financial law issues

Financial Law Issues for Lawyers in Transition EconomiesA three day series of seminars in London jointly hosted by The London School of Economics and Political Science and the European Bank for Reconstruction and Development.

23-25 June 2010

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Financial Law Issues for Lawyers in Transition EconomiesThis series of seminars is held over a three day period at the London School of Economics and Political Science (LSE) and the European Bank for Reconstruction and Development. It follows the highly successful series held in 2008 and 2009 and offers the opportunity to examine in depth, with leading academics and experienced practitioners, the key issues of particular sensitivity for transition economies in areas such as concession-based project finance and public private partnerships, secured lending and environment law. The seminars, which will be designed to stimulate open discussion (with delegate numbers being limited to approximately 35) will be of interest to all lawyers based, or practising in, transition economies.

BackgroundLaw is a fundamental part of the toolkit for economic and political change. Countries that wish to make the transition from ‘command’ economies to something akin to a market economy need to implement legal changes in order to facilitate the necessary economic and political changes. This is not an easy or straightforward process and it takes time. Time is itself a precious commodity in countries that wish to improve their physical infrastructure to offer better access to, say, clean water and electricity to their citizens to improve transport links within and across their borders. They will need to encourage foreign investment – and potential investors will look to the laws of the investee country to safeguard their investment.

The situation is made more complex by the advent of global markets across the entire world – especially in banking and finance – and the accompanying demands for more globally consistent laws and regulation to serve and regulate those markets.

The seminars will explore these topics. The speakers will propose a global approach, taking into account both the common law regimes that often apply to multi-jurisdiction financing documents and the civil law tradition of transition countries.

Delegates will be presented with a Certificate of Attendance at the conclusion of the seminars.

LSE’s Law and Financial Markets ProjectThese seminars are being arranged as part of the ongoing programme of LSE’s Law and Financial Markets Project. Any profits from these seminars will be used to fund the Project’s activities and other Law Department activities at LSE. More information about the project and opportunities to participate in its activities can be found at its website www.lse.ac.uk/collections/law/projects/lfm.htm or by contacting the director of the project, Roger McCormick, at [email protected] or on +44 (0)7802 604 316.

The EBRD Legal Transition ProgrammeThe EBRD is associated with these seminars as part of its Legal Transition Programme, an initiative to contribute to the improvement of the investment climate in transition countries. Programme activities focus on the development of legal rules and establishment of the legal institutions and culture on which a vibrant market-orientated economy depends. More information about the programme can be found at www.ebrd.com/law or by contacting Michel Nussbaumer, Chief Counsel, EBRD at [email protected]

Outline of programmePlease note that the details below are subject to change. Details of venues (conference rooms etc) will be made available following registration.

Day 1: Project Finance, Public Private Partnerships and Concession Based Financing (23 June 2010, at the London School of Economics and Political Science)

Continued ...

Co-Chairs for the day: Roger McCormick and Christoph Sicking

8.45 Coffee

9.15-9.30 Welcome and general introduction Roger McCormick Christoph Sicking

9.30-10.15 Session 1 – Introduction to project finance, public private partnerships and concession based financing

Roger McCormick

• The classic ‘star’ structure of limited recourse financing

• Role of special purpose vehicle; single point of responsibility; how limited recourse is achieved

• Key risks, risk transfer and allocation

• Key players and their relationships: host government, sponsors, lenders and project company

• Contractual structure: project structure, finance structure and security structure

10.30-11.15 Session 2 – Sources of limited recourse financing, bankability and risks and risk perceptions

Harry Boyd-Carpenter

• Why use limited recourse financing – the worst option, apart from all the rest…

• Strengths and weaknesses of the financing model

• Sponsor interests and dynamics

• Funding sources – equity and quasi-equity

• Funding sources – IFIs, ECAs and commercial banks

• Consequences of this funding choice – the focus on risk

• Risk – identification, perception and allocation

11.15-11.45 Tea and Coffee

11.45-12.30 Session 3 – Key aspects of term sheet and project finance loan agreement Christoph Sicking

• Significance of term sheet

• Representations and warranties

• Conditions precedent

• Affirmative and negative covenants

• Financial covenants

• Events of default

• Dispute resolution

• Boilerplate provisions

12.30-13.45 Lunch

13.45-14.45 Session 4 – Commentary on contents of term sheet and loan agreement Roger McCormick

• Key issues in negotiations

• The planning and structuring of negotiations

• The realities of risk allocation

• How documents interlock

14.45-15.30 Session 5 – Typical provisions in concession agreements and comparable documents relating to infrastructure and energy projects

