Académique Documents
Professionnel Documents
Culture Documents
Project Finance
in 38 jurisdictions worldwide
Contributing editors: E Waide Warner Jr and Gavin R Skene 2010
Published by
Getting The Deal Through
in association with:
Achour Law Firm
Addleshaw Goddard LLP
ǼLEX
Aequitas Law Firm
Al Busaidy, Mansoor Jamal & Co
Al-Jadaan & Partners Law Firm (in cooperation with Clifford
Chance LLP)
Anzola Robles & Associates
Boden Law Office
Cardenas & Cardenas Abogados
Cárdenas, Di Ció, Romero, Tarsitano & Lucero
Clarus Law Associates
Ćurković Ćurić, Janušić & Banić Law Firm
Davis Polk & Wardwell LLP
DFDL Mekong
Eversheds Ots & Co
Fasken Martineau DuMoulin LLP
Gorrissen Federspiel
Grischenko and Partners Law and Patent Offices
IMMMA Advocates
JeantetAssociés
Kelemenis & Co
Lema, Solari & Santivañez Abogados
Lex Caribbean
López Velarde, Heftye y Soria
Mallesons Stephen Jaques
Mochtar Karuwin Komar
Myanmar Thanlwin Legal Services Ltd (in association with
DFDL Mekong)
Nagy és Trócsányi Ügyvédi Iroda
Nörr Stiefenhofer Lutz OOO
Orrick Hölters & Elsing
PeliFilip
Puno & Puno
Rodriguez & Mendoza
Shearman & Sterling LLP
Souza Cescon Barrieu & Flesch Advogados
Staiger, Schwald & Partner
contents
Project Finance Global Overview E Waide Warner, Jr and Gavin R Skene Davis Polk & Wardwell LLP 3
2010 Argentina Luis E Lucero Cárdenas, Di Ció, Romero, Tarsitano & Lucero 5
Contributing editor: E Waide Australia John Naughton, Nicole Ho, Amelia Fitzhardinge Mallesons Stephen Jaques 11
Warner Jr and Gavin R Skene,
Davis Polk & Wardwell LLP Barbados Diana Wilson Patrick and Alana Goodman Lex Caribbean 19
Business development manager Brazil Roberto Lima and Fernanda Ribeiro Souza Cescon Barrieu & Flesch Advogados 25
Joseph Samuel
Cambodia Martin Desautels and Sambo Ly DFDL Mekong 33
Marketing managers
Alan Lee Canada W Thomas Barlow Fasken Martineau DuMoulin LLP 38
Dan Brennan
George Ingledew Colombia Bernardo P Cárdenas M, Camilo Cortés and Alejandra Pazos
Edward Perugia Cardenas & Cardenas Abogados 44
Robyn Hetherington
Dan White Croatia Danijel Antun Banić and Ana Ćurković Ćurić
Tamzin Mahmoud
Ellie Notley Ćurković Ćurić, Janušić & Banić Law Firm 50
Nigeria
L Fubara Anga and Chinyere Nwanya
ǼLEX
1 Collateral floating charge and the person in whose favour such later charge was
What types of collateral are available? granted had actual notice of that prohibition at the time when the
In Nigeria, individuals and companies may pledge, mortgage, grant charge was granted to him.
assignments, create liens or charge their property, assets or undertak- Stamp duty is 0.375 per cent and filing at the CAC is 1 per cent
ings as collateral for loans. Assets that may be taken as collateral of the amount secured. Land registration and the governor’s consent
include real estate, operating or other licence rights or concessions, fee vary from state to state.
leaseholds, buildings, moveable property, contractual rights, receiva- In Lagos state, land registration and the governor’s consent are
bles, shares, securities, onshore and offshore bank accounts, entire 0.5 per cent and 2 per cent of the loan amount, respectively.
enterprises, after-acquired property, proceeds from investments and Generally, stamp duty is assessed on the entire loan amount.
the sale of collateral. However, creditors sometimes pay duty on a fraction of the loan
A common form of security is the fixed and floating charge over amount. The implication of not stamping the full loan amount is
the assets of a corporate entity. There are certain statutory charac- that such creditors will only be secured for the amount stamped and
teristics of the Nigerian floating charge that suggest that it is a more the security will be void against the liquidator and creditors of the
effective security than the fixed charge. Pursuant to section 180(1) borrower in respect of the loan balance.
of the Companies and Allied Matters Act chapter C20 LFN 2004 In view of the additional consent fee and land registration neces-
(CAMA), a floating charge holder may not only have a receiver but sary to perfect security over land, creditors sometimes take a floating
also a manager appointed by the court to run the assets charged. charge over the entire undertaking or property of the borrower. It is
Section 180(2) CAMA further provides that a receiver or manager also not uncommon to for parties to agree that title documents to
may be appointed over the assets charged where the floating charge land will be deposited with the charge holder and an executed mort-
has not become enforceable but the court is of the opinion that the gage instrument be held in escrow by an escrow trustee, pending the
assets are in jeopardy. Pursuant to section 180(2) CAMA, assets need to perfect the same.
charged are deemed to be in jeopardy where events have occurred or A corporate trustee can hold security on behalf of project lenders.
are about to occur which make it unreasonable for the borrower to
maintain freedom to deal with the assets. 3 Existing liens
How can a creditor assure itself as to the absence of liens with priority
to the creditor’s lien?
