments
subject to applicable terms and limitations,
are subject to withholding tax.
to carry out payment of insurance
premium under most reinsurance contracts Reinsurance obligations arise out of
concluded with non-resident reinsurers. mandatory criteria and standards of capital
246
adequacy and the solvency and liquidity • Competitive tendering;

of the insurer. If the amount covered under
• Competitive dialogue; or
the policy exceeds ten per cent (10%) of the
amount of its paid-in authorised capital and • Direct negotiations
reserves, the insurer is obliged to reinsure
All three procedures for the selection of
its liability. The insurer, following entering
a private partner are available only for
into a reinsurance agreement, remains fully
a concessionary PPP, while for a non-
responsible before a policyholder.
concessionary PPP only one procedure is
In practice, most of the local insurers used - a competitive tendering.
reinsure their risks with international
reinsurers due to the lack of insurance In the event of only one application in
reserves. the bidding, the PPP contract may be
concluded between the state partner
E. Financing of Public-Private with this applicant by agreeing with him
Partnership (PPP) Projects on the essential terms of the contract,
18. Is PPP a permitted method of provided that such applicant meets the
developing projects, and if so, have main qualification requirements for the
any PPP projects been developed to participants of the competition, unless
date in your jurisdiction? otherwise specified laws regulating
relations that arise in the process of
Public-private partnership (“PPP”) is a concluding public-private partnership
long-term cooperation between the state contracts.
and private companies, with the aim of
creating, updating and further effective It is common practice when the procuring
management of public facilities and socially authority conducts a pre-bid conference
significant services traditionally provided where potential bidders can get additional
by the state. information on PPP project.
Yes, PPP is a permitted method of The state partner controls the PPP contract
developing projects in Ukraine. In fact, implementation but cannot, however,
the Ukrainian government has been interfere with the economic activities of the
actively promoting PPP projects in various private partner or third parties.
sectors, including transportation, energy,
healthcare, and infrastructure. Private partners shall provide the public
partners with information on the contract
The Ukraine PPP statutes establish the performance as specified in the PPP
organizational and legal framework of contract, the public partner shall keep this
the interaction of public partners with information confidential.
private partners and the basic principles
of the public-private partnership on a Officers of the public partners monitor the
contractual basis, while Resolution No. PPP contract performance in accordance
384 regulates each step of the tender with their authority under the law and the
procedure. The Concession law regulates PPP contract.
the implementation of concession projects. There is no explicit legislative provision
Furthermore, please note that Article 5
stating that PPP implementation must
of the PPP Law states that PPPs may be
be prioritized against other government
concluded as concession agreements
investment priorities. At the same time,
Procurement procedures provide for three state targeted programs, the purpose of
options: which is to promote the implementation
247
of state policy in priority areas of state In Ukraine, there are various types of host
development, in accordance with the Law government support available for project
of Ukraine “On State Targeted Programs”, financing. Some of the commonly used
can be implemented by use of the PPP types include:
mechanism.
• Treasury guarantees: The Ukrainian
Several PPP projects have been developed government may provide guarantees
in Ukraine in recent years, including for debt raised by project companies,
concession of seaports: Chernomorsk, typically covering repayment of
Izmail Sea Port, Reni Port and others, principal and interest.
concession of airports, construction of
industrial parks, concession of railway • Fiscal incentives: The Ukrainian
stations, construction of highways and government may offer fiscal incentives
bridges, etc. Please review the full list here in the form of tax breaks, exemptions or
https://pppagency.me.gov.ua/projects/ reductions for qualifying projects.
19. Are direct agreements between the • Paying to a private partner the
public authorities and the Lenders payments provided for in the
permissible under the local law, and agreement concluded under the public-
if so, commonly seen in the Project private partnership, in particular the fee
Finance market in your jurisdiction? for operational readiness;
Direct agreements between public • Infrastructure development support:
authorities and lenders are generally the Ukrainian government may provide
permissible under law of Ukraine. infrastructure development support
such as land grants, construction
In Ukraine, direct agreements are
subsidies, supplying a private partner
commonly seen in project financings,
with goods (works, services) necessary
including those involving public-private
partnerships (PPPs). for the public-private partnership
implementation, acquiring by the state
The statute provides grounds for partner a certain amount of goods
replacement of a private partner in PPP: (works, services) produced (performed,
- if initiated by the state partner upon provided) by the private partner
material breach of the PPP contract by pursuant to the agreement concluded
the private partner; under the PPP.
- if initiated by the creditor (financier) The availability of government support

