Financial Law Issues for Lawyers in Transition Economies Department of Law The School of Economics A three day series of seminars in London jointly hosted by The London and Political Science School of Economics and Political Science and the European Bank for Houghton Street London WC2A 2AE Reconstruction and Development.

Tel: +44 (0)20 7955 7684 23-25 June 2010 Email: [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 7631 Fax: +44 (0)20 7338 6150

Email: [email protected] www.ebrd.com/law This publication is printed on recycled stock Financial Law Issues for The seminars will explore these topics. The Outline of programme Lawyers in Transition speakers will propose a global approach, taking into account both the common Please note that the details below are subject to change. Details of venues (conference rooms etc) will be made available following registration. Economies law regimes that often apply to multi- jurisdiction financing documents and the This series of seminars is held over a civil law tradition of transition countries. three day period at the London School of Economics and Political Science (LSE) and Delegates will be presented with a Day 1: Project Finance, Public Private Partnerships and Concession Based Financing the European Bank for Reconstruction Certificate of Attendance at the conclusion (23 June 2010, at the London School of Economics and Political Science) and Development. It follows the highly of the seminars. successful series held in 2008 and 2009 and offers the opportunity to examine in depth, LSE’s Law and Financial Co-Chairs for the day: with leading academics and experienced Roger McCormick and practitioners, the key issues of particular Markets Project Christoph Sicking sensitivity for transition economies in areas These seminars are being arranged as 8.45 Coffee such as concession-based project finance part of the ongoing programme of and public private partnerships, secured 9.15-9.30 Welcome and general introduction Roger McCormick LSE’s Law and Financial Markets Project. lending and environment law. The seminars, Christoph Sicking Any profits from these seminars will be which will be designed to stimulate open 9.30-10.15 Session 1 – Introduction to project finance, public private partnerships Roger McCormick used to fund the Project’s activities and discussion (with delegate numbers being and concession based financing other Law Department activities at LSE. limited to approximately 35) will be of More information about the project • The classic ‘star’ structure of limited recourse financing interest to all lawyers based, or practising in, and opportunities to participate in its • Role of special purpose vehicle; single point of responsibility; how limited transition economies. activities can be found at its website recourse is achieved www.lse.ac.uk/collections/law/ • Key risks, risk transfer and allocation projects/lfm.htm or by contacting the Background • Key players and their relationships: host government, sponsors, lenders and director of the project, Roger McCormick, Law is a fundamental part of the toolkit for project company at roger.mccormick@ukonline. economic and political change. Countries • Contractual structure: project structure, finance structure and co.uk or on +44 (0) 7802 604 316. that wish to make the transition from security structure ‘command’ economies to something akin 10.30-11.15 Session 2 – Sources of limited recourse financing, bankability Harry Boyd-Carpenter to a market economy need to implement The EBRD Legal Transition and risks and risk perceptions legal changes in order to facilitate the Programme • Why use limited recourse financing – the worst option, apart from all the rest… necessary economic and political changes. This is not an easy or straightforward The EBRD is associated with these • Strengths and weaknesses of the financing model seminars as part of its Legal Transition process and it takes time. Time is itself a • Sponsor interests and dynamics precious commodity in countries that wish Programme, an initiative to contribute to improve their physical infrastructure to the improvement of the investment • Funding sources – equity and quasi-equity to offer better access to, say, clean water climate in transition countries. Programme • Funding sources – IFIs, ECAs and commercial banks and electricity to their citizens to improve activities focus on the development of • Consequences of this funding choice – the focus on risk transport links within and across their legal rules and establishment of the legal borders. They will need to encourage institutions and culture on which a vibrant • Risk – identification, perception and allocation market-orientated economy depends. foreign investment – and potential investors 11.15-11.45 Tea and Coffee will look to the laws of the investee More information about the programme 11.45-12.30 Session 3 – Key aspects of term sheet and project finance loan agreement Christoph Sicking country to safeguard their investment. can be found at www.ebrd.com/law or by contacting Michel Nussbaumer, Chief • Significance of term sheet The situation is made more complex by the Counsel, EBRD at [email protected] advent of global markets across the entire • Representations and warranties world – especially in banking and finance – • Conditions precedent and the accompanying demands for more • Affirmative & negative covenants globally consistent laws and regulation to serve and regulate those markets. • Financial covenants • Events of default • Dispute resolution • Boilerplate provisions