2 Perfection and priority
How is a security interest in each type of collateral perfected and how A creditor may conduct searches on the documents and files of the
is its priority established? Are any fees, taxes or other charges payable debtor at the Corporate Affairs Commission and the Lands Registry
to perfect a security interest and, if so, are there lawful techniques as these are public documents. These searches are not necessarily
to minimise them? May a corporate entity, in the capacity of agent or conclusive. Also, a creditor could obtain assurances (representations
trustee, hold collateral on behalf of the project lenders as the secured and warranties) from the debtor that there are no existing third-party
party? liens with priority to the creditor’s lien.
Perfection involves stamping of the security instrument at the Stamp
Duties Office and filing the security instrument at the Corporate 4 Foreclosure on and sale of collateral
Affairs Commission (CAC). Where land is used as security, the gov- What steps must a project lender take to foreclose on and sell
ernor’s consent must be obtained and the instrument registered at collateral in your jurisdiction?
the Lands Registry. A creditor with a pledge over shares may serve a
notice and affidavit of interest on the issuer of the shares. This would The project lender must apply for a court order to foreclose the bor-
entitle the creditor to receive notice of proposed transfer payments or rower’s right of redemption. In his application, the project lender must
returns in respect of the shares. include evidence of indebtedness and show that the contractual pay-
Generally, a creditor takes priority if his or her security interest is ment date has passed with the principal or interest remaining unpaid
registered first in time. The creditor with a legal interest takes priority and that a reasonable time has lapsed with the default continuing. An
over a creditor with an equitable interest. application for a court order to foreclose is made by originating sum-
For registrable security interests, priority is determined by the mons and is supported by an affidavit verifying the claim.
order of registration. For example, under the Land Instruments The deed of mortgage may prescribe the conditions for the exer-
Registration Law of Lagos State, a security instrument takes effect cise of a power of sale. If these conditions are not met the sale shall be
from the date of its registration. Section 179 CAMA provides that a ineffectual. Where the deed does not provide for a power of sale, the
fixed charge on an asset has priority over a floating charge affecting project lender may apply to court for a judicial sale. Legal mortgagees
that asset unless the terms on which the floating charge was granted have power of sale conferred by the provisions of the Conveyancing
prohibit the creation of any later charge having priority over the Act 1881 and the Property and Conveyancing Law 1959.
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Generally, a sale of collateral is by way of a public sale through export proceeds. Investors may open foreign currency domiciliary
a licensed auctioneer or by a private sale if the terms of the secu- accounts in Nigeria.
rity instrument provide. Project lenders cannot participate as buy- There are no restrictions on Nigerians (except for public office
ers in a sale or it will be tainted by fraud. A sale may be in foreign holders) establishing and maintaining foreign currency accounts in
currency. other jurisdictions.
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• the minister of transport and the Nigerian Maritime A creditor is required to obtain an order of court to seize the
Administration and Safety Agency (maritime); assets of a business. However, a creditor with a floating charge over
• the minister of transport (rail); all the assets and undertaking of a debtor may enter into possession
• the minister of aviation (aviation); of a charged property or appoint a receiver or manager over such
• the minister of works and the Federal Road Management Agency property, if so authorised under the security instrument. A lessor who
(roads); and retains title can take possession of the charged property.
• the minister of information and communications and the
Nigerian Communications Commission (telecommunications).
22 Title to natural resources
Who has title to natural resources? What rights may private parties
Historically, the federal government has been the major participant
acquire to these resources and what obligations does the holder
in these sectors. However, in the past 10 years, key public enterprises
have? May foreign parties acquire such rights?
have been privatised and commercialised. Concessions are being
granted mainly to operators in the transport and road sectors. The Constitution of Nigeria 1999 vests the federal government
with title over all minerals, oil and gas in, under or upon any land
in Nigeria, its territorial waters and its exclusive economic zone.
18 International arbitration
Private parties may only acquire rights to win and carry away natu-
How are international arbitration contractual provisions and awards
ral resources. Foreign parties may acquire such rights through local
recognised by local courts? Is the jurisdiction a member of the ICSID
subsidiaries operating in Nigeria.
Convention or other prominent dispute resolution conventions? Are
The holders of rights to win and carry away natural resources
any types of disputes not arbitrable? Are any types of disputes subject
are required to observe all applicable laws and regulations, and pay
to automatic domestic arbitration?
rents, royalties and taxes when due. They are required to minimise
Nigeria is a party to the Convention on the Recognition and and manage environmental impact resulting from activities, and
Enforcement of Foreign Arbitral Awards 1958 (New York rehabilitate and reclaim the land to its natural or predetermined state
Convention). This has been domesticated in the Arbitration and or to such state as the applicable laws or regulations may specify.
