project finance 2020 - barentskrans

Project Finance 2020A practical cross-border insight into project finance

Ninth Edition

Featuring contributions from:

Abuka & Partners

Allen & Gledhill LLP

Allen & Gledhill (Myanmar) Co., Ltd.

Arthur Cox

ASP, Sociedade de Advogados, RL

BarentsKrans

Brigard Urrutia

Canales

Cirio Advokatbyrå AB

Criales & Urcullo Abogados

Cyril Amarchand Mangaldas

Dal Pozzo Advogados

Dentons UK and Middle East LLP

Flor & Hurtado, Abogados

GB2A AVOCATS

Global Law Office

Gorrissen Federspiel

Guilherme Daniel & Associados

Kantenwein

Lee and Li, Attorneys-at-Law

Milbank LLP

Mori Hamada & Matsumoto

N. Dowuona & Company

Oraro & Company Advocates

Prager Dreifuss Ltd.

Rahmat Lim & Partners

Sardelas Petsa Law Firm

Soemadipradja & Taher

Tesenyi & Partners

Tshisevhe Gwina Ratshimbilani Inc.

VdA

Project Finance 2020Ninth Edition

Contributing Editor:

John DewarMilbank LLP

©2020 Global Legal Group Limited. All rights reserved. Unauthorised reproduction by any means, digital or analogue, in whole or in part, is strictly forbidden.

DisclaimerThis publication is for general information purposes only. It does not purport to provide comprehen-sive full legal or other advice. Global Legal Group Ltd. and the contributors accept no responsibility for losses that may arise from reliance upon information contained in this publication. This publication is intended to give an indication of legal issues upon which you may need advice. Full legal advice should be taken from a qualified professional when dealing with specific situations.

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ISBN 978-1-83918-041-5ISSN 2048-688X

Table of Contents

Expert Chapters

Q&A Chapters

1

8

Why the World Needs Multi-Sourced Project Financings (and Project Finance Lawyers…)John Dewar, Milbank LLP

Project Financing in Emerging Markets: Four Pertinent Issues That Can Affect the Success of a ProjectHoward Barrie, Tom Guilfoyle & Dominic Spacie, Dentons UK and Middle East LLP

14 AngolaVdA: Manuel ProtásioASP, Sociedade de Advogados, RL: Vanusa Gomes

24 BoliviaCriales & Urcullo Abogados: Adrián Barrenechea B. & José A. Criales

149 IndonesiaSoemadipradja & Taher: Rahmat Soemadipradja, Oene Marseille, Aris Prasetiyo & Emalia Achmadi

157 IrelandArthur Cox: Matt Dunn & Charlotte Upton

33 BrazilDal Pozzo Advogados: Augusto Neves Dal Pozzo & Renan Marcondes Facchinatto

40 ChinaGlobal Law Office: Dr. Xin Zhang & Shuhui Luo

49 ColombiaBrigard Urrutia: Manuel Fernando Quinche & César Felipe Rodríguez

61 DenmarkGorrissen Federspiel: Morten Nybom Bethe & Tina Herbing

70 EcuadorFlor & Hurtado, Abogados: Mario A. Flor & Alejandro Pérez Arellano

80 England & WalesMilbank LLP: John Dewar & Munib Hussain

98 FranceGB2A AVOCATS: Grégory Berkovicz & Pascal Deniau

107 GermanyKantenwein: Marcus van Bevern & Sven Ceranowski

115 GhanaN. Dowuona & Company: NanaAma Botchway & Akosua Achiaa Akobour Debrah

124 GreeceSardelas Petsa Law Firm: Konstantina (Nantia) Kalogiannidi & Katerina Limnaiou

132 HungaryTesenyi & Partners: Gergely Brassnyó & Balázs Kálmán

169 JapanMori Hamada & Matsumoto: Yusuke Murakami & Kei Shirakawa

178 KenyaOraro & Company Advocates: Pamella Ager & James K. Kituku

189 MalaysiaRahmat Lim & Partners: Dzuhairi bin Jaafar Thani & Syed Rashid bin Rahim Alsree

201 MexicoCanales: Emilio Sáenz, Ana C. Decanini & Bernardo Canales Fausti

208 MozambiqueVdA: Teresa Empis FalcãoGuilherme Daniel & Associados: Guilherme Daniel

218 MyanmarAllen & Gledhill (Myanmar) Co., Ltd.: Minn Naing Oo & Lee Jun Yee

226 NetherlandsBarentsKrans: Jason van de Pol

236 NigeriaAbuka & Partners: Patrick C. Abuka & Sunday Edward, Esq.

246 PortugalVdA: Teresa Empis Falcão & Ana Luís de Sousa

256 SingaporeAllen & Gledhill LLP: Kok Chee Wai & Kelvin Wong

266 South AfricaTshisevhe Gwina Ratshimbilani Inc.: Eduan Kapp

139 IndiaCyril Amarchand Mangaldas: Santosh Janakiram & Surya Sreenivasan

278 SwedenCirio Advokatbyrå AB: Jesper Johansson & Fredrik Eliasson

286 SwitzerlandPrager Dreifuss Ltd.: Daniel Hayek & Mark Meili

294 TaiwanLee and Li, Attorneys-at-Law: Hsin-Lan Hsu & Pauline Wang

304 USAMilbank LLP: Daniel J. Michalchuk & Richard M. Hillman

Project Finance 2020

Chapter 25226

Netherlands

BarentsKrans Jason van de Pol

Netherlands

© Published and reproduced with kind permission by Global Legal Group Ltd, London

Under Dutch law, a security right over registered assets (regis-tergoederen), such as real property (onroerende zaken), takes the form of a mortgage (hypotheek). A mortgage is created by a notarial deed (notariële akte) that is registered in the Dutch land register (Kadaster).