Continued ... 12.30-13.45 Lunch Day 2: An Introduction to Concepts of Insolvency and Security 13.45-14.45 Session 4 – Commentary on contents of term sheet and loan agreement Roger McCormick (24 June 2010, at the London School of Economics and Political Science) • Key issues in negotiations • The planning and structuring of negotiations Co-Chairs for the day: • The realities of risk allocation Michael Bridge and • How documents interlock Frederique Dahan 14.45-15.30 Session 5 – Typical provisions in concession agreements and comparable Roger McCormick 9.30-10.30 Session 1 – Practice and principles Andrew McKnight documents relating to infrastructure and energy projects • Corporate and individual debtors • The parties; duality of roles and conflicts of interest; host government as concession grantor and/or as “customer” – Creditors and others who have dealings with a debtor • The justification for “guarantees” – What happens when things go wrong • How to assess the documents from a lender’s point of view – The general concept of equal misery amongst unsecured creditors – Creditors who receive preferential treatment • Provisions regarding environmental impact, local communities and comparable issues; – Security as a method of protection in an insolvency • The position, and influence, of ‘stakeholders’ – Other reasons for taking security • The specifications • Assets in the context of security – The types of assets that may be available • Price mechanisms and deadlines/milestones – Matching types of security to assets • Benchmarking • Cover by third parties • Force majeure and undue hardship • Liquidated damages and other remedies for non-performance – Guarantees from associated entities • Termination rights and financial consequences of termination – Cover from independent entities • Assignability and step-in rights • Concepts of set-off and netting 15.30-16.00 Tea and Coffee • Cross-border issues and an introduction to conflict of laws 16.00-17.00 Session 6 – Legal opinions and the role of transaction and local lawyers Andrew McKnight 10.30-11.30 Session 2 – Secured finance: the English model Michael Bridge • The purposes of legal opinions • English concepts of security – To cover legal issues, not commercial or financial issues – The English concepts of security, the scope and coverage of security – To cover the conflict of laws issues that arise in the transaction – The types of asset that are available as security – An opinion, not a cast iron assurance – Present v. future assets • The limits on giving opinions • Possessory v. non-possessory security – Speaks as of a certain date – Fixed security – Speaks of identified documentation, not other matters – The concept of the floating charge – Subject to assumptions as to matters of fact and laws of other jurisdictions – Priority issues as between competing claimants – Legal qualifications • Alternatives to security – In some jurisdictions, may not cover unknown statutes – The concept of quasi-security • The beneficiaries of legal opinions (eg, immediate parties, parties with – Equipment finance techniques a derivative interest, regulators, credit rating agencies, security trustees) – Retention of title in favour of suppliers • Who should give them (eg, lawyers qualified in the relevant jurisdictions, independent lawyers, the banks’ lawyers, the borrower’s lawyers, in-house lawyers) – Receivables financing • The matters that should be covered – Title transfer transactions (particularly for securities) – Local law opinions (eg, in the jurisdiction of incorporation/establishment • Cross-border issues in secured/proprietary transactions and in the jurisdiction where relevant assets are located) – Characterising the issues involved in a transaction – The transactional opinion (eg, as to the governing law of the facility agreement) – The issues that are likely to be involved in a financing transaction • Responsibilities of those giving opinions (eg, liability in contract or tort, – The English approach to proprietary transactions involving rights in rem conflict of laws issues) – Conflicts rules for different types of asset • The form of an opinion – The effect upon a transaction of illegality or avoidance under a foreign law 17.00-17.30 Round-up of Day 1 and Introduction to Case Study All speakers 11.30-12.00 Tea and Coffee 17.30-19.00 Drinks