upon foreclosure of security (the for project financing in Ukraine is subject
property rights of the private partner to the relevant laws and regulations, and
under the PPP contract); whether after the terms and conditions of such support
an event of material default or on other are typically negotiated on a case-by-case
grounds in the financing documents. basis.
The replacement shall be made in 21. Are political risk events usually
accordance with the stipulated procedure. under the responsibility of the
treasury guarantee, debt The allocation of political risk events
assumption etc.) available in your between the public and private parties
jurisdiction. under PPP agreements in Ukraine may
248
vary and depend on the terms of each In Ukraine, investors and lenders may be
specific contract. In general, political risk protected through a stabilization clause.
events are typically addressed in the PPP
The Government guarantees the stability
agreement, and the allocation of risks may
be negotiated and agreed between the of the conditions for investment activities,
parties. The risks may be allocated to the observance of the rights and legitimate
party best able to manage and mitigate the interests of its entities. Terms of contracts
risk, or to the party that is better suited to concluded between investment entities
bear the risk based on its expertise, access remain in force for the entire duration of
to financing, and risk appetite. In some these contracts, and in cases where after
cases, political risk events may be shared their conclusion by law (except for tax,
between the public and private parties, and customs, and currency legislation, as well as
in other cases, the risks may be covered legislation on licensing of certain economic
by insurance or other risk management activity types) conditions that worsen
mechanisms. the position of the entities or limit their
rights are set up, if these entities have not
Evidently, it is quite difficult to purchase agreed to change the contract term. The
new policies to cover military risks during Government guarantees the protection of
active hostilities, even if the region (district investments, as well as foreign investments,
of a separate oblast, for example) has regardless of ownership. Investment
not been the object of aggression. If you
protection is provided by the legislation of
purchased a policy covering war risks
Ukraine, as well as international treaties of
before 22 February 2022, or such coverage
Ukraine. Investors, including foreign ones,
is incorporated into existing one, then it is
are provided with equal treatment that
necessary to analyze in detail the relevant
excludes the application of discriminatory
provisions. Specialised political/war risk
measures that could hinder the investment
insurance policies in a similar fashion
management, use, and liquidation, as
contain a list of insurance events and a
number of exclusions. That is, not every well as the conditions and procedure
loss, even caused by warfare, is guaranteed for the export of invested valuables and
to be reimbursed. For example, the policy investment results.
may cover only the direct material damage, However, the availability of protection
and does not cover the seizure of the depends on industry of the investment.
enterprise, or other deprivation of use of For example, the Government of Ukraine
the insured property. has taken various steps to ensure that the
In addition, the Ministry of Economy of Ukrainian electricity market is attractive
Ukraine reports that the Government of to foreign investors. The most important
Ukraine has agreed with the Multilateral step is the stabilisation clause, which is an
Investment Guarantee Agency (“MIGA”) to undertaking by the state to preserve the
insure investments despite hostilities. MIGA favourable legal framework for renewable
and the Government of Ukraine are ready energy and to refrain from introducing
to implement a pilot project worth USD 30 changes that would be disadvantageous
million. to renewable energy producers, except
where changes are required in the interests
of defence, national security, tax regime,
public order and environment protection.
signing of the relevant concession However, the effectiveness of stabilization
agreement? clauses in Ukraine has been the subject of
249
some debate, as the Ukrainian government Regulation on certification of force

has been known to challenge such clauses majeure by the Chambers of Commerce
in the past. As such, investors and lenders and Industry of Ukraine) provides for the
need to carefully negotiate and draft list of such circumstances: war or threat
stabilization clauses to ensure that they are of war, armed conflict or serious threat of
enforceable and provide the desired level such conflict, hostile attacks, blockades
of protection. (including the closure of ducts), a ban on
exports or imports, military embargoes,
mobilization, armed forces actions, riots
(including elements of hybrid aggression),
legislation?
acts of terrorism, sabotage, piracy, invasion,
Yes, force majeure is specifically regulated curfew, requisition (seizure), fire, explosion,
under Ukrainian legislation. The Civil flood, illegal actions of third parties (illegal
Code of Ukraine defines force majeure seizure of an enterprise), quarantine, etc.
as extraordinary and unavoidable
The list of statutory force majeure grounds
circumstances that cannot be foreseen
coincides in many respects with the
or prevented by reasonable measures.
situations invoked by martial law or during
Examples of force majeure events are
other special periods (see the table).
natural disasters, military actions, strikes,
epidemics, and other events beyond the Lack of funds, short supply of services or
control of the parties. commodities, exchange rate volatility is
Under Ukrainian law, force majeure events generally not considered force majeure.
may excuse a party’s non-performance Therefore, the behavior of the markets
of its contractual obligations, provided should greatly impress the judges before
that such events render performance they allow any exception to this rule. In
impossible. The affected party must notify our opinion, theoretically, this may be an
the other party of the force majeure objective impossibility to make a payment
event as soon as possible, and must take as a result, if the bank does not work, in
reasonable steps to mitigate the impact of particular, due to the lack of electricity
the event on its performance. supply in the region, destruction of
equipment, unauthorized interference
It should be noted that the occurrence of a with the operation of the bank’s computer
force majeure event does not automatically networks or the bank is closed in
terminate the contract, but may suspend its connection with the risk of physical seizure
performance for the duration of the force or destruction of branches - in case of
majeure event. If the force majeure event blocking the relevant settlement by the
continues for a prolonged period of time, enemy; legislative restriction of payments,
the parties may be entitled to terminate in particular cross-border currency
the contract based on the provisions of transfers - as currently introduced by the
the contract or on the grounds of material National Bank; bankruptcy of a systemically
breach of contract. important bank or large clearing house
It is an established rule of business customs member of an organized commodity
and statutory law that a person is released market, such as electricity, fuel; The physical
from liability for breach of contract if he/ inability of a director or accountant to make
she proves that a breach was caused due a payment if they are under occupation
to accident or force majeure. Article 14-1 of or shelling without access to a client-bank
Law of Ukraine ‘On Chambers of Commerce system and unable to move to a safe place
and Industry of Ukraine’ (dubbed by where there is an operating bank.
250
Certification of force majeure However, for PPP obligatory projects

