Legal issues of general application

Government permission

What government approvals are required for typical project finance transactions? What fees and other charges apply?

The government approvals required for a project finance transaction will depend on the industry involved and the jurisdiction of the project. Typically, project finance transactions will require approvals on the federal, state and local level. For example, electric power projects are regulated at the federal level by the Federal Energy Regulatory Commission (FERC) as well as at the state level. FERC is responsible for regulating all wholesale sales of electric power and state authorities have responsibility for regulating electric power generation, transmission and distribution assets. For example, to the extent an interconnection agreement is not fully consistent with an approved tariff, the non-conforming interconnection agreement must be approved by FERC. Environmental approvals at the federal, state and local level, depending on the characteristics of the project, will typically be required and they are discussed further below. Depending on where the project is located, a significant number of local construction and operating permits may be required based on local ordinances. Also, as previously mentioned, depending on the type of infrastructure, CFIUS clearance may be required.

Registration of financing

Must any of the financing or project documents be registered or filed with any government authority or otherwise comply with legal formalities to be valid or enforceable?

Pursuant to article 9 of the UCC, security over most types of personal property must be perfected through filing a UCC financing statement in the relevant jurisdiction.

Mortgages or deeds of trust over real property must be recorded in the jurisdiction where the real property is situated.

As a general matter, with the exception of certain real estate documents (which often must be notarised and include certain language required by the local filing office), the financing and project documents are not subject to legal formalities such as notarisation or apostillation.

Arbitration awards

How are international arbitration contractual provisions and awards recognised by local courts? Is the jurisdiction a member of the ICSID Convention or other prominent dispute resolution conventions? Are any types of disputes not arbitrable? Are any types of disputes subject to automatic domestic arbitration?

The United States is a member of the ICSID Convention, the New York Convention and the Panama Convention.

The Federal Arbitration Act (FAA) implements the New York Convention and the Panama Convention and promotes arbitration. If the arbitration is of a commercial nature, a foreign party or property situated abroad is involved or there is some reasonable relationship with a foreign state, the international arbitration provisions of the FAA will apply. If these conditions are not met, the FAA’s domestic arbitration provisions will apply. Any party to an arbitration that is subject to these conventions may apply to the district court of the United States for an order confirming the award as against any other party, as long as it is brought within three years after the arbitral award is made. The district courts having jurisdiction over the enforcement of an arbitration award will be those in which an action could be brought except for the arbitration agreement or those in the district and division that embraces the seat of the arbitration if such seat is within the United States. The court should confirm the award unless it finds one of the grounds for refusal or deferral of recognition or enforcement of the award specified in the applicable convention.

Access to arbitration is not available in certain criminal and family law matters, in disputes where civil penalties may apply and in certain employment and civil rights matters.

Law governing agreements

Which jurisdiction’s law typically governs project agreements? Which jurisdiction’s law typically governs financing agreements? Which matters are governed by domestic law?

It is typical for project agreements to be governed by either the laws of the state in which the project is situated or by New York law. In particular, there are many states that consider certain provisions under laws applicable to construction contracts, including terms of payments or warranties, to be matters of public policy. Therefore, the law of the state where the project is located may override a choice of law in a construction contract.

Given the extensive experience of New York courts in hearing cases involving financing agreements and the well-established case law in this area, financing agreements are most often governed by New York law.

Security documents, such as mortgages, may be required to be governed by the law in which the secured property is located. In connection with personal property, although a security interest could be created by the law of any state (subject to applicable conflict of laws rules), in the case of possessory security interests and security interests in negotiable documents, goods, instruments, money, tangible chattel paper or as-extracted collateral, perfection of the security interest may be required to be done in accordance with the laws of the state where the collateral or the wellhead or minehead is located.

Submission to foreign jurisdiction

Is a submission to a foreign jurisdiction and a waiver of immunity effective and enforceable?

The submission to a foreign jurisdiction is generally enforceable.

Waivers of sovereign immunity are also enforceable pursuant to the Foreign Sovereign Immunities Act.