Roger McCormick

• The parties; duality of roles and conflicts of interest; host government as concession grantor and/or as ‘customer’

• The justification for ‘guarantees’

• How to assess the documents from a lender’s point of view

• Provisions regarding environmental impact, local communities and comparable issues;

• The position, and influence, of ‘stakeholders’

• The specifications

• Price mechanisms and deadlines/milestones

• Benchmarking

• Force majeure and undue hardship

• Liquidated damages and other remedies for non-performance

• Termination rights and financial consequences of termination

• Assignability and step-in rights


16.00-17.00 Session 6 – Legal opinions and the role of transaction and local lawyers Andrew McKnight

• The purposes of legal opinions

– To cover legal issues, not commercial or financial issues

– To cover the conflict of laws issues that arise in the transaction

– An opinion, not a cast iron assurance

• The limits on giving opinions

– Speaks as of a certain date

– Speaks of identified documentation, not other matters

– Subject to assumptions as to matters of fact and laws of other jurisdictions

– Legal qualifications

– In some jurisdictions, may not cover unknown statutes

• The beneficiaries of legal opinions (eg, immediate parties, parties with a derivative interest, regulators, credit rating agencies, security trustees)

• Who should give them (eg, lawyers qualified in the relevant jurisdictions, independent lawyers, the banks’ lawyers, the borrower’s lawyers, in-house lawyers)

• The matters that should be covered

– Local law opinions (eg, in the jurisdiction of incorporation/establishment and in the jurisdiction where relevant assets are located)

– The transactional opinion (eg, as to the governing law of the facility agreement)

• Responsibilities of those giving opinions (eg, liability in contract or tort, conflict of laws issues)

• The form of an opinion

17.00-17.30 Round-up of Day 1 and Introduction to Case Study All speakers

17.30-19.00 Drinks

Day 2: An Introduction to Concepts of Insolvency and Security (24 June 2010, at the London School of Economics and Political Science)

Co-Chairs for the day: Michael Bridge and Frederique Dahan

9.30-10.30 Session 1 – Practice and principles Andrew McKnight

• Corporate and individual debtors

– Creditors and others who have dealings with a debtor

– What happens when things go wrong

– The general concept of equal misery amongst unsecured creditors

– Creditors who receive preferential treatment

– Security as a method of protection in an insolvency

– Other reasons for taking security

• Assets in the context of security

– The types of assets that may be available

– Matching types of security to assets

• Cover by third parties

– Guarantees from associated entities

– Cover from independent entities

• Concepts of set-off and netting

• Cross-border issues and an introduction to conflict of laws

10.30-11.30 Session 2 – Secured finance: the English model Michael Bridge

• English concepts of security

– The English concepts of security, the scope and coverage of security

– The types of asset that are available as security

– Present v. future assets

• Possessory v. non-possessory security

– Fixed security

– The concept of the floating charge

– Priority issues as between competing claimants

• Alternatives to security

– The concept of quasi-security

– Equipment finance techniques

– Retention of title in favour of suppliers

– Receivables financing

– Title transfer transactions (particularly for securities)

• Cross-border issues in secured/proprietary transactions

– Characterising the issues involved in a transaction

– The issues that are likely to be involved in a financing transaction

– The English approach to proprietary transactions involving rights in rem

– Conflicts rules for different types of asset

– The effect upon a transaction of illegality or avoidance under a foreign law


Continued ...

12.00-12.45 Session 3 – Corporate insolvency and restructuring Andrew McKnight and Michael Bridge

• Concepts of insolvency and insolvency proceedings

– Formal and informal procedures and self-help procedures

– The English insolvency procedures

– Administration contrasted with US Chapter 11

– Voluntary arrangements

– Schemes of arrangement

– Receivership (specific and administrative receivership)

• Restricting administrative receivership – and the exceptions thereto

• The pari passu concept and the distribution of assets in liquidation

• Insolvency set-off

• The order and ranking of claims in a liquidation

• Rescues and restructurings of insolvent businesses

• Avoidance/deferral/suspension of security in insolvency proceedings

– Registration requirements

– The risk of re-characterisation

– Dispositions after the commencement of winding up

– Transactions at an undervalue, preferences, avoidance of transactions, transactions to defraud creditors

– The effect of administration and a proposal for a voluntary arrangement

• Cross-border insolvency

– The scenario

– The issues that are likely to arise

– The approach that is taken in England

– The EC Insolvency Regulation 2000

12.45-13.45 Lunch

13.45-14.30 Session 4 – Secured lending in emerging markets – pitfalls and problems Harry Boyd-Carpenter

• Security – what does it really mean?