Continued ... 12.00-12.45 Session 3 – Corporate insolvency and restructuring Andrew McKnight and • UNIDROIT Michael Bridge • Legal Certainty Group • Concepts of insolvency and insolvency proceedings • Disappearing property rights and other issues arising from the Lehmans – Formal and informal procedures and self-help procedures collapse – The English insolvency procedures 15.30-16.00 Tea and Coffee – Administration contrasted with US Chapter 11 16.00-17.00 Session 6 – Security law reform in transition economies Frederique Dahan – Voluntary arrangements • Problems in reforming security law – Schemes of arrangement • EBRD involvement – Receivership (specific and administrative receivership) • International standards • Restricting administrative receivership – and the exceptions thereto • Opportunity of reform: legal efficiency • The pari passu concept and the distribution of assets in liquidation • Examples – and vision for the future • Insolvency set-off 17.00-17.30 Round-up of Day 2 All speakers • The order and ranking of claims in a liquidation • Rescues and restructurings of insolvent businesses Day 3: Miscellaneous issues affecting participants and advisers in project financings and the • Avoidance/deferral/suspension of security in insolvency proceedings – Registration requirements financial markets (25 June 2010, at the European Bank for Reconstruction and Development) – The risk of re-characterisation – Dispositions after the commencement of winding up Co-Chairs for the day: Roger – Transactions at an undervalue, preferences, avoidance of transactions, McCormick and Michel transactions to defraud creditors Nussbaumer – The effect of administration and a proposal for a voluntary arrangement 9.30-10.30 Session 1 – Project sponsor issues Andrew Hart • Cross-border insolvency • What is a Project Sponsor? – The scenario • Considerations in structuring the project company – The issues that are likely to arise • Contractual relationships between Sponsors and the Project Company – The approach that is taken in England • Allocation of Risk between Sponsors and Lenders – The EC Insolvency Regulation 2000 • How Sponsors extract profit from the Project 12.45-13.45 Lunch • Restrictions on equity transfers 13.45-14.30 Session 4 – Secured lending in emerging markets – pitfalls and problems Harry Boyd-Carpenter • Common events of default relating to Sponsors • Security – what does it really mean? • ‘Comfort letters’ and other Sponsor Support • Security – what counts? 10.30-11.30 Session 2 – Drafting and Negotiating Techniques: ‘Weasel Words’ Christoph Sicking • Security – why bother? • The strength of obligations: ‘best endeavours’ and ‘reasonable endeavours’ • Context – the Anglo-Saxon expectation • Implied terms and the exercise of discretion: ‘reasonableness’ and ‘good faith’ • Theory… and reality, telling the ‘Enforcement Story’ • Materiality and ‘MAC’ clauses • Things that get in the way: execution, perfection, scope, enforcement 11.30-11.45 Tea and Coffee • Dispute resolution 11.45-12.45 Session 3 – Comparison of common law and civil law approaches to Hugh Collins commercial documentation and examples of commercial drafting 14.30-15.30 Session 5 – Investment securities: current issues Eva Micheler and Roger McCormick • The need for legal certainty • Investment securities and the function of property rights • Why common lawyers draft ‘in extenso’ • Immobilisation and Dematerialisation • No general, overriding ‘fairness’ or ‘equilibrium’ requirement amongst commercial parties • Pooling • What are the advantages and disadvantages of a solvency test • Legal Uncertainty 12.45-14.00 Lunch • Ring Fencing • Good Faith Purchaser • Choice of Law • Shortfalls

Continued ... 14:00-15:00 Session 4 – Environment, social and governance issues in project finance Paul Watchman Speaker profiles • Whose Law is it Anyway? – Environmental and social assessment – Hard Law v. Soft Law – Local Law v. International Law Professor Michael Bridge Andrew Hart – Imposing developed world standards on developing states Michael Bridge was an undergraduate and postgraduate student at LSE Andrew Hart is a partner of international law firm, Fulbright & Jaworski – Jurisdictional issues relating to standards of project assessment before starting his academic career. Before coming to LSE in 2007, he International L.L.P., based in London. He leads the energy and infrastructure • Governance, Complicity and Other Human Rights Issues held chairs in law at McGill University, the University of Nottingham and transaction group in the firm’s London office. He joined the firm in November – Prior Consultation v. Prior Consent UCL, abd was Dean of the Faculty of Laws at UCL. He has been a Visiting 2007 from Freshfields Bruckhaus