assessments conducted when identifying
Тhe Chambers of Commerce and Industry
of Ukraine (“CCI”) and its regional divisions and preparing a PPP:
are authorized to issue a certificate of • Socio-economic analysis
force majeure, which is sufficient evidence
under the Ukrainian law. A breaching party • Fiscal affordability assessment
must apply to the CCI for a certificate and, • Risks assessment
establish, to the contemplation of the CCI
expert, the causal link between the force • Comparative assessment of PPP v. non-
majeure and non-performance of the PPP procurement
contract.
• Financial viability assessment
With the extreme situation caused by
the initiation of the war, the CCI has • Environmental impact assessment
published on its website a general official • Social impact assessment
letter certifying force majeure of Russia’s
aggression against Ukraine – from 24 • Market sounding for private sector
February 2022 until the end. Thus, the interest
procedure for the martial law period had
been simplified: a business no longer • Market sounding for technological
needs to apply to the CCI with a bundle of solutions
documents to certify force majeure on each The procuring authority entity does not
contract. The only thing you must do is to provide or facilitate obtaining of the
establish the respective causal link with the
environmental permits, such as emission
non-performance of the agreement.
permit, permit for felling green areas etc.
Moreover, the contract may contain a
provision, if force majeure lasts more than Instead, the procuring authority, as the
a certain period (for example, 90, or 180 investor in the construction (site owner),
days), the contract may be terminated at must procure an environmental impact
the initiative of one of the parties. assessment as a prerequisite to commence
the construction works.
and social requirements in project Article 4 (2) of the Law on Concession puts
financings? a burden of the environmental impact
In project financings, environmental and assessment (EIA) on a concessionaire
social requirements are often included in (private partner) after the concession
project financing agreements, and they contract has been signed.
aim to ensure that the project is developed This norm conflicts with Article 2 (3) of the
and operated in a manner that is consistent
Law of Ukraine on Environmental Impact
with sustainable development principles.
Assessment, which stipulates that state
There are no environmental requirements authorities, local self-government bodies
in private project financings as such, (i.e., public partner) are the subjects of
however the restrictions or obligations the EIA whenever such public partner is
might be applicable to the operating a customer of the planned activity. Their
project (e.g., plant or factory) itself. role under the concession contract can be
The environmental and social requirements designated as a customer (procuress’ of the
are those mostly dictated by lenders. public service).
251
F. Jurisdiction, Waiver of It is worth noting that the enforcement