Conciliation Act, chapter A18 LFN 2004. Foreign awards are recog- They are also required to compensate occupiers of land affected
nised as binding and enforceable in Nigeria. The party that applies for by their activities for any disturbance to their surface rights or any
enforcement must supply the original or certified copy of the award damage done to crops, fishing, economic trees and buildings. Where
and the arbitration agreement. Where the award is not in English, a the land is acquired by the government for mineral extraction pur-
certified translation of the award must also be supplied. Section 52 poses, the rightholder must pay compensation to the landowner.
of the Arbitration and Conciliation Act set out the grounds on which Where the land is acquired for mining purposes, the occupiers of land
an award will not be enforced. This section re-enacts the grounds retain the right to graze livestock upon or to cultivate the surface of
provided by the New York Convention. the land insofar as the grazing or cultivation does not interfere with
Nigeria acceded to the International Centre for Settlement mining operations in the area.
of Investment Disputes (ICSID) Convention and the New York
Convention on 23 August 1965 and 17 March 1970, respectively.
23 Royalties on the extraction of natural resources
All matters except matters of a criminal nature are arbitrable.
What royalties and taxes are payable on the extraction of natural
The Trade Disputes Act, chapter T8 LFN 2004, provides that all
resources, and are they revenue- or profit-based?
trade disputes must be referred to the Industrial Arbitration Panel.
Royalties are payable to the federal government in respect of oil pro-
duced from concessions. They are production-based and are fixed in
19 Applicable law
accordance with the location of the field. Royalties may be paid in
Which jurisdiction’s law typically governs project agreements? Which
foreign currency or, subject to the direction of the minister, wholly
jurisdiction’s law typically governs financing agreements? Which
or partly in petroleum.
matters are governed by domestic law?
The royalty rate for onshore production is 20 per cent; royalties
Generally, parties are free to choose the law governing their agreements. for shallow onshore production from areas with water up to 100
Most foreign parties adopt English law. Security Instruments and tech- metres deep is 18.5 per cent; royalties for production from areas up
nology transfer agreements are usually governed by Nigerian law. with water up to 200 metres deep is 16.5 per cent.
The royalty for deep offshore production under a production
sharing contract in areas with water from 201 to 500 metres deep
20 Jurisdiction and waiver of immunity
is 12 per cent; 8 per cent for areas of water depth from 501 to 800
Is a submission to a foreign jurisdiction and a waiver of immunity
metres; and zero per cent for production in areas of water depth
effective and enforceable?
above 1000 metres.
Generally, Nigerian courts observe the provisions of any choice of The inland basin has a flat rate of 10 per cent. Royalty rates for
jurisdiction clause included in a contract except where illegal or con- production from marginal field operations vary subject to a sliding
trary to public policy. Nigerian law recognises that sovereign, diplo- scale of the volume of production, and range from 2.5 per cent to
matic and consular immunity may be waived. 18.5 per cent for production below 5,000 barrels per day to produc-
tion between 15,000 and 25,000 barrels per day.
All companies engaged in mining activities are subject to a cor-
21 Bankruptcy
porate tax of 30 per cent assessed on taxable profits. An 85 per
What entities are excluded from bankruptcy proceedings and what
cent petroleum profits tax is chargeable on the profits of companies
legislation applies to them? What processes are available to seize the
involved in petroleum exploration. Oil companies operating petro-
assets of a business outside of court proceedings?
leum sharing contracts in the deep offshore area and inland basins
No entity is excluded from bankruptcy proceedings. Creditors rely are taxed at a flat rate of 50 per cent on the chargeable profits. No
on the insolvency provisions in the Companies and Allied Matters royalties have been prescribed for mining operations.
Act, chapter C20, LFN 2004, while the Bankruptcy Act chapter B2,
LFN 2004 applies to individuals.
A mineral title holder who intends to export solid minerals must reg- Infrastructure project financing through bonds
There are indications of a shift by the government from funding
ister with the Nigerian Export Promotion Council, obtain an export infrastructure with public funds to accessing the capital market
clearance from the Ministry of Mines and Steel Development and through long-term bonds. The Lagos state government recently
comply with other custom requirements. Requirements for obtain- floated a 50 billion naira bond (which was oversubscribed) for
ing an export clearance include evidence of payment of royalty and infrastructure development in the state. Other states that have
inspection of the minerals to be exported by an officer of the Mines issued bonds include Imo State (18.5 billion naira) and Kwara
State (30 billion naira). The Securities and Exchange Commission
Inspectorate Division. recently disclosed that it had received applications from two
Crude oil sales are regulated by the federal government. Any states to issue bonds worth a total of 56 million naira to finance
person wishing to export crude oil or crude oil products must obtain infrastructure developments in the states. The federal government
an export permit from the Department of Petroleum Resources. has indicated that it may opt for bond financing for its road
projects across the country.
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