A security right over most other assets, such as movable assets (which are not also registered assets), bank accounts, receiva-bles and shares, commonly take the form of a right of pledge ( pandrecht). The procedure differs for each asset type and secu-rity right created. Below, we describe the most commonlyused security rights in a project financing, together with a brief description of each procedure.■ Apossessoryrightofpledge(vuistpandrecht) over movable

assets is created by bringing the relevant movable asset under the control (in de macht) of the pledgee or a third party agreed between the pledgor and the pledgee.

■ Anon-possessory rightofpledge (bezitloos pandrecht) over movable assets is created by a private deed (onderhandse akte)thatisregisteredwiththeDutchtaxauthoritiesoranotarial deed (notariële akte).

■ Adisclosedrightofpledge(openbaar pandrecht) over receiv-ables is created by a (notarial or private) deed and noti-fication of the right of pledge to the relevant debtor(s). The credit balance standing on a bank account should be pledged pursuant to a disclosed right of pledge, too.

■ Anundisclosedrightofpledge(stil pandrecht) over receiva-bles can be created by a private deed (onderhandse akte) that is registeredwith theDutch tax authoritiesor anotarialdeed (notariële akte).

■ Arightofpledgeoverregisteredshares(aandelen op naam) is created by a notarial deed (notariële akte).

2.2 Can security be taken over real property (land), plant, machinery and equipment (e.g. pipeline, whether underground or overground)? Briefly, what is the procedure?

Security over land can be created by way of a mortgage (hypotheek). Plant, machinery and equipment are considered part (bestand-deel )ofthelandtotheextenttheseareabidinglyunitedwiththeland (duurzaam met de grond verenigd ) and in that case they can be secured by a mortgage. It should, however, be noted that the legal ownership of network cables or pipelines, which are laid down underground, on the land or above the land for purposes oftransportofsolid,liquidorgaseoussubstancesofenergyordata, is not automatically with the owner of the land but, in prin-ciple, with the relevant authorised builder. It may, therefore, be necessary to transfer the ownership of such network (or any part thereof) first before a project party can create security over it.

1 Overview

1.1 What are the main trends/significant developments in the project finance market in your jurisdiction?

Project finance remains very active in the Netherlands. However, we are seeing a shift in the type of projects developed. Where it used to be PPP projects that were most in play, these days it is the renewable projects (large and small scale) that are mostfrequentlydeveloped. This is theresultofastrongpushtowards renewables, amongst others, delivered by the (stable) StimulationofSustainableEnergyProduction(SDE+)scheme.Following the standardisation of certain project documents (such as deeds of superficies), developers are seeking further to lower transaction costs. One way of doing that is by ‘pooling’ multiple (usually small scale) renewable projects under one financing arrangement if these meet certain eligibility criteria. Finally, there is the recentdevelopmentof theCOVID-19 (or corona-virus) outbreak. Although the impact of this outbreak in general and on the project finance market in the Netherlands is not yet clear,itislikelythatCOVID-19willleadtodelaysinconstruc-tion and events of default. Given the typically thin capitalisation of project companies, the impact on the Dutch project finance market could be severe (without government interference).

1.2 What are the most significant project financings that have taken place in your jurisdiction in recent years?

TheA9Badhoevedorp-HolendrechtPPPProjectreachedfinan-cial close in December 2019. Furthermore, there have been several financings of offshore windfarms in the North Sea, such asBorselle3&4,ofatotalamountofseveralbillionEurosintherecent years.

2 Security

2.1 Is it possible to give asset security by means of a general security agreement or is an agreement required in relation to each type of asset? Briefly, what is the procedure?

Dutchlawdoesnotexpresslyprovideforaninstrumentpursuantto which a general security right can be created over all assets of a security provider; the concept of a “floating charge” does not existintheNetherlands.Eachassettypemustbemortgagedorpledged using its own procedure. The mortgaging and pledging of several asset types can, however, be combined in one deed provided that the relevant procedures are correctly applied.

227BarentsKrans

Project Finance 2020© Published and reproduced with kind permission by Global Legal Group Ltd, London

2.6 What are the notarisation, registration, stamp duty and other fees (whether related to property value or otherwise) in relation to security over different types of assets (in particular, shares, real estate, receivables and chattels)?

Feesrelatingtotheexecutionofnotarialdeeds(forpurposeofa right of mortgage or right of pledge over registered shares) vary per civil law notary. Registration of a (non-disclosed (stil ) or non-possessory (bezitloos))rightofpledgewiththeDutchtaxauthorities is free of charge. Registration in the Dutch land register (Kadaster)ofarightofmortgagewillcostEUR144.50perrightofmortgage.NootherDutchregistrationtax,stampdutyoranyothersimilardocumentarytaxorduty(otherthancourt fees when enforcing via a court order) is payable in the Netherlands in respect of security rights.

2.7 Do the filing, notification or registration requirements in relation to security over different types of assets involve a significant amount of time or expense?

Filing, notification and registration requirements relating tosecurity are fairly straightforward in the Netherlands and gener-ally do not take a long time. For instance, registration of a right of mortgage with the Dutch land register (Kadaster) can usually be effected by the relevant civil law notary electronically on the samedayastheexecutionofthedeedofmortgage.RegistrationwiththeDutchtaxauthoritiescanalsobecompletedatthesameday. Proof of registration (a time stamp on each deed presented) will be returned a few weeks later. The fees involved are nominal ornon-existent,assetoutinourresponsetoquestion2.6above.

2.8 Are any regulatory or similar consents required with respect to the creation of security over real property (land), plant, machinery and equipment (e.g. pipeline, whether underground or overground), etc.?

Generally,Dutch law does not foresee a specific requirementfor the granting of security over real property (land), plant, machinery or equipment. However, special consentsmay berequiredinveryspecificcases.

3 Security Trustee

3.1 Regardless of whether your jurisdiction recognises the concept of a “trust”, will it recognise the role of a security trustee or agent and allow the security trustee or agent (rather than each lender acting separately) to enforce the security and to apply the proceeds from the security to the claims of all the lenders?