Immunity of submission to a foreign law and waiver
of immunity provisions may be subject
25. Are submission to a foreign law and to the terms of any relevant bilateral or
the waiver of immunity provisions multilateral treaties to which Ukraine is a
enforceable? party.
As a matter of principle, Ukrainian law 26. Can financing documents provide
permits the parties to a contract to for arbitration clauses?
freely elect the law which shall govern
their agreement, provided that (i) such Financing agreements in Ukraine are
agreement is an “international contract”, typically governed by Ukrainian law where
and (ii) such election is made in good the parties are Ukrainian. If the financing
faith, i.e., without the intention of avoiding agreement involves a foreign party, it can
application of any mandatory provisions of be governed by the law chosen by the
Ukrainian law which would have otherwise parties. In practice, English law will typically
applied to such agreement. be chosen by the parties.
The Ukrainian State and State entities Ukrainian law will apply if it is chosen by
generally do not enjoy sovereign immunity the parties and where the rules of the
in Ukraine with respect to applications Ukrainian private international law is so
to have an arbitral award or foreign court direct (in the absence of the parties’ choice).
judgment against them recognised In that case, the parties’ agreement to refer
in Ukraine. However, there are certain their disputes to arbitration is effective and
assets of the State which are unable to enforceable in accordance with Article II of
be enforced against, e.g., fixed assets the New York Convention.
of enterprises in which the Ukrainian Where there is no foreign element present
State holds 25% stake or more and such in a relationship, including where all of the
immunity cannot be waived. parties are Ukrainian, the parties are not
Under Ukrainian legislation, foreign States free to choose a foreign law. Mandatory
enjoy absolute jurisdictional immunity rules of Ukrainian law will apply irrespective
under Article 79 of the Law of Ukraine “On of the parties’ choice of law.
international private law”. Such immunity G. Trends and Projections
can be waived by the competent organs of
the respective State. 27. What are the main current trends
Recent court practice has shown the jurisdiction?
willingness of the Ukrainian courts
A full-scale Russia’s invasion of Ukraine
to change that approach in favour of
has badly impacted the economy and
functional immunity. In particular, the
led to suspension of infrastructure and
courts have applied the United Nations
energy projects, not to mention that a
Convention on Jurisdictional Immunities
severe damage has been caused to social,
as a rule of customary international law
energy and transportation infrastructure of
as in Everest et al vs Russia (Case No.
Ukraine.
796/165/2018). The courts have also
suggested that an agreement to arbitrate in However, even during the wartime, we see
a bilateral investment treaty can constitute that a number of social projects such as the
a sufficient waiver of State immunity. construction of child hospitals or residential
252
properties for displaced are being financed debt financing and credit risk coverage
by international financial institutions. for Ukrainian private projects. It is also
expected that the MIGA will allocate
The war and high political violence risk
funding for political risk insurance for
remain to be the biggest obstacle for
the international investors and financial Ukraine-related projects in a broad range of
institutions to finance the projects in sectors. In addition, the EBRD, the EIB and
Ukraine, even if the projects are located other development banks have committed
in the Western part of Ukraine and remain to provide financing and support for
untouched by the war. Therefore, most of Ukraine.
the construction or renovation projects Given the foregoing, we trust that a massive
are structured through the participation financing for the Ukrainian energy, housing,
of sovereign which either acts as direct healthcare and infrastructure projects will
borrower or issues the sovereign guarantee be unleashed by international financial
in order to cover the political violence institutions and donors once the war is
risk for the financiers and investors. We over.
therefore anticipate that all projects during
the war time will be driven or supported by 29. What are the alternative reference
the state until the war ends. interest rates which are being
in the project finance market? In order to depart from LIBOR and apply
new benchmarks, the National Bank of
Thanks to Ukraine’s success on the
Ukraine has advised that Ukrainian banks
battlefield, we can observe a growing
and non-banking d\financial institutions to
interest of international donors,
refrain from concluding agreements and
international financial institutions,
using financial instruments that reference
development banks and equity funds in
the future recovery and reconstruction in LIBOR and switch instead to benchmarks
Ukraine after the war is over. that has been published on the official
websites of central banks, including the
For instance, BlackRock FMA will provide Federal Reserve System, the European
advisory support for the Ministry of Central Bank, and international institutions.
Economy to design an investment
framework with a goal of creating
opportunities for both public and private
investors to participate in the future
reconstruction and recovery of the
Ukrainian economy. It is expected that
Black Rock will manage an up to US$ 25
bln investment fund for reconstructing
the Ukrainian infrastructure destroyed or
damaged during the war.
On the other side, IFC has launched $2
bln response package in financing and
guarantees to support Ukrainian private
sector. DFC, the U.S. development finance
institution, has committed to provide
253
UZBEKISTAN
CENTIL LAW
Kamilla Khamraeva Madina Hamidova Islam Gulomov

Senior Associate Senior Associate Senior Associate
kamilla.k@centil.law madina.hamidova@ islam.g@centil.law
centil.law
A. Overview • Law on Pledge (as amended) dated 1