Deringer, where he had been a partner for Professor at the Universities of Leeds, Malaya, Hong Kong, Melbourne, nine years. Andrew has a broadly based international transactions practice – Displacement Sydney and Auckland and at Monash University. which covers a range of corporate and finance transactions in the energy and – Land rights and customs infrastructure sector, including greenfield project finance and development, – Cultural issues public-private partnership projects, M & A in relation to energy and • Challenging and Delaying Projects Harry Boyd-Carpenter infrastructure assets, restructuring and Islamic finance. In the project finance – Legal challenge Harry, who is a British Citizen, joined EBRD as counsel in 2005 where he area, he has advised many development financial institutions, such as IFC, ADB, JBIC and Export-Import Bank of the United States. – Locus Standi of communities and NGOs advised on a range of equity and loan investments across Central and Eastern Europe and in former CIS countries. Prior to joining EBRD Harry – Judicial review was a senior associate in the project finance group of Allen & Overy LLP in Emmanuel Maurice – Tort and nuisance claims London, working on a range of international project finance transactions – Jurisdictional issues in the PPP/PFI, oil and gas and power sectors. In 2001-2002 Harry worked Emmanuel Maurice, EBRD General Counsel, joined the Bank as Assistant – Human rights cases for the European Agency for Reconstruction based in Pristina, Kosovo. General Counsel in 1991. He was promoted Deputy General Counsel in 1995 and was appointed General Counsel in 1998. Emmanuel Maurice – Administrative law challenge Since 1st January 2008, Harry has been working in the EBRD Banking department as a Principal Banker in the power and Energy Utilities team. has graduate and post-graduate law degrees (Universities of -1, Paris-II • Elephant Traps for Sponsors and Lenders and Other Lessons from Major and Stanford, California) and a graduate degree from the Institut d’Etudes Project Finance Projects Politiques de Paris. Prior to joining the Bank, he worked in the New York – EBRD, Environmental and Social Policy and Performance Requirements (2008) Professor Hugh Collins and Paris offices of Willkie Farr and Gallagher, a US law firm (1974-85) and – IMF social and environmental policies Hugh Collins is a Professor of English Law at LSE. He studied law at with the International Finance Corporation in Washington (1985-91). – OECD Common Approaches, Equator Principles, Carbon Principles, Climate Oxford and Harvard, became a Fellow of Brasenose College, Oxford, Principles and other voluntary guidance before moving to LSE in 1991. He has published numerous book including Roger McCormick 15.00-15.30 Tea and Coffee Regulating Contracts (OUP, 1999) and Employment Law (2003). Recently he has been researching in the field of European Contract law. He is General Roger Mccormick is the Director of the Law and Financial Markets Project 15.30-17.00 Session 5 – Case study: Participative discussion Roger McCormick Editor of the Modern Law Review and a Fellow of the British Academy. at LSE and also a Visiting Professor there. He is also the author of Legal Risk Visual depiction of how documentation typically allocates 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 What is meant by ‘risk management’ in the project finance context Frederique Dahan six years ago, having practised law in the City of London for nearly 30 Influences that affect risk management years (22 of them as a partner of Freshfields, where he was for several Frederique Dahan presently serves as Lead Counsel and Head of the Financial years the head of its project finance practice group). He has represented Consideration of characteristics of project company vehicle and its ability Law Unit (FLU) in the Legal Transition Team (LTT) of the EBRD, which provides clients on project finance transactions in Russia and Hungary as well as to absorb risk legal reform assistance to the countries of central and Eastern Europe and the many other jurisdictions, including China, India, the Philippines and various former Soviet Union. Frederique oversees all of the FLU legal reform projects Risk allocation matrix participative discussion parts of Africa. At LSE, he teaches courses on project finance and legal risk concerning secured transactions and access to credit, insolvency and creditors’ in financial markets, amongst other things. 