The Netherlands does not have its own legislation on trusts. However, the Netherlands is party to The Hague Convention on the Law Applicable to Trusts and their Recognition and there-fore generally recognises foreign trusts. The Netherlands also recognises the role of security agents or trustees to enforce the security and apply the proceeds from a security to the claims of the lenders. However, since it is generally assumed that a right of mortgage or right of pledge cannot be validly created under Dutch law in favour of a person who is not the creditor of secured liabilities, it is standard market practice to use a parallel debt for purpose of Dutch law security rights.

Plant,machineryorequipmentthatisnotpart(bestanddeel ) of the land can be created by way of a (possessory or non-possessory) right of pledge ( pandrecht).Pleaserefertoquestion2.1abovefora generic description of the procedure.

2.3 Can security be taken over receivables where the chargor is free to collect the receivables in the absence of a default and the debtors are not notified of the security? Briefly, what is the procedure?

Yes. Under Dutch law, a pledgor can create an undisclosed right of pledge (stil pandrecht) over receivables, without notifying the relevantdebtors,providedthatsuchreceivablesareinexistenceat the moment of creation of the right of pledge or directly arise from a then existent legal relationship (reeds bestaande rechtsver-houding).Pleaserefertoquestion2.1aboveforagenericdescrip-tion of the procedure.

2.4 Can security be taken over cash deposited in bank accounts? Briefly, what is the procedure?

Yes. Under Dutch law, a pledgor can create a disclosed right of pledge (openbaar pandrecht) over cash deposited in bank accounts whicharemaintainedintheNetherlands.Pleaserefertoques-tion 2.1 above for a generic description of the procedure. The notificationprocedure,however, requiresparticularandtimelyattention as receivables in respect of cash deposited in bank accounts may generally not be pledged without the consent of the relevant account bank. In addition, Dutch account banks gener-ally have a (prior ranking) right of pledge and a right of set-off under the general banking conditions (algemene bankvoorwaarden) with respect to any cash deposited in bank accounts. Depending on the situation, account banks may be willing to waive their right of pledge and right of set-off in its entirety or agree to limit theuseofsuchrights(forexample,totheamountofcostsrelatedto maintaining the bank account with the account bank).

2.5 Can security be taken over shares in companies incorporated in your jurisdiction? Are the shares in certificated form? Briefly, what is the procedure?

Yes. Under Dutch law, security can be created over shares in the capital of a Dutch company, such as a Dutch private limited liability company (besloten vennootschap met beperkte aansprakelijkheid ) and a Dutch public limited liability company (naamloze vennootschap).

Shares in a Dutch private limited liability company take the form of registered shares (aandelen op naam). No share certifi-cates may be issued with respect to such shares.

Shares in a Dutch public limited liability company can take the form of bearer shares (aandelen aan toonder) or registered shares (aandelen op naam). As from 1 January 2020, a change in law has come into effect pursuant to which the option to incorporate a Dutch public limited liability company with bearer shares has ceasedtoexist,pursuanttowhichexistingDutchpubliclimitedliability companies need to amend their articles of association so that such company has only issued registered shares. Holders of bearershareswillhaveuntil1January2021toexchangetheirbearershares intoregisteredshares. Until suchexchange, therelevant holder cannot invoke any rights attached to the shares in the relevant Dutch public limited liability company.Pleaserefertoquestion2.1aboveforagenericdescriptionof

the procedure to create security over registered shares (aandelen op naam).

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payments (surseanse van betaling) or bankruptcy ( faillissement). However, a bankruptcy trusteemay require themortgageeorthe pledgee to enforce its security right within a reasonable period of time. If the mortgagee or the pledgee fails to do so, the bankruptcy trustee may sell the assets. The mortgagee or the pledgee has a statutory priority right on the proceeds, but will not be paid until the bankruptcy estate is distributed and will have to share in the bankruptcy costs. In addition, the Dutch courts may suspend enforcement of any security rights forthemaximumperiodoffourmonthsifthemortgagororthepledgor has been declared bankrupt ( failliet verklaard ) or has been granted a suspension of payment (surseance verleend ). A suspen-sion of enforcement does not prevent the pledgee from noti-fying the debtors and collecting the receivables pledged after such notification. However, during the suspension the pledgee may not take recourse against any amounts collected nor sell the receivables.

5.2 Are there any preference periods, clawback rights or other preferential creditors’ rights (e.g. tax debts, employees’ claims) with respect to the security?

The validity of transactions entered into (such as the granting of securityrights)maybeaffectedbytheprovisionsofSection3:45of the Dutch Civil Code (Burgerlijk Wetboek)orSection42et seq. oftheDutchBankruptcyCode(Faillissementswet). These provi-sions give (future) creditors and the bankruptcy trustee the right to challenge the validity of certain transactions entered into by a person which are prejudicial to the right of recovery of its cred-itor(s),providedthatsuchpersonand,totheextentthetransac-tion is entered into for a consideration, the counterparty knew or should have known that the rights of other creditors would be prejudiced. If the transaction is entered into within the year before bankruptcy without there being an earlier obligation in place to enter into the relevant transaction, Dutch law provides for the rebuttal presumption that the relevant counterparty should have known that the rights of other creditors would be prejudiced with the entering into of the transaction. The Dutch tax authorities and employees are preferred by

statute (bevoorrecht) with respect to tax claims and employees’claims (wages, pensions, etc.), although such claims generally rank after any claim that is secured by a Dutch right of mort-gage or right of pledge. However, it should be noted that the Dutchtaxauthoritieshaveastatutorypriorityright(bodemvoor-recht)onequipmentandothermovableassetswhichareusedforfurnishing and located at the premises of the debtor of certain taxclaimsintheNetherlands(bodemzaken), which prevails over a right of pledge over such assets, even if the pledgor is not the debtorofthetaxclaim.TheholderofasecurityrightoversuchmovableassetsmustgivetheDutchtaxauthoritiesatleastfourweeks prior notice before it may enforce its rights over such movable assets (including collecting or selling such movable assets)toallowtheDutchtaxauthoritiestoexercisetheirstatu-tory priority right first.