May 1998;
• Law on Mortgage dated 4 October
2006;
• Law on Foreign Economic activity (as
The central piece of legislation in the area amended) No. 77-II dated 26 May 2000;
of project financing in Uzbekistan is the
• Law on Nature Protection No. 754-XII
Civil Code effective from 1 March 1997
dated 9 December 1992 (“Law on
as amended (“Civil Code”). A few other
Nature Protection”);
normative legal acts that are applied in
the project financing transactions are as • Law on Environmental Examination
follows: No. 73-II dated 25 May 2000 (“Law on
Environmental Examination”), etc.
• Law on Public – Private Partnership
dated 12 June 2019 (“PPP Law”);
• Law on Foreign Investments and what are the most significant project
Investment Activity dated 25 December financings closed during the last 12
2019; months?
• Law on Foreign Currency Exchange (as Uzbek market as well as its legislative
amended) dated 22 October 2019; framework are still undergoing structural
developments and constant changes where
• Law on Foreign Borrowings dated 29 Uzbek Government is an important actor in
August 1996; defining the market development.
255
Uzbekistan has been consistently its owners as such do not own “shares” but
commended by the IMF, ADB and rather they own “participating interests” in
World Bank for its tight monetary policy the LLC.
and resilience to the global economic
A shareholder in both LLC and JSC is
downturn. This is largely attributed to the
entitled to pledge its participating interest/
country’s selective approach to foreign
shares provided that:
borrowings and the conservative level
of reliance on world capital markets for (a) the charter of the company does not
generating domestic growth. prohibit the pledge of participating
interests in favour of a third party; and
The government of Uzbekistan is keen
to see domestic banks and financial (b) a resolution approving this pledge
institutions play a more prominent role is adopted by a general meeting of
in propelling the economy towards the participants of the LLC / of shareholders
targeted objectives. Project finance of the JSC.
is increasingly becoming a popular
A pledge of participating interest shall
instrument of implementing large strategic
be made in a simple written form, no
investment projects across different
registration is required for its validity
government priorities.
and effectiveness. The pledge of shares
The most significant project of the year is shall be signed in front of an officer from
a project financing for a wind power plant the depository office and is subject to
with a capacity of 500 MW in the Uzbek registration with the relevant shares
city of Zarafshan of Masdar Company. The depository’s office.
project received the PFI Awards as the Deal
of the Year in Central Asia.
B. Security Interest What are the endorsement types
certificates?
your jurisdiction? Private sale is not recognised as a method
for the enforcement of share pledge under
Among the most commonly used security
Uzbek law. Enforcement of the share pledge
types in project financing in Uzbekistan
is executed only through the public online-
are pledges over movable and immovable
auction, via stock exchange.
property as well as property rights (e.g.,
contractual rights, receivables and bank 6. Can security interest be established
accounts). over future assets, rights and
pledged as a security to the benefit Uzbek law does not allow to establish the
of lenders? If so, is there a specific security interest over the future assets
requirement in terms of formalities (other than future receivables as explained
or procedure to be followed for below). Pledge can be created only over the
establishing or perfecting a share assets already purchased by the pledgor
pledge? and reflected in its accounting books.
Yes, shares in both limited liability company Future receivables of the pledgor can be
(“LLC”) and joint stock company (“JSC”) can pledged in favor of the pledgee provided
be pledged to lenders. We note that in LLC, that the parties can define the future
256
receivables substantially enough so it 8. Is security trustee concept

allows to distinguish it in the future, e.g., enforceable in your jurisdiction? If
Uzbek law allows creation over future not, is an alternative mechanism,
receivables from the contract which already such as a parallel debt, available?
exist at the moment of pledge execution.
The concept of security trustee is not
7. What are the steps to be taken by recognised under Uzbek legislation. Uzbek
the lenders to enforce their security law requires that only the lender (the
interest, in case the borrower creditor) can act as a pledgee. In case there
are several creditors under the same facility
agreement, one of the creditors (agent) can
act as a security agent (pledgee) on behalf
of other secured creditors.
The concept of technical insolvency is C. Incentives and Restrictions
not defined and recognized under Uzbek
laws. Thereby, enforcement of security in 9. What are the main incentives and
such cases should be agreed by the parties exemptions for project financing in
your jurisdiction?
under the security documents.
Incentives and exemptions depend on
Enforcement of security interest in case of the types of the projects which are being
insolvency of the borrower. financed. There are several government
In accordance with local legislation, the support programs which provide for
incentives in different areas, such as
legal entity can be declared as a bankrupt
agriculture, textile, etc. There are also
(insolvent) only upon the decision of a
Free Economic Zones in certain regions
court. After the bankruptcy procedures
of Uzbekistan, the residents of which are
have been commenced by the court, the entitled to tax and customs exceptions,
interests of the creditors are represented subsidies.
by the committee of creditors or creditors
meeting and all further actions on behalf 10. Are there any incentives or
of the creditors are carried out only by exemptions specifically applicable
the committee/meeting of creditors. The to foreign investors?
creditors shall register with the registry of Yes, only foreign investors under PPP
creditors, where all claims of the creditors projects have a right to link the prices for
are reflected. the sale of the goods/products/services
under PPP to foreign currency.
The process of enforcement of the security
interest shall begin upon the relevant Foreign investors also enjoy certain
decision of the court have been issued. privileges in obtaining work permits and
entry visas for foreign employees.
Settlements with the creditors are
conducted in accordance with the register borrowing bank loans and
of creditors in the order, established under shareholder loans from abroad and/
the law on Insolvency. or in a foreign currency?
Claims of secured creditors are satisfied There are no any restrictions for borrowing
from the funds received after the sale of the bank loans and shareholder loans from
secured property in a public online-auction. abroad and/or in a foreign currency.
257
12. Are there any restrictions for D. Insurance

