The International Comparative Legal Guide to:
Project Finance 2014 3rd Edition A practical cross-border insight into project finance
Published by Global Legal Group, with contributions from: Abuda Asis & Associates
Heuking Kühn Lüer Wojtek
Advokatfirmaet Thommessen AS
Ikeyi & Arifayan
Ali Budiarjo, Nugroho, Reksodiputro Counsellors at Law
Iwata Godo
BMT LAW
Khan Corporate Law
Boga & Associates
Koep & Partners
Bonelli Erede Pappalardo
Kyriakides Georgopoulos Law Firm
Brigard & Urrutia Abogados S.A.S.
Loyens & Loeff
Cabinet d’Avocats Charles Badou
Mattos Filho, Veiga Filho, Marrey Jr. e Quiroga Advogados
Clayton Utz
Milbank, Tweed, Hadley & McCloy LLP
Cuatrecasas, Gonçalves Pereira
Odvetniki Šelih & partnerji, o.p., d.o.o.
Debarliev, Dameski & Kelesoska Attorneys at Law
Philippi, Yrarrazaval, Pulido & Brunner
DFDL
Project Lawyers
El-Borai & Partners
Sysouev, Bondar, Khrapoutski
Etude Kabinda/Avocats DRC
Torres Plaz & Araujo
Galicia Abogados, S.C.
Vieira de Almeida & Associados
Gorrissen Federspiel
Walder Wyss Ltd.
Hajji & Associés
The International Comparative Legal Guide to: Project Finance 2014 General Chapters:
Contributing Editor
John Dewar, Milbank, Tweed, Hadley & McCloy LLP Account Managers
Edmond Atta, Beth Bassett, Antony Dine, Dror Levy, Maria Lopez, Florjan Osmani, Paul Regan, Gordon Sambrooks, Oliver Smith, Rory Smith Sales Support Manager
Toni Wyatt Sub Editors
1
Why the World Needs Project Bonds (and Project Finance Lawyers) – John Dewar & Oliver Irwin, Milbank, Tweed, Hadley & McCloy LLP
1
2
CEMAC Countries: Where Harmonised Regulations Shared by Six Central African Countries Facilitate Project Financings in Emerging Countries – Jean-Pierre Bozec, Project Lawyers
6
Country Question and Answer Chapters: 3
Albania
Boga & Associates: Renata Leka & Besa Velaj (Tauzi)
4
Australia
Clayton Utz: Bruce Cooper
18
5
Belarus
Sysouev, Bondar, Khrapoutski: Alexander Bondar & Vitalis Markevich
28
6
Belgium
Loyens & Loeff: Marc Vermylen & Christophe Laurent
37
7
Botswana
Khan Corporate Law: Shakila Khan
48
8
Brazil
Mattos Filho, Veiga Filho, Marrey Jr. e Quiroga Advogados: Pablo Sorj & Thiago Moreira
57
Philippi, Yrarrazaval, Pulido & Brunner: Marcelo Armas M. & Marcela Silva G.
66
Brigard & Urrutia Abogados S.A.S.: Manuel Fernando Quinche González & César Rodríguez Parra