5.3 Are there any entities that are excluded from bankruptcy proceedings and, if so, what is the applicable legislation?

Private-sector entities incorporated in the Netherlands are generally not excluded from bankruptcy proceedings in theNetherlands.

3.2 If a security trust is not recognised in your jurisdiction, is an alternative mechanism available (such as a parallel debt or joint and several creditor status) to achieve the effect referred to above which would allow one party (either the security trustee or the facility agent) to enforce claims on behalf of all the lenders so that individual lenders do not need to enforce their security separately?

Pleaserefertoquestion3.1above.Itisstandardmarketpracticeto use a parallel debt structure for purpose of Dutch law secu-rity rights.

4 Enforcement of Security

4.1 Are there any significant restrictions which may impact the timing and value of enforcement, such as (a) a requirement for a public auction or the availability of court blocking procedures to other creditors/the company (or its trustee in bankruptcy/liquidator), or (b) (in respect of regulated assets) regulatory consents?

A Dutch law right of mortgage may be enforced if the debtor is in default (verzuim) in the performance of the secured liabil-ities by way of (i) a public auction, or (ii) a private sale author-ised by the competent Dutch court, all with due observance of the applicable provisions of Dutch law. Appropriation by the mortgagee is not allowed, but the mortgagee may bid on the assetsinapublicauctionand,ifaprivatesaleisrequestedandthe mortgagee submits a more favourable bid before the end of the hearing of such request, theDutch competent courtmayauthorise that the assets remain with the mortgagee.

A Dutch law right of pledge may be enforced if the debtor is in default (verzuim) in the performance of the secured liabili-ties by way of (i) a public auction, (ii) a private sale authorised by the competent Dutch court, (iii) a private sale agreed between the pledger and the pledgee after the pledgee has become enti-tled to enforce, or (iv) in respect of receivables only, by collec-tion of such receivables (after notice of the right of pledge to the relevant debtor), all with due observance of the applicable provi-sions of Dutch law. Appropriation by the pledgee is not allowed, but the pledgee may bid on the pledged assets in a public auction and the Dutch competent court may authorise that the pledged assets will remain with the pledgee for an amount determined by such court. If it concerns a financial collateral arrange-ment within the meaning of the Financial Collateral Directive (2002/47/EC), the pledgee may set off the secured liabilitiesagainst the value of the assets, provided that such set-off has been agreed between the pledgor and the pledgee.

4.2 Do restrictions apply to foreign investors or creditors in the event of foreclosure on the project and related companies?

Foreign entities or creditors are generally not subject to restrictions in the event of foreclosure on the projects and related companies.

5 Bankruptcy and Restructuring Proceedings

5.1 How does a bankruptcy proceeding in respect of the project company affect the ability of a project lender to enforce its rights as a secured party over the security?

Under Dutch law, a mortgagee and a pledgee may in principle enforce their security rights as if there were no suspension of

229BarentsKrans


in accordance with statutory requirements. In those cases,the directors are irrefutably deemed to have performed their duties improperly and a statutory presumption applies that the improper performance of duties was an important cause of the bankruptcy. The latter presumption may be rebutted if the directorscanprovethatthereareotherexternalcausesforthecompany’s bankruptcy.

Finally, directors may be liable towards the company’s cred-itors under tort law. In contrast to a number of other jurisdic-tions,directorsofadistressedDutchcompanyarenotexplicitlyobliged to file for insolvency at a given moment as a result of not meetingacertainliquidityorsolvencytest.However,adirectormay be personally liable towards the company’s creditors if such director enters into obligations on behalf of the company while knowing, or having sufficient reason to know, that the company would be unable to fulfil those obligations and that the company has insufficient assets against which the deprived creditor could take recourse.

6 Foreign Investment and Ownership Restrictions

6.1 Are there any restrictions, controls, fees and/or taxes on foreign ownership of a project company?

No ownership restriction, controls and fees apply in general to foreign owners of a project company incorporated in the Netherlands.Authorisationisrequiredforinvestmentinspecificregulated areas including nuclear industry, banking, financial services and defence. Dutch and EU competition rules may impact ownership by companies with Dutch, EU or global busi-nessturnoversexceedingspecificthresholds.CompliancewithEU directives may impact an entity’s ability to invest in or own certain assets (such as the project company or assets held by the project company).

Capital gains or losses realised upon the disposal of shares in a Dutch project company are generally not subject to corporate incometaxintheNetherlands.Furthermore,theNetherlandsdoes not levy share transfer taxes. Dividends distributed byaDutch project company tax resident in theNetherlands aregenerally subject to 15% Dutch dividend withholding tax.DeductionsorexemptionsmaybeavailablepursuanttoDutchdomestic law or applicable treaties for the avoidance of double taxation.

6.2 Are there any bilateral investment treaties (or other international treaties) that would provide protection from such restrictions?

The Netherlands has concluded many bilateral investment trea-tiesandtreatiesfortheavoidanceofdoubletaxation.

6.3 What laws exist regarding the nationalisation or expropriation of project companies and assets? Are any forms of investment specially protected?

Pursuant to Dutch law, ownership is in principle inviolable. As ageneral rule,noonemaybeordered to relinquishhisprop-erty exceptwhere the common good so demands. Thismayonly take place in accordance with the Dutch Nationalisation Act (Onteigeningswet) and only against full compensation. This applies irrespective of the form of incorporation or type of investment.

5.4 Are there any processes other than court proceedings that are available to a creditor to seize the assets of the project company in an enforcement?