jurisdiction? 15. Can local insurance policies be
The foreign entities and citizens are not
entitled to privatize land, i.e., cannot have No, local insurance policies may not be
ownership rights over the land and there governed by foreign laws.
are also limits on the share ownership 16. Can insurance proceeds under the
in certain sectors (mass media, national
security etc.).
Otherwise, foreign investments are not lenders?
subject to any specific restrictions in
Yes, insurance proceeds under the
Uzbekistan.
insurance and reinsurance policies can be
13. Is there any minimum equity assigned to the benefit of the lenders. This
requirement, under the legislation can be achieved via pledge of rights under
or in practice, for project financings insurance agreements.
No, there is no minimum equity concerns or other issues in relation
requirement under the legislation for to the insurance provisions
project financing.
14. Please explain the registration documentation, if any?
The following requirements of local
legislation should be considered:
enforceable in your jurisdiction. - Insurance of the property interests of
The transaction documents in project a legal entity - resident of the Republic
financing are subject to the following of Uzbekistan located on the territory
registration procedures: of the Republic of Uzbekistan can be
insured only by an insurance company
- Registration of a loan agreement with - resident of the Republic of Uzbekistan,
the Central Bank of the Republic of
except otherwise explicitly provided
Uzbekistan;
under the law;
- Registration with cadaster authority for
- Authorized state authority has a right to
land lease rights pledge and mortgage;
provide for minimum requirements and
- Registration with the State Register of conditions to insurance contracts;
Pledges for any pledge agreement;
- Prior to the assignment of insurance
- Registration of onshore export and obligations for reinsurance to foreign
import contracts with the Unified insurance companies, the reinsurer
Electronic Information System of (reinsurance broker) is obliged to offer
Foreign Trade Operations. proposals to conclude reinsurance
Special regulatory approvals are required contracts in the amount of at least
for any state-owned company acting as a 50 percent of the obligations to local
borrower. insurance companies.
258
E. Financing of Public-Private • payments for the early termination of