• Security – what counts?

• Security – why bother?

• Context – the Anglo-Saxon expectation

• Theory… and reality, telling the ‘Enforcement Story’

• Things that get in the way: execution, perfection, scope, enforcement

• Dispute resolution

14.30-15.30 Session 5 – Investment securities: current issues Eva Micheler and Roger McCormick

• Investment securities and the function of property rights

• Immobilisation and Dematerialisation

• Pooling

• Legal Uncertainty

• Ring Fencing

• Good Faith Purchaser

• Choice of Law

• Shortfalls

• UNIDROIT

• Legal Certainty Group

• Disappearing property rights and other issues arising from the Lehmans collapse


16.00-17.00 Session 6 – Security law reform in transition economies Frederique Dahan

• Problems in reforming security law

• EBRD involvement

• International standards

• Opportunity of reform: legal efficiency

• Examples – and vision for the future

17.00-17.30 Round-up of Day 2 All speakers

Day 3: Miscellaneous issues affecting participants and advisers in project financings and the financial markets (25 June 2010, at the European Bank for Reconstruction and Development)

Co-Chairs for the day: Roger McCormick and Michel Nussbaumer

9.30-10.30 Session 1 – Project sponsor issues Andrew Hart

• What is a Project Sponsor?

• Considerations in structuring the project company

• Contractual relationships between Sponsors and the Project Company

• Allocation of Risk between Sponsors and Lenders

• How Sponsors extract profit from the Project

• Restrictions on equity transfers

• Common events of default relating to Sponsors

• ‘Comfort letters’ and other Sponsor Support

10.30-11.30 Session 2 – Drafting and Negotiating Techniques: ‘Weasel Words’ Christoph Sicking

• The strength of obligations: ‘best endeavours’ and ‘reasonable endeavours’

• Implied terms and the exercise of discretion: ‘reasonableness’ and ‘good faith’

• Materiality and ‘MAC’ clauses


11.45-12.45 Session 3 – Comparison of common law and civil law approaches to commercial documentation and examples of commercial drafting

Hugh Collins

• The need for legal certainty

• Why common lawyers draft ‘in extenso’

• No general, overriding ‘fairness’ or ‘equilibrium’ requirement amongst commercial parties

• What are the advantages and disadvantages of a solvency test

12.45-14.00 Lunch

Continued ...

14:00-15:00 Session 4 – Environment, social and governance issues in project finance Paul Watchman

• Whose Law is it Anyway?

– Environmental and social assessment

– Hard Law v. Soft Law

– Local Law v. International Law

– Imposing developed world standards on developing states

– Jurisdictional issues relating to standards of project assessment

• Governance, Complicity and Other Human Rights Issues

– Prior Consultation v. Prior Consent

– Displacement

– Land rights and customs

– Cultural issues

• Challenging and Delaying Projects

– Legal challenge

– Locus Standi of communities and NGOs

– Judicial review

– Tort and nuisance claims

– Jurisdictional issues

– Human rights cases

– Administrative law challenge

• Elephant Traps for Sponsors and Lenders and Other Lessons from Major Project Finance Projects

– EBRD, Environmental and Social Policy and Performance Requirements (2008)

– IMF social and environmental policies

– OECD Common Approaches, Equator Principles, Carbon Principles, Climate Principles and other voluntary guidance


15.30-17.00 Session 5 – Case study: Participative discussion Roger McCormick

Visual depiction of how documentation typically allocates risk

What is meant by ‘risk management’ in the project finance context

Influences that affect risk management

Consideration of characteristics of project company vehicle and its ability to absorb risk

Risk allocation matrix participative discussion

17.00-18.00 General Round-up and distribution of certificates

18.00-19.30 Drinks

Speaker profiles

Professor Michael Bridge Michael Bridge was an undergraduate and postgraduate student at LSE before starting his academic career. Before coming to LSE in 2007, he held chairs in law at McGill University, the University of Nottingham and UCL, abd was Dean of the Faculty of Laws at UCL. He has been a Visiting Professor at the Universities of Leeds, Malaya, Hong Kong, Melbourne,

Sydney and Auckland and at Monash University.