As mentioned above, it is usually not necessary to start court proceedings with respect to the enforcement of Dutch law secu-rity rights. Summary proceedings (kort geding) may, however, be usefulifprovisionalmeasuresarerequiredinviewoftheinterestof the parties.

5.5 Are there any processes other than formal insolvency proceedings that are available to a project company to achieve a restructuring of its debts and/or cramdown of dissenting creditors?

At this stage, there is no such formal insolvency proceeding available. However, a new formal Dutch insolvency procedure is presented as a bill which provides for court confirmation of an extrajudicialrestructuringplan,makingitbindingonallcred-itors and shareholders affected. It offers great flexibility byallowing for public and non-public variations of the restructuring proceedings,dependingonthedebtor’sCOMI.Itprovidesforcross-class cram-down, the restructuring of group company obligations through either one or more aligned proceedings, and the termination of onerous contracts. Supporting court meas-ures and a short timeframe allow for deal certainty and a swift restructuring process. The procedure is inspired by interna-tionalrestructuringpractices, inparticular theUKSchemeofArrangement and US Chapter 11 proceedings.

5.6 Please briefly describe the liabilities of directors (if any) for continuing to trade whilst a company is in financial difficulties in your jurisdiction.

Directors are generally not personally liable under Dutch corpo-rate or insolvency law for the debts of a Dutch private limited liability company (besloten vennootschap met beperkte aansprakelijkheid ) or a Dutch public limited liability company (naamloze vennootschap). In general, director’s liability arises only if a serious personal fault can be attributed to him or her. Dutch corporate law allows directors wide discretion in how they fulfil their duties. Even if a director takes a decision that (in retrospect) proves to have negativeconsequencesforthecompanyand/oritscreditors,thestarting point remains that the director is not personally liable.

Dutch law distinguishes between liability to:■ thecompanyundercorporatelaw(i.e.internalliability);■ thebankruptcyestateunderinsolvencylaw;and■ the company’s creditors under tort law (i.e. external

liability). Internal liability may arise if the directors fail to fulfil their

duties. Only the company or its bankruptcy trustee (curator) can bringactionsonthisground.Violationsofcorporaterules(e.g.the company’s articles of association) are deemed to constitute improper management.

Upon bankruptcy, the bankruptcy trustee (curator) can hold directors personally liable for the estate’s deficit if they have performed their duties as directors in an inappropriate manner for a three-year period preceding the bankruptcy. The bank-ruptcy trustee (curator) must prove that the inappropriate fulfil-ment of the director’s duties was an important cause of the company’s bankruptcy. That said, statutory presumptions to lessen the bankruptcy trustee’s burden of proof are available if the board of directors has failed to conduct a proper admin-istration or properly deposit the company’s annual accounts

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(Minister van Economische Zaken en Klimaat). The ownership of the minerals or geothermal energy is transferred to the licence hold-er(s) only by the production of the minerals or geothermal energy underaproduction licence issuedbytheMinisterofEconomicAffairs and Climate Policy (Minister van Economische Zaken en Klimaat). The same authority is authorised to approve the transfer, merger or demerger of such licences (either directly or indirectly). A foreign entity can be one of the holders of a production licence.

Pipelines and cablesThe ownership of a network of pipelines or cables resides with the employer of such network or its successor in title. Certain networks, such as electricity and gas transport and distribu-tion networks, can only be owned by network operators (netbe-heerders). These network operators are (indirectly) jointly owned by governmental bodies, such as municipalities (gemeenten). As such, not all networks of pipelines and cables can be owned by foreign entities.

7.4 Are there any royalties, restrictions, fees and/or taxes payable on the extraction or export of natural resources?

TheDutch state charges taxes directly to the licence holder,suchassurfaceduties(offshoreexplorationlicenceorproduc-tion licence), royalties relating to the amount of minerals produced(productionlicence)andthe50%Dutchstateprofitshare (production licence). Furthermore, the Dutch state may derive value through its indirect participation in the production licence.Therearerestrictionsinplaceinrelationtotheextrac-tionandexploitationofminerals.Forexample,duetoseismo-logic activity in the northern parts of the Netherlands, the gas production ceiling applicable to the Groningen reservoir is up to 12 billion m3 for 2020.

7.5 Are there any restrictions, controls, fees and/or taxes on foreign currency exchange?

Therearenogeneralrestrictionsonforeigncurrencyexchange.However, anti-money laundering rules applicable to all catego-ries of businesses could be relevant. Fees may be imposed by banks in the Netherlands when dealing in foreign currencies. Corporateincometaxmayariseonexchangegainsandlosses,dependingontheassetorliabilityinquestion.

7.6 Are there any restrictions, controls, fees and/or taxes on the remittance and repatriation of investment returns or loan payments to parties in other jurisdictions?

The Netherlands is business-friendly. There are no general restrictions, controls, fees and/or taxes on foreign currencyexchange, whichmeans that repatriation of funds is generallystraightforward, subject to international sanctions that may be in place. There is no discrimination in favour of local companies andthereisnorequirementtoreinvestprofitsintheNetherlands.

7.7 Can project companies establish and maintain onshore foreign currency accounts and/or offshore accounts in other jurisdictions?

Subject to sanctions and anti-money laundering rules, project companies in the Netherlands can establish and maintain

7 Government Approvals/Restrictions

7.1 What are the relevant government agencies or departments with authority over projects in the typical project sectors?

Theexactnatureoftheprojectwilldeterminewhichregulatorybodies and/or Dutch governmental agencies will have authority over the project. However, there are a number of bodies which have an overarching function in respect of the development related to typical project sectors.

With respect to offshore wind energy projects in the Dutch ExclusiveEconomicZoneandprojectsrelatingtotheexplora-tionandextractionofmineralsorgeothermalenergy,whetheronshoreoroffshoreintheDutchExclusiveEconomicZone,apermitisrequiredfromtheMinisterofEconomicAffairsandClimate Policy (Minister van Economische Zaken en Klimaat).Themajorityofonshoreprojectswillrequirespatialplanning

amendments and/or permits. Depending on the nature of the project, municipalities (gemeenten) or provinces ( provincies) of the relevant area are generally the competent authority.