Partnership (PPP) Projects the PPP agreement;
18. Is PPP a permitted method of • procedure for exchanging information
developing projects, and if so, have on the implementation of the PPP
any PPP projects been developed to project, on the security of rights and
date in your jurisdiction? obligations of the parties.
Yes, PPP is a permitted method for the The PPP Law also provides for the lenders’
project development in Uzbekistan. In step-in rights and allows the private
accordance with the report published partner to grant its lenders any form of
by the PPP Development Agency of security, including its rights under the
Uzbekistan (former authorized body in PPP agreement, assets, share pledge,
the PPP sector of Uzbekistan) in January assignment and transfer of rights under
2023, about 200 PPP projects have been other PPP project agreements forming part
developed in Uzbekistan including 8 of the PPP project.
projects in the energy sector and 20
projects in the healthcare sector of the In practice, in PPP projects, the direct
country58. agreements are signed in relation to the
PPP agreement, the government support
19. Are direct agreements between the agreement and the land lease agreement.
permissible under the local law, and 20. Please indicate the types of host
if so, commonly seen in the Project government supports (including
Finance market in your jurisdiction? treasury guarantee, debt
Yes, direct agreements are allowed under jurisdiction.
Uzbek law and are commonly seen in the
Project Finance Market of Uzbekistan. The PPP Law allows provision of additional
guarantees and state support to a private
In particular, Article 35 of the PPP Law partner and lenders under the PPP projects.
states that lenders may enter into direct
agreements with the public partner or Particularly, PPP Law sets out a non-
private partner and requires such direct exhaustive list of government support
agreements to contain the following: measures that can be provided to a private
partner and/or lenders under a PPP project
• lenders’ rights and obligations in as follows:
connection with the replacement or
removal of the private partner (or the (a) subsidies, including those allocated
private partner management); to ensure a guaranteed minimum
income for the private partner from the
• obligation to pay the lenders the fees
implementation of the PPP project;
payable by the public partner to the
private partner in accordance with (b) contributions in the form of assets
the PPP agreement in the event of and property necessary for the
replacement or removal of the private implementation of the PPP project;
partner;
(c) funds from the state budget of
• conditions to mitigate the risk of Uzbekistan covering a certain amount
termination of the PPP agreement; or part of goods, works, services that
58 https://www.pppda.uz/en/10897
259
are produced or supplied under the PPP 22. Are investors and lenders usually
project; protected against a change in
(d) provision of loans, grants, credit
facilities and other types of financing; agreement?
(e) additional guarantees aimed at Yes, the PPP Law expressly recognizes that
ensuring that the sponsors are able to a PPP agreement can envisage change in
fulfill their obligations under the PPP law protection mechanisms entitling the
project; private partner to request compensation
in the form of lump-sum payment, tariff
(f) tax incentives and preferences, as well
adjustment or amendment of the PPP
as other benefits;
agreement in the event the change in law
(g) other guarantees and/or types of occurring after the execution of the PPP
compensation. agreement directly increases the private
partner’s costs or decreases its revenue
Any additional guarantees and state from the PPP project.
support shall be provided by execution of a
government support agreement between At the same time, the PPP Law provides
that such change in law protection shall not
a private partner and the Republic of
apply to the change of law resulting in the
Uzbekistan represented by the Ministry
change of taxes following execution date of
of Economy and Finance or otherwise as
the PPP agreement unless such changes are
provided under a PPP agreement. discriminatory in respect of a certain PPP
21. Are political risk events usually project.
under the responsibility of the In practice, change in law provisions under
public party or the private party a PPP agreement usually apply from a bid
under the PPP agreements? date (in case of tendered projects only) and
cover the general changes in taxes as well.
Under the PPP agreements in Uzbekistan,
In order to rectify such deviations from the
political risk events are usually under the
PPP Law, such extension of a change in
responsibility of the public party. law protection is provided as an additional
In particular, PPP agreements in guarantee under a government support
Uzbekistan usually contain a political risk agreement.
event concept which includes political 23. Is force majeure specifically
force majeure events (wars, revolutions, regulated under the local
strikes of a political nature, embargo legislation?
etc. in Uzbekistan or directly involving
Yes, under Article 333 of the Civil Code, a
Uzbekistan), change-in-law and other
party can be relieved from liability if such
political events affecting the private partner party proves that it could not perform
and the project. its obligation due to force majeure
In case the political risk events occurred circumstances unless otherwise provided
and continuing, the private partner is for by law or the underlying contract.
usually entitled to claim increased costs The Regulation on Administrative
and / or terminate the PPP agreement. Regulation for Delivery of Public Services
260
Confirming Force Majeure Events59 defines aspects are contained in various laws (for
the term “force majeure” as emergency, example, the Law on Nature Protection,
unavoidable and unforeseen circumstances which provides that every citizen has
under given conditions caused by natural the right to a clean, safe and healthy
phenomena (earthquakes, landslides, environment).
hurricanes, droughts, etc.) or socio-
economic circumstances (state of war,
Immunity
blockades, bans on import and export,
etc.), which are not dependent on the will 25. Are submission to a foreign law and
and actions of the parties in connection the waiver of immunity provisions
with which they are unable to fulfill their enforceable?
obligations.
Under general provisions of Uzbek laws,
24. What are the general environmental parties to an agreement can agree on
and social requirements in project a foreign law to govern the agreement
financings? provided that there is a “foreign element”
in the transaction (e.g., one party is a
The project financings are subject to
foreign company). That said, a choice
requirements of imperative local laws,
of a governing law does not affect the
regulations and norms. The key law
applicability of mandatory rules of Uzbek
governing the environmental regime in
laws regulating corresponding relations.
Uzbekistan is the Law on Nature Protection
and Law on Environmental Examination. In accordance with article 79 of the Uzbek
Civil Code, the state (represented by the
The Law on Nature Protection specifically
government) takes part in relationships
provides for environmental management,
regulated by civil legislation on an equal
prevention and control of pollution as well
basis with other participants and is liable
as sustainable management and use of
for its undertakings with its own property.
natural resources.
The Uzbek Civil Code is therefore clear that
The Law on Environmental Examination
if the government enters into a commercial
sets out the criteria for environmental
activity, it loses special treatment or
experts, the procedures conducted in
sovereign immunity. When dealing with
the course of expertise, the duration of
the government directly in Uzbekistan it is
expertise and the financial obligations
widespread practice for the government,
of applicants. State environmental
as a public entity, to waive its sovereign
examination is the key instrument for
immunity. From our experience of direct
ensuring compliance of the contemplated
contracts with the government, whether
project with the environmental legislation.
investment agreements or PSAs, the waiver
The Equator Principles are not part of of sovereign immunity was not an issue.
the legislation of Uzbekistan; however, It is quite natural for a foreign investor to
the Equator Principles are used in several request the government of a host country
large infrastructure projects in Uzbekistan to waive immunity.
financed by DFIs and foreign banks.
Meanwhile, the Republic of Uzbekistan is
Uzbekistan has no specific legislation not a party to any multilateral or bilateral
governing social matters, but certain treaties with any Western jurisdiction or the
59 Resolution of the Cabinet of Ministers of the Republic of Uzbekistan No. 625 dated 28 2022.
261
United States for the mutual enforcement Investment in key energy and
of court judgments. Consequently, should manufacturing sectors, coupled with
a judgment be obtained from a national priority infrastructure development, remain
court in any Western jurisdiction or the dominant areas of the project finance
United States, it is highly unlikely to be sector in Uzbekistan with increasing activity
given direct effect in Uzbek courts. in the energy sector.
26. Can financing documents provide Infrastructure development is, by and
for arbitration clauses? large, funded by the state, occasionally
raising much needed financial resources
A party’s submission to a foreign
from IFIs or financial institutions and state
jurisdiction is legally binding and
development funds in Asia or the Middle
enforceable if a dispute is subject to
East, predominantly China, South Korea and
international commercial arbitration.
oil rich Arab countries.
Uzbekistan is a party to the 1958 New York
Convention and, thus, arbitral awards made 28. Are any significant development or
in foreign jurisdictions are recognized and change expected in the near future
enforced in Uzbekistan unless there are in the project finance market?
grounds for the refused pursuant to Article
As mentioned above, the main focus in the
5 of the New York Convention.
coming years will remain with the energy
Investor-state disputes submitted to ICSID industry. The government of Uzbekistan
and other institutional or ad hoc arbitration is aiming to generate approximately 25%
tribunals abroad in accordance with valid of all its energy needs from renewable
arbitration clauses are also subject to sources, including solar, by 2026. It is
recognition and enforcement in Uzbekistan therefore contemplating developing a
pursuant to the New York Convention. strategy for the use of alternative sources
Apart from the arbitration clause, there of energy, along with the very intensive
shall be a due sovereign immunity construction of small HPPs in the near
waiver from the state or its governmental future. The government plans to spend
organization in an investor-state dispute. 314.1 billion UZS ($81 million) of its own
money and raise 20.5 trillion UZS ($5.3
Disputes relating to administrative,
billion) from foreign sources to develop
corporate, family, inheritance and
hydro, solar and wind power through 2025.
employment relations are not arbitrable
under Uzbek law. 29. What are the alternative reference
Also, Uzbek courts have exclusive
jurisdiction over the cases related to
immovable property (buildings and land)
when such immovable property is located SOFR is being commonly used in
in Uzbekistan and transportation of Uzbekistan as an alternative reference
passengers, baggage and goods when the interest rates during the LIBOR transition
transport organization is incorporated in period.
Uzbekistan.
jurisdiction?
262

