Legal issues of general application

Government permission

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

Typically, domestic lending for, or investment in, a project finance transaction in India does not specifically require any government approvals apart from project or concession specific approvals or consents. However, foreign investments in equity instruments and loans of loans availed from offshore lenders in the form of external commercial borrowings are regulated by the RBI and FEMA rules and regulations. RBI approval may be required if the project finance proposed exceeds the limits or caps prescribed under the regulations or otherwise fall within restrictions as to end use, tenor, etc. Other than stamp duties, registration fees and filing fees as applicable, there is no other specific transaction fee that is payable to the government for a project finance transaction per se.

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?

See question 2 for filing or registration requirements. These registration or filing requirements, however, are less from a validity and enforceability perspective and more from a public notice perspective to establish priority and maintain a public record.

Additionally, loans availed in the form of external commercial borrowings are required to be assigned a specific loan registration number by the RBI for which an application is to be made prior to disbursement of the loan.

In India, notarisation of documents is used to verify and attest the execution of documents. In respect of foreign documents, since India is a signatory to the Hague Convention Abolishing the Requirement of Legalisation for Foreign Public Documents, the issue of an apostille certificate is usually sufficient to create a presumption under law that the party to the document has signed the document.

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 Arbitration and Conciliation Act 1996 (Arbitration Act) along with applicable procedural laws, governs dispute resolution by way of arbitration in India. Indian law recognises the right of parties to contractually submit their disputes to international arbitration. India is not a member of the ICSID Convention. However, India is a member of the New York Convention on the Recognition and Enforcement of Foreign Arbitral Awards 1958 as well the Geneva Convention on the Execution of Foreign Arbitral Awards 1927. Therefore, international arbitral awards passed in any of the convention member states are recognised by local courts in India. Such foreign awards are enforced as a decree of court, but remain subject to certain conditions enumerated in the Arbitration Act. For instance, the subject matter of the dispute must be arbitrable in India and must not be contrary to public policy of India. For awards that are passed in non-convention states, a fresh civil suit is required to be instituted in India.

Though Indian law does not specifically exclude any specific nature of disputes from arbitration, certain kinds of disputes have been excluded by the courts in India, such as suits for enforcement of a mortgage, criminal offences, insolvency, guardianship, antitrust or matrimonial disputes. Similarly, the Arbitration Act does not specifically set out any disputes that are mandatorily required to be arbitrated. Specific statues and policies applicable to certain sectors may require or encourage resolution of disputes by way of arbitration. For instance, the Micro, Small and Medium Enterprises Development Act 2006 provides for automatic conciliation and arbitration of disputes.

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?

Where the project is located in India, generally project agreements are governed by Indian law since the functioning of the project and compliances are subject to Indian laws and further this makes it convenient to institute suits and seek necessary reliefs, including interim reliefs where required. Where there are non-resident parties to the agreement, and the transaction has a nexus with another jurisdiction, it is possible that the parties may opt for foreign laws as the governing laws for such agreements.

Project finance documentation for loans to fund project costs, where such loans are rupee denominated, are typically Indian law-governed. However, it is not unusual for certain contractual comforts (such as sponsor support documentation or guarantees) to be governed by foreign laws, if the provider of such comfort is a non-resident entity. In the case of offshore financing transactions, it is usual for the facility agreement for external commercial borrowings to be made subject to foreign laws, usually a neutral law such as English law or Singaporean law, which are very often laws of jurisdictions where the lender has a presence. Security documents for Indian projects are usually governed by Indian laws due to location of secured assets and for ease of enforcement and interim reliefs and given the wider range of remedies available to Indian lenders under Indian regulations for enforcement.

Submission to foreign jurisdiction

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

Parties can contractually choose to submit to the jurisdiction of foreign courts and Indian courts will usually honour the same. Despite being courts of natural jurisdiction, Indian courts do not normally grant relief on matters where the parties have submitted to the jurisdiction of foreign courts. If approached, however, Indian courts may exercise their inherent jurisdiction, based on the cause of action having arisen within their territorial jurisdiction, or to prevent injustice where such a choice of jurisdiction is oppressive, unfair or inequitable and does not bear any real or substantial connection to the subject matter of the dispute in reliance on the doctrine of forum non conveniens. Once a foreign jurisdiction has been chosen, the burden of establishing that the forum of choice of the parties is a forum non conveniens or proceedings therein are vexatious is on the party so contending.