Other governmental agencies and departments may be involved, depending on the nature of the project.

7.2 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?

There is no general filing or registration duty for financing or project documents but certain security agreements requirenotarisation (i.e. deeds of mortgage and deeds of pledge of shares) and certain derivatives transactions need to be reported to the relevant Trade Repository. In addition, a right of mort-gage needs to be registered with the Dutch land register (Kadaster). Furthermore, a non-disclosed right of pledge (stil pandrecht) over receivables and a non-possessory right of pledge (bezitloos pandrecht)overmovableassetswhicharenotexecutedasanotarialdeedneedtobefiledwiththeDutchtaxauthorities.

7.3 Does ownership of land, natural resources or a pipeline, or undertaking the business of ownership or operation of such assets, require a licence (and if so, can such a licence be held by a foreign entity)?

LandThe ownership of land is not licensed in the Netherlands.

WaterIn order to impound or abstract groundwater and surface water, a permit must be obtained from either the relevant province ( provincie), the relevant water board (waterschap)or theMinisterof Infrastructure and Environment (Minister van Infrastructuur en Milieu). Foreign entities can have such licence.

Wind, wave, tidal or solar energyNolicencesarerequiredfortheuseofrenewableenergyresources,althoughtheusualplanningpermissionsandconsentsrequiredtocarryoutconstructionandengineeringworkswillberequired.

Minerals and geothermal energyPursuant to the Mining Act (Mijnbouwwet), it is prohibited to explorefororproducemineralsorgeothermalenergywithoutalicence from the MinisterofEconomicAffairsandClimatePolicy

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7.10 Is there any specific legal/statutory framework for procurement by project companies?

The EU procurement laws (as implemented in the Netherlands in the Dutch Public Procurement Act (Aanbestedingswet 2012)) are applicable to project companies developing public-sector projects if the public contracts fall within the scope of the rulesandexceedcertainfinancialthresholds.Therulesensurethat the award process is transparent, non-discriminatory and respects the principles of equal treatment. EU procurementlaws apply to contracts awarded by central governments, local authorities or other public-sector bodies.

8 Foreign Insurance

8.1 Are there any restrictions, controls, fees and/or taxes on insurance policies over project assets provided or guaranteed by foreign insurance companies?

There are no restrictions on insurance policies over project assets provided by foreign insurance companies, unless the foreign insurance company is carrying out and effecting the insurance in the Netherlands. If the foreign insurance company is carrying out and effecting the insurance in the Netherlands, it requiresalicencefromtheDutchCentralBank(DNB)andhasto comply with the Financial Supervision Act (Wet op het financieel toezicht) rules, unless it can rely on European Union passporting rightsorotherexclusions.

8.2 Are insurance policies over project assets payable to foreign (secured) creditors?

Foreign banks, and other foreign creditors, can be named as co-insured on the insurance policies over project assets. In addition, any claims arising under such insurance policy can generally be pledged in favour of such foreign banks, and other foreign creditors.

9 Foreign Employee Restrictions

9.1 Are there any restrictions on foreign workers, technicians, engineers or executives being employed by a project company?

The general position is that nationals of the European Union have the automatic right to work in the Netherlands by virtue of beinganEUcitizen.Mostcitizensofstateswhicharenotpartof the European Union need both a work permit and a resident permit to work in the Netherlands.

10 Equipment Import Restrictions

10.1 Are there any restrictions, controls, fees and/or taxes on importing project equipment or equipment used by construction contractors?

As the EU is a customs union, Dutch companies can buy most goodsfromotherMemberStateswithoutrestrictions–althoughVAT and excise duty will normally still apply. If a Dutchcompany imports from outside the EU, it may have to comply withimportlicensingrequirementsandwithcommoncustomstariffs that apply across the EU. Apart from the general restric-tion concerning materials that are deleterious to health and safety

onshore foreign currency accounts and/or offshore accounts in other jurisdictions.

7.8 Is there any restriction (under corporate law, exchange control, other law or binding governmental practice or binding contract) on the payment of dividends from a project company to its parent company where the parent is incorporated in your jurisdiction or abroad?

There are no restrictions on dividend payments to non-Dutch resident parent companies, other than the general Dutch corpo-rate rules on the distribution of dividends. Pursuant to these general rules, the general meeting of a Dutch private limited liability company (besloten vennootschap met beperkte aansprakeli-jkheid ) is generally authorised to resolve on the distribution of dividends based on the company’s accounts prepared by the management board (unless otherwise provided in the articles of association). If the intended distribution is detrimental to the continuity of the company, to be determined on the basis of the outcome of a balance test and liquidity test, themanage-ment board may refuse to approve the intended distribution. The Dutch general corporate rules on distribution of dividends for a public limited liability company (naamloze vennootschap) are authorised by the general meeting of the company and based on the accounts prepared by the company. Distributions are limited to formal rules on capital preservation and creditor protection.

7.9 Are there any material environmental, health and safety laws or regulations that would impact upon a project financing and which governmental authorities administer those laws or regulations?

Proposed developments must be assessed to determine what effectstheymayhaveontheenvironment.Beforedevelopmentconsent is granted, projects likely to have significant effects on the environment by virtue of their nature, size or location must undergo an environmental impact assessment (EIA). The developerwillberequiredtosubmitanEIAtothecompetentauthority when applying for development consent. In addi-tion, where a proposed development is likely to have a signifi-cant effect on a designated European conservation site (Natura 2000 areas), an appropriate assessment (AA) must be carried out undertheHabitatsDirective,theBirdsDirectiveandtherele-vant national legislation transposing that Directive. Failure tocarryoutanadequateEIAorAAmayresult inaproposeddevelopment being challenged in the courts by way of judicial review.Dependingontheimpact,theMinistryofAgriculture,Nature and Food Quality (Ministerie van Landbouw, Natuur en Voedselkwaliteit) or the relevant province ( provincie) is the regu-lator tasked with the administration of the Dutch environmental licensing regime.