17.00-18.00 General Round-up and distribution of certificates rights, corporate governance and securities markets. She personally leads all 18.00-19.30 Drinks secured transactions projects - with country-specific projects currently on-going in Mongolia, Moldova, and Russia. Frederique is a recognised expert in the Andrew McKnight subject matter, having personally worked on some of the key EBRD standards setting projects on secured transactions, collateral registers and mortgage Andrew McKnight is a Visiting Professor of Law at Queen Mary, University lending. Prior to joining the EBRD in 2000, Frederique worked as a Lecturer of London and a Consultant at Salans LLP. He is a who has at the University of Essex, in the , teaching Comparative law, practised in the City of London for almost 30 years, specialising in English, European Company Law, Cross-Border Insolvency and Business and Corporate cross-border and international banking and finance transactions, as well Law Issues in Central and Eastern Europe. She was also a Research Fellow at the as related areas such as insolvency, financial reconstructions and banking Institute of Advanced Legal Studies in London, UK. 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 Frederique has published numerous articles on secured transactions, including in legal journals that specialise in banking and international finance. He is in the Butterworths Journal of International Banking and Financial Law, Law also a general editor of the Encyclopaedia of Banking Law (Butterworths, and Financial Markets Review, Penn State International Law Review, Uniform LexiasNexis). 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. Professor Dr Eva Micheler Paul Watchman Registration Eva Micheler is a Senior Lecturer in Law at LSE and a Professor at the Paul Watchman is Chief Executive of QWC, a business consultancy. In Department of Business Law of the Vienna University of Economics. She 2006 he was named with Hank Paulson, former Chairman and CEO of is also a member of the Board of the Institute of Central and Eastern Goldman Sachs and US Treasury Secretary, as one of the six most influential European Business Law with overall academic responsibility for its worldleaders in the development of sustainable banking. Prior to seeing If you would like to register for attendance please contact Mandy Tinnams on +44 (0)20 7955 Russian section. up QWC Paul practised environmental and land development law for over 30 years. He was formerly a partner with and Head of its 7684 or by email at [email protected]. The cost of attendance at these seminars is £1,750 Environmental and Planning Practice, a partner with Freshfields Bruckhaus payable, immediately following registration, by sterling cheque to ‘The London School of Michel Nussbaumer and Deringer in its Environmental Planning and Regulationgroup and Economics’. Payment other than by cheque can be arranged; please contact Mandy Tinnams for Michel Nussbaumer is Chief Counsel of the EBRD Legal Transition and global head of the environmental practice and climate change group Knowledge Management Team, a group of legal experts working on of Dewey & LeBoeuf. Paul is the principal author of the UN EP FI report details. If you register before 30th April 2010 the lower cost of £1,600 will apply. No refunds are legal policy dialogue and technical assistance in the EBRD countries of on the integration of Environment Social and Governance issues into payable under any circumstances except cancellation of the seminars. operations. Prior to that, Michel worked for almost three years as counsel pension fund investment decision-making, His principal interests relate on EBRD banking operations, where he was responsible for legal aspects of to the environment, climate change and carbon regulation, carbon various investments of the Bank, with a particular focus on SME financing. capture and sequestration, alternative energy, corporate governance, A place will be reserved for you once you have been registered and on receipt of your payment Michel has practiced as a commercial lawyer in Geneva, Moscow and corporate and social responsibility, business and human rights, sustainable London. While in private practice, Michel acted as a Swiss correspondent finance, including the Equator Principles and sustainable and responsible by no later than Friday 11 June 2010 but please note that LSE and EBRD reserve the right to for various legal publications and has also published a number of articles on investment. His most recent publications on these subjects include as editor refuse to accept any person for registration. As places are extremely limited you are advised to and contributor of Climate Change: A Guide to Carbon Law and Practice Swiss and Russian legal matters. Michel, who is a Swiss national, received register as soon as possible. his Masters Degree in Law from the University of California at Berkeley and (2008) and Complicity: Charting a Path through the Conceptual Minefield also was a visiting scholar at the Moscow State University. 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 Christoph Sicking Financial Institutions, The Prince of Wales’s Trust, London Climate Change Panel, European Commission, and Fair Pensions. Christoph 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.