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Ergun Publication Series: Global Legal Guides

Ergun Publication Series: Global Legal Guides

Dr. Çağdaş Evrim Ergün

Ergun Books (UK) Limited

17. QATAR....................................................................................................................................................... 167

Pablo Gayol Gonzalo Santamaria Juan Pablo Lentino

A. Overview Law (Law N° 24,065), Renewable Energy

the existence of the pledge, reflecting interest, in case the borrower

1 Section 2229 of the CCC.

A.B.M. Nasirud Doulah Amina Khatoon

A. Overview • The Washington Convention on the

4. Can the shares of a company be Security agreements are required to be

7. What are the steps to be taken by • the security is rendered insufficient

As stated above, local law governed 8. Is security trustee concept

Year Thrust Thrust Industries Physical Industries Industries Developers Industries

registration fees and stamp duty required Q Incentives to export oriented

• double taxation can be avoided; for obtaining foreign loan. Pursuant to

Security Eligible Statutory requirements Perfection

Security Eligible Statutory requirements Perfection

D. Insurance Insurances must be obtained from local

This means that increasing numbers recent changes or developments in project

BOSNIA AND HERZEGOVINA

Nebojsa Maric Dzana Smailagic Ezmana Turkovic Arijana

A. Overview The said laws are compatible with the

There are three types of security used based on an administrative decision

The common, out-of-court collection of registration. According to the Framework

E. Financing of Public-Private Public guaranties for Lenders should be

− Contract on PPP which is based on F. Jurisdiction, Waiver of

Maurício Teixeira dos Rafael Baleroni

A. Overview and securities laws (like the Brazilian

7 The list can be seen at UNCTAD: https://investmentpolicy.unctad.org/international-investment-agreements/countries/27/

suspends and eliminates certain federal Other incentives may be available

for entities with FDI exceeding BRL100,000 financing structures. However, in

Sasa Jovicic Marija Lalin Lucia Mocibob

A. Overview 2. How mature is the project finance

All major project finance-based Project financing projects in Croatian

B. Security Interest The establishment of a pledge over the

insolvency is generally processed as regular C. Incentives and Restrictions

There are no special incentives and restriction is often circumvented by the

In terms of real estate investment in D. Insurance

partnerships were mostly established Croatian government support may be

Mikkel Fritsch Julius Michaelsen

A. Overview The most significant project financings

secured by the mortgage(s) by way of lov om kapitalmarkeder). In such case, the

investment in sustainable and socially security or public order). Investments,

designing, constructing, and operating operating and maintaining the facilities

of contaminated or possibly contaminated in a foreign jurisdiction may not be

financing. Many projects related to sustainability objectives, and many financial

Amir H. Jahanguiri Farrah Bandomi Mombongo

A. Overview More generally, the legal provisions

For specific categories of companies which as triggering an event of default) is deemed

- non-possessory pledges over tangible in France with hundreds of examples in

The above-mentioned conditions to qualify Finance documents can provide for

Tim Garcia Matthew Torres

A. Overview Depending on the type and nature of the

global financing projects, specifically in security interests mentioned in Question 3

E. Financing of Public-Private Different types of government support in

As alluded to in our response to Question 2, a jurisdiction, the most significant