Projects involving certain specified industrial activities may requireanemissionslicenceundertheEUIndustrialEmissionsDirective and relevant national legislation transposing the Directive. The Dutch Emissions Authority (Nederlandse Emissieautoriteit) is the regulator tasked with the administration of this regime.

The Work Conditions Act (Arbeidsomstandighedenwet) and underlying legislation is the main piece of Dutch legisla-tion governing health and safety. It imposes an obligation on employers to provide and maintain a safe workplace for employees. The legislation is enforced by the Inspection SZW (Inspectie SZW ).

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accordance with the provisions of Regulation (EC) No. 593/2008 of the Parliament and the Council on the Law Applicable to Contractual Obligations (Rome I), the selection of a foreign law will be valid and legally binding in the Netherlands, and Dutch courts would apply such law provided that the contents of the relevant provisions of the chosen laws do not contravene with the principles of Dutch public policy. The law chosen for security documents will, however, depend the applicable private international laws that apply.

13.3 What matters are typically governed by domestic law?

Dutch law is usually chosen if the project solely or mainly concerns the Netherlands. If one of the project parties is the Dutch State or another Dutch public entity, the project agree-ment will almost always be governed by Dutch law.

14 Jurisdiction and Waiver of Immunity

14.1 Is a party’s submission to a foreign jurisdiction and waiver of immunity legally binding and enforceable?

A judgment rendered by a foreign court will generally be recog-nised and enforced in the Netherlands subject to: (i) the provi-sions of the EC Regulations on Jurisdiction and the Recognition andEnforcementofJudgmentsinCivilandCommercialMattersof 12 December 2012 (recast) or the EC Regulation creating a European Enforcement Order for uncontested claims of 21 April 2004,bothasamendedfromtimetotime;(ii)theprovisionsoftheConvention on Jurisdiction on the Recognition and Enforcement ofJudgmentsinCivilandCommercialMatters,Lugano2007;or(iii) the provisions of any (other) applicable bilateral or multilateral enforcement treaty to which the Netherlands is a party. Parties are generally not entitled to any immunity from suit from any legal proceedings in the Netherlands to enforce any project document or finance document or any liability or obligation of such party arising thereunder in respect of itself or its assets.

15 International Arbitration

15.1 Are contractual provisions requiring submission of disputes to international arbitration and arbitral awards recognised by local courts?

Contractual provisions requiring submission to internationalarbitration are generally valid and binding upon the parties to such contract under Dutch law. However, a Dutch competent court may assume jurisdiction in summary proceedings (kort geding)ifprovisionalmeasuresarerequiredinviewoftheinterestof the parties.

An arbitral award rendered by such court will in principle be recognised and enforced in the Netherlands pursuant to Section Vof theConventionon theRecognition andEnforcement ofForeign Arbitral Awards of New York, 1958, and Section 1075 of the Dutch Code of Civil Procedures, unless (a) the party against whom recognition or enforcement is sought proves that: (i) the parties to the submission to arbitration were under some inca-pacity or the submission to arbitration is invalid under the chosen law; (ii) the party against whom the award is invoked was not given proper notice of the appointment of the arbitrator or the arbitral proceedings or was otherwise unable to present his case; (iii) the award deals with a difference not contemplated by the submission to arbitration or it contains decisions on matters beyond the scope of the submission to arbitration; (iv) the arbitral

and the environment, there are no legal restrictions or controls whichapplyexclusivelytoimportingconstructionequipment.

10.2 If so, what import duties are payable and are exceptions available?

This is not applicable.

11 Force Majeure

11.1 Are force majeure exclusions available and enforceable?

Force majeure is recognised in the Netherlands and applies auto-matically when a contract is governed by Dutch law. Parties canneverthelessincludeanexpressprovisionon force majeure if they wish to override or deviate from the statutory provisions. However, liability for non-performance attributable to a party’s ownfaultorgrossnegligencecanneverbeexcluded.

12 Corrupt Practices

12.1 Are there any rules prohibiting corrupt business practices and bribery (particularly any rules targeting the projects sector)? What are the applicable civil or criminal penalties?

Under Dutch law, multiple forms of bribery are criminalised in the Dutch Criminal Code. A distinction is made between bribery of (foreign) public officials and private commercial bribery, depending on the capacity of the person who was bribed. Furthermore, a distinction is made between active bribery, which relates to the briber’s conduct, and passive bribery, which relates to thepersonwhowasbribed. Themaximumpenaltyfor bribery of public officials can lead to an imprisonment of up to 12 years or a fine of up to EUR 83,000 per violation with respecttoindividuals.Withrespecttolegalentities,amaximumof EUR 830,000 applies, unless the court deems such punish-mentimproperinwhichcaseafineofupto10%oftheannualturnoverofthecompanymayberuled.Maximumpenaltiesforprivate commercial bribery can lead up to an imprisonment of four years or a fine of up to EUR 83,000 per violation for indi-viduals.Withrespecttolegalentities,again,amaximumofEUR830,000 applies, unless the court deems such fine improper in whichcasea fineofup to10%of theannual turnoverof thecompany may be applied.

13 Applicable Law

13.1 What law typically governs project agreements?

Project agreements are typically governed by Dutch law. In purely private projects involving only private entities, the parties may however agree to apply a foreign law, which will apply subject to the compliance of the international private law rules of the countries to which each of the private entities belong.

13.2 What law typically governs financing agreements?

Finance documentation is generally governed by Dutch law. However, English or New York law may be other options when the syndicate of lenders is not familiar with Dutch law. In

233BarentsKrans


18 Other Matters

18.1 Are there any other material considerations which should be taken into account by either equity investors or lenders when participating in project financings in your jurisdiction?