Harry Boyd-CarpenterHarry, who is a British Citizen, joined EBRD as counsel in 2005 where he advised on a range of equity and loan investments across Central and Eastern Europe and in former CIS countries. Prior to joining EBRD Harry was a senior associate in the project finance group of Allen & Overy LLP in London, working on a range of international project finance transactions in the PPP/PFI, oil and gas and power sectors. In 2001-2002 Harry worked for the European Agency for Reconstruction based in Pristina, Kosovo. Since 1st January 2008, Harry has been working in the EBRD Banking

department as a Principal Banker in the power and Energy Utilities team.

Professor Hugh Collins Hugh Collins is a Professor of English Law at LSE. He studied law at Oxford and Harvard, became a Fellow of Brasenose College, Oxford, before moving to LSE in 1991. He has published numerous book including Regulating Contracts (OUP, 1999) and Employment Law (2003). Recently he has been researching in the field of European Contract law. He is General

Editor of the Modern Law Review and a Fellow of the British Academy.

Frederique Dahan Frederique Dahan presently serves as Lead Counsel and Head of the Financial Law Unit (FLU) in the Legal Transition Team (LTT) of the EBRD, which provides legal reform assistance to the countries of central and Eastern Europe and the former Soviet Union. Frederique oversees all of the FLU legal reform projects concerning secured transactions and access to credit, insolvency and creditors’ rights, corporate governance and securities markets. She personally leads all secured transactions projects - with country-specific projects currently on-going in Mongolia, Moldova, and Russia. Frederique is a recognised expert in the subject matter, having personally worked on some of the key EBRD standards setting projects on secured transactions, collateral registers and mortgage lending. Prior to joining the EBRD in 2000, Frederique worked as a Lecturer at the University of Essex, in the United Kingdom, teaching Comparative law, European Company Law, Cross-Border Insolvency and Business and Corporate Law Issues in Central and Eastern Europe. She was also a Research Fellow at the Institute of Advanced Legal Studies in London, UK.

Frederique has published numerous articles on secured transactions, including in the Butterworths Journal of International Banking and Financial Law, Law and Financial Markets Review, Penn State International Law Review, Uniform Law Review, European Business Law Review and Uniform Commercial Code Law Journal. She is also the Editor (with John Simpson) of the work on Secured Transactions Reform and Access to Credit, 2008, Elgar. Frederique is a qualified French solicitor. She received her Doctorate in Law from the University of Paris I Panthéon-Sorbonne.

Andrew HartAndrew Hart is a partner of international law firm, Fulbright & Jaworski International L.L.P., based in London. He leads the energy and infrastructure transaction group in the firm’s London office. He joined the firm in November 2007 from Freshfields Bruckhaus Deringer, where he had been a partner for nine years. Andrew has a broadly based international transactions practice which covers a range of corporate and finance transactions in the energy and infrastructure sector, including greenfield project finance and development, public-private partnership projects, M & A in relation to energy and infrastructure assets, restructuring and Islamic finance. In the project finance area, he has advised many development financial institutions, such as IFC, ADB, JBIC and Export-Import Bank of the United States.

Emmanuel MauriceEmmanuel Maurice, EBRD General Counsel, joined the Bank as Assistant General Counsel in 1991. He was promoted Deputy General Counsel in 1995 and was appointed General Counsel in 1998. Emmanuel Maurice has graduate and post-graduate law degrees (Universities of Paris-1, Paris-II and Stanford, California) and a graduate degree from the Institut d’Etudes Politiques de Paris. Prior to joining the Bank, he worked in the New York and Paris offices of Willkie Farr and Gallagher, a US law firm (1974-85) and

with the International Finance Corporation in Washington (1985-91).

Roger McCormickRoger Mccormick is the Director of the Law and Financial Markets Project at LSE and also a Visiting Professor there. He is also the author of Legal Risk in the Financial Markets (Oxford University Press 2006) and the Editor of Law and Financial Markets Review. He retired from full-time legal practice six years ago, having practised law in the City of London for nearly 30 years (22 of them as a partner of Freshfields, where he was for several years the head of its project finance practice group). He has represented clients on project finance transactions in Russia and Hungary as well as many other jurisdictions, including China, India, the Philippines and various parts of Africa. At LSE, he teaches courses on project finance and legal risk in financial markets, amongst other things.