73
9
Chile
10 Colombia
9
Nicholas Catlin Amy Hirst
11 Congo - D.R.
Etude Kabinda/Avocats DRC: Dr. Alex Kabinda Ngoy & Ms. Dolores Kimpwene Sonia 81
Editors
12 Denmark
Gorrissen Federspiel: Morten Lundqvist Jakobsen & Tina Herbing
90
13 Egypt
El-Borai & Partners: Dr. Ahmed El Borai & Dr. Ramy El Borai
98
14 England & Wales
Milbank, Tweed, Hadley & McCloy LLP: Clive Ransome & Munib Hussain
106
15 Germany
Heuking Kühn Lüer Wojtek: Adi Seffer
120
Alan Falach
16 Greece
Kyriakides Georgopoulos Law Firm: Despina J. Doxaki & Ioanna I. Antonopoulou 128
Global Head of Sales
17 Indonesia
Ali Budiarjo, Nugroho, Reksodiputro Counsellors at Law: Emir Nurmansyah & Freddy Karyadi
138
Beatriz Arroyo Gemma Bridge Senior Editor
Suzie Kidd Group Consulting Editor
Simon Lemos Group Publisher
18 Italy
Bonelli Erede Pappalardo: Catia Tomasetti & Simone Ambrogi
151
Richard Firth
19 Japan
Iwata Godo: Landry Guesdon & Takashi Domon
161
Published by
20 Kosovo
Boga & Associates: Sokol Elmazaj & Sabina Lalaj
168
21 Lao PDR
DFDL: Walter Heiser & Duangkamol Ingkapattanakul
176
22 Luxembourg
Loyens & Loeff: Vassiliyan Zanev & Xavier Guzman
185
23 Macedonia
Debarliev, Dameski & Kelesoska Attorneys at Law: Dragan Dameski & Jasmina Ilieva Jovanovikj
194
24 Mexico
Galicia Abogados, S.C.: Carlos de Maria y Campos S. & Bernardo Martínez Negrete E.
202
25 Morocco
Hajji & Associés: Amin Hajji
213
iStockphoto
26 Myanmar
DFDL: James S. Finch & Jaime Casanova
220
Printed by
27 Namibia
Koep & Partners: Peter Frank Koep & Hugo Meyer van den Berg
228
Ashford Colour Press Ltd. April 2014
28 Netherlands
Loyens & Loeff: Gianluca Kreuze & Niels Muller
236
29 Nigeria
Ikeyi & Arifayan: Sola Arifayan & Kenechi Ezezika
246
30 Norway
Advokatfirmaet Thommessen AS: Cathinka Kahrs Rognsvåg & Ellen Teresa Heyerdahl
255
31 Philippines
Abuda Asis & Associates: Cornelio B. Abuda & Jehremiah C. Asis
264
32 Portugal
Vieira de Almeida & Associados: Manuel Protásio & Ana Luís de Sousa
272
33 Sierra Leone
BMT LAW: Glenna Thompson
281
34 Slovenia
Odvetniki Šelih & partnerji, o.p., d.o.o.: Mia Kalaš & Blaž Ogorevc
288
35 Spain
Cuatrecasas, Gonçalves Pereira: Héctor Bros & Jaume Ribó
298
36 Switzerland
Walder Wyss Ltd.: Thomas Müller-Tschumi & Alexandre Both
309
37 USA
Milbank, Tweed, Hadley & McCloy LLP: Eric F. Silverman & Simone M. King
319
38 Venezuela
Torres Plaz & Araujo: Federico Araujo & Juan Carlos Garantón
328
39 Vietnam
DFDL: Hoang Phong Anh & Akemi Kishimoto
336
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Chapter 6
Belgium
Marc Vermylen
Loyens & Loeff
1 Overview 1.1
What are the main trends/significant developments in the project finance market in Belgium?
The role of the European Investment Bank, export credit agencies and certain insurance companies has undoubtedly been key to reaching financial close on several deals, particularly in the renewables sector. All of the offshore wind deals in Belgium have included the EIB’s and the ECA’s participation, which enabled investors to secure long-term financing. Without being comparable to the UK, one can notice a significant increase in PPP projects, mainly in the form of DBFM (design, build, finance, maintain), launched at government level (municipalities, provinces, regions, federal state) and for a multiplicity of objects (infrastructure, prisons, schools, etc.). The benefit of a government refinancing guarantee (which does not jeopardise the ESA neutrality) is a general trend in these projects. In the Belgian PPP market, the Flemish schools project, a highprofile framework programme in 2010, introduced a new PPP model whereby (i) DBM and F tenders were split into a so-called DBM + F model, and (ii) a two-step model was used where the Flemish government concluded a DBFM framework agreement with an intermediary SPV, which in turn concluded DBFM contracts with the separate schooling communities. The deal includes a six-year mini-perm loan to pay for the construction phase which will be refinanced upon project completion by a long-term financing. Nevertheless, a guarantee by the Flemish government in support of the long-term debt facility was still required. The pilot phase of the EU-EIB Project Bond Initiative, established by Regulation No. 670/2012, which aims at reviving and expanding capital markets to finance large European infrastructure projects in the fields of transport, energy and information technology, is also looked at favourably by all market parties and may prove to be successful in the coming years. The A11 road public-private partnership (PPP) in Belgium has been selected to be one of the infrastructure projects for the pilot phase. This transaction is expected to reach financial close in the first half of 2014. As the number of Belgian Institutions for Occupational Retirement Plans exploring opportunities to invest in project financing deals is steadily increasing, it is anticipated that they will assume a more active role in future deals.