Dutch, EU, US and UN sanctions can be an issue if a project or business might involve dealing with sanctioned persons, enti-ties or assets.

18.2 Are there any legal impositions to project companies issuing bonds or similar capital market instruments? Please briefly describe the local legal and regulatory requirements for the issuance of capital market instruments.

Therearenolegalrequirementsthatapplyexclusivelytoprojectcompanies seeking to issue bonds or similar capital markets instruments. Any project company seeking to issue debt instru-ments(securities)onEuronextAmsterdam(“Euronext”)mustcomply with Euronext Listing Rules (the “Listing Rules”)and the relevant regulatory rules applicable under the Dutch Financial Supervision Act (Wet op het financieel toezicht).TheFinancialMarketsAuthority(Autoriteit Financiële Markten)

is the body responsible for regulating all securities listed on the Euronext.TheListingRulescontain(i)therulesandregulationsfor listing debt securities, and (ii) the continuing obligations that apply to issuers and bondholders for the duration of the listing. The Listing Rules cover principles ranging from corporate governance and executive remuneration to accounting stand-ards and full disclosure of information to prospective investors.

19 Islamic Finance

19.1 Explain how Istina’a, Ijarah, Wakala and Murabaha instruments might be used in the structuring of an Islamic project financing in your jurisdiction.

DutchlawdoesnotexpresslyrecognisetheconceptsofIstina’a, Ijarah, Sukuk, Wakala and Murabaha. However, it is mainly considered that the structuring of a project financing under Dutch law may comply with Shari’ah law when using Dutch law instruments which are of similar in nature, such as:■ aninvestmenttitleforSukuk, according to which principal

andremunerationareindexedontheperformanceoftheassets owned by an issuer; and

■ the purchase of chattel property with deferred payment(including a positive margin) for Murabaha.

19.2 In what circumstances may Shari’ah law become the governing law of a contract or a dispute? Have there been any recent notable cases on jurisdictional issues, the applicability of Shari’ah or the conflict of Shari’ah and local law relevant to the finance sector?

There is no relevant case law in the Netherlands regarding the application of Shari’ah law as regards the governing law of a contract or dispute. It remains also very unlikely that Dutch courts would accept its application, unless (i) the governing law of the relevant agreement is set as the law of a country with legis-lation based on Shari’ah law, and (ii) such legislation does not contradict with Dutch public policies.

tribunal that rendered the award was constituted in violation of the law of the country where the arbitration took place; or (v) the arbitral award has not yet become binding on the parties, or has been set aside or suspended by a competent authority or the country in which or under the law of which it was rendered, or (b) the Dutch court finds that (i) the subject matter of the dispute is not capable of settlement by arbitration under Dutch law, or (ii) recognition or enforcement of the arbitral award would be contrary to public policy (openbare orde) of the Netherlands.

15.2 Is your jurisdiction a contracting state to the New York Convention or other prominent dispute resolution conventions?

Yes. The Netherlands has been a party to the New York Convention since 1958.

15.3 Are any types of disputes not arbitrable under local law?

Most disputes are arbitrable under Dutch law. However, anarbitration agreement may not serve to determine legal conse-quencesthat,accordingtoDutchlaw,maynotbefreelydeter-mined by the parties.

15.4 Are any types of disputes subject to mandatory domestic arbitration proceedings?

There is no mandatory domestic arbitration procedure.

16 Change of Law / Political Risk

16.1 Has there been any call for political risk protections such as direct agreements with central government or political risk guarantees?

There have not been many calls for political risk protections in the Netherlands in recent years as policy has proven stable. However, it should be noted that the mandatory phasing out of coal-fired energy plants in the Netherlands has triggered a call for compensation.

17 Tax

17.1 Are there any requirements to deduct or withhold tax from (a) interest payable on loans made to domestic or foreign lenders, or (b) the proceeds of a claim under a guarantee or the proceeds of enforcing security?

Payments made by a Dutch project company in respect of interest payable on loans or proceeds of a claim under a guarantee or the proceeds of enforcing security may generally be made free fromwithholdingordeductionofanytaxesofwhatevernatureimposed, levied, withheld or assessed by the Netherlands.

17.2 What tax incentives or other incentives are provided preferentially to foreign investors or creditors? What taxes apply to foreign investments, loans, mortgages or other security documents, either for the purposes of effectiveness or registration?

There are noDutch tax incentives provided preferentially orspecifically to foreign investors or creditors.

234 Netherlands


19.3 Could the inclusion of an interest payment obligation in a loan agreement affect its validity and/or enforceability in your jurisdiction? If so, what steps could be taken to mitigate this risk?

Under Dutch law, the inclusion of an interest payment obliga-tion in a loan agreement generally does not affect its validity and/or enforceability.

235

Jason van de Pol has been active as an attorney at law in the (national and international) banking and finance practice since 2007. He advises financial institutions, other investors, borrowers and real property and project developers on documenting and structuring financing transactions.Jason has ample experience in assisting with the legal aspects of project finance, leveraged finance, real estate finance, direct lending, asset-based finance and financial restructurings. He is also regularly involved in large-scale renewable energy and other sustainability projects.

BarentsKransLange Voorhout 32514 EA The HagueNetherlands

Tel: +31 6 4623 3060Email: [email protected] URL: www.barentskrans.nl/en

BarentsKrans is an independent Dutch law firm with about 80 lawyers and civil-law notaries located in The Hague, the Netherlands. Excellent in dispute resolution and with a strong reputation for transactional advice, BarentsKrans is known for high-quality service. Our clients include listed and privately held multinational companies and financial institutions with commercial interests in the Netherlands. A unique combination of high quality advice, operational independence and knowledge of the Dutch legal and regulatory environment sets us apart among law firms in the Netherlands, and positions us to focus exclusively on helping clients achieve their commercial objectives.

www.barentskrans.nl/en

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