Andrew McKnightAndrew McKnight is a Visiting Professor of Law at Queen Mary, University of London and a Consultant at Salans LLP. He is a solicitor who has practised in the City of London for almost 30 years, specialising in English, cross-border and international banking and finance transactions, as well as related areas such as insolvency, financial reconstructions and banking regulation. He is the author of The Law of International Finance (OUP 2008), as well as a large number of legal articles that have been published in legal journals that specialise in banking and international finance. He is also a general editor of the Encyclopaedia of Banking Law (Butterworths, LexiasNexis).

Professor Dr Eva MichelerEva Micheler is a Senior Lecturer in Law at LSE and a Professor at the Department of Business Law of the Vienna University of Economics. She is also a member of the Board of the Institute of Central and Eastern European Business Law with overall academic responsibility for its Russian section.

Michel Nussbaumer Michel Nussbaumer is Chief Counsel of the EBRD Legal Transition and Knowledge Management Team, a group of legal experts working on legal policy dialogue and technical assistance in the EBRD countries of operations. Prior to that, Michel worked for almost three years as counsel on EBRD banking operations, where he was responsible for legal aspects of various investments of the Bank, with a particular focus on SME financing. Michel has practiced as a commercial lawyer in Geneva, Moscow and London. While in private practice, Michel acted as a Swiss correspondent for various legal publications and has also published a number of articles on Swiss and Russian legal matters. Michel, who is a Swiss national, received his Masters Degree in Law from the University of California at Berkeley and

also was a visiting scholar at the Moscow State University.

Christoph SickingChristoph Sicking is Chief Counsel at EBRD, where he advises on a variety of debt (including project finance) and equity transactions, in both the public and private sector, across Central and Eastern Europe, Central Asia, and the former CIS countries. He is in charge of a team of transaction lawyers, many of whom are focussed on project finance transactions, and most recently has worked on transactions in Turkey, which became a country of operation of EBRD in 2008. Prior to joining EBRD, Christoph was an associate at the New York office of US-based law firm Hunton & Williams, where he advised on cross-border project and structured finance transactions, with strong emphasis on cross-border leveraged leasing. Christoph holds degrees in both common and civil law from McGill University and is qualified in New

York, Massachusetts and England and Wales.

Paul Watchman Paul Watchman is Chief Executive of QWC, a business consultancy. In 2006 he was named with Hank Paulson, former Chairman and CEO of Goldman Sachs and US Treasury Secretary, as one of the six most influential worldleaders in the development of sustainable banking. Prior to seeing up QWC Paul practised environmental and land development law for over 30 years. He was formerly a partner with Brodies and Head of its Environmental and Planning Practice, a partner with Freshfields Bruckhaus and Deringer in its Environmental Planning and Regulationgroup and global head of the environmental practice and climate change group of Dewey & LeBoeuf. Paul is the principal author of the UN EP FI report on the integration of Environment Social and Governance issues into pension fund investment decision-making, His principal interests relate to the environment, climate change and carbon regulation, carbon capture and sequestration, alternative energy, corporate governance, corporate and social responsibility, business and human rights, sustainable finance, including the Equator Principles and sustainable and responsible investment. His most recent publications on these subjects include as editor and contributor of Climate Change: A Guide to Carbon Law and Practice (2008) and Complicity: Charting a Path through the Conceptual Minefield in M J Pattanaik, Human Rights and Business: Perspectives and Practices (2008). Paul is a director ofmember of or adviser to a number of public and charitable bodies including the United Nations Environmental Panel Financial Institutions, The Prince of Wales’s Trust, London Climate Change Panel, European Commission, and Fair Pensions.

Registration

If you would like to register for attendance please contact Mandy Tinnams on +44 (0)20 7955 7684 or by email at [email protected]. The cost of attendance at these seminars is £1,750 payable, immediately following registration, by sterling cheque to ‘The London School of Economics’. Payment other than by cheque can be arranged; please contact Mandy Tinnams for details. If you register before 30 April 2010 the lower cost of £1,600 will apply. No refunds are payable under any circumstances except cancellation of the seminars.

A place will be reserved for you once you have been registered and on receipt of your payment by no later than Friday 11 June 2010 but please note that LSE and EBRD reserve the right to refuse to accept any person for registration. As places are extremely limited you are advised to register as soon as possible.

Department of LawThe London School of Economics and Political ScienceHoughton StreetLondon WC2A 2AE

Tel: +44 (0)20 7955 7684Email: [email protected]

www.lse.ac.uk/collections/law/projects/lfm.htm

Legal Transition Programme European Bank for Reconstruction and Development One Exchange Square London EC2A 2JN

Tel: +44 (0)20 7338 7631Fax: +44 (0)20 7338 6150

Email: [email protected]

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