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Christophe Laurent
1.2
What are the most significant project financings that have taken place in Belgium in recent years?
The Belgian offshore wind market has seen many high-profile deals reach financial close (Belwind (2009), C-Power (2010), Northwind (2012)). The federal government has set aside a large zone specifically for seven offshore wind parks. Most concessions have been granted. In 2013, the construction phase for these projects was up and running. About 192 MW of new offshore wind power capacity was connected to the electricity grid in Belgium, which amounts to up to 12% of the entire European capacity in 2013. Belgium is third in Europe with an amount of 571 MW installed offshore wind capacity, making up 8.7% of total European installations. Various PPP projects were launched at federal and Flemish level in the last few years. The Flemish schools financing, which is a major European infrastructure PPP transaction, closed in June 2010. The project covers the construction of about 211 primary and secondary schools in Flanders. In addition, a PPP project for new tramways in Antwerp (Brabo II) and in between Hasselt and Maastricht (Spartacus) was introduced in 2013. At federal level the Haren Prison PPP transaction has been awarded to Cafasso Consortium, containing a prison project with a capacity of 1190 prisoners. Lately, the Brussels Capital and Walloon region have also started to launch PPP projects, such as the renovation of the Leopold II tunnel (Brussels Capital) and the Tram de Liège (Wallonia). A major project currently ongoing is “Viapass”, where the three Belgian Regions have entered into a cooperation agreement and are acting together for the implementation of a toll system for trucks. This project derives from a European initiative and directive, and has also required modifications to the Belgian tax legislation in order to ensure the tax deductibility of the toll. This is a DBFMO project whereby the awarded project company will also be in charge of the operation of the system and collection of toll. Between 2007 and 2011, a huge boom in solar and onshore deals swept the market in Flanders, either by way of project finance or leasing constructions. As a result of a change in the subsidy system, the flow of deals dried up. Since 2011, a secondary market has developed and this development is currently still ongoing whereby international funds and international and local investors show an interest in existing SPVs and sometimes in O&M portfolios. Finally, the Walloon region is now working on a new decree regarding the development of onshore wind farms, defining, inter alia, the zones for implantation of such wind farms.
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2 Security
Belgium
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?
Other than a pledge on the entire commercial business of a company, general security agreements are not market practice in Belgium. The procedure to create and perfect security on an asset differs according to its type and nature. Security on immovable property should, as a matter of Belgian law, be granted by way of a mortgage (hypotheek/hypothèque). Security on movable assets should instead be created either by way of a possessory pledge (pand/gage), as a part of a pledge on a commercial business (pand op de handelszaak/gage sur fonds de commerce) or, for certain assets only, by way of a security assignment (eigendomsoverdracht ten titel van zekerheid/transfert de propriété à titre de garantie). Note however that a new Act on security interests on movable assets was adopted in 2013. This new Act of 11 July 2013 is expected to enter into force at the latest by the end of 2014. It provides for a national UCC-type filing register, a newly created public register called the “National Register of Pledges” (Nationaal Pandregister/Registre national des Gages), where pledges on tangible or intangible movable assets can be registered. 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 on immovable property (commonly land, buildings and certain immovable real property rights) is created by way of a mortgage. A mortgage is created by a notarial deed drawn up by a notary public in one of the official languages of Belgium. In order to make the mortgage enforceable against third parties, the deed must be registered with the tax authorities and subsequently recorded at the relevant mortgage keeper’s office. A mortgage does not result in any transfer of title, nor does it give physical possession or control to the mortgagee. Under the existing legislation, security on machinery and equipment can be created either (i) by way of a possessory pledge, or (ii) as part of a pledge on the commercial business, unless the plant, machinery and equipment are considered to be immovable by nature, in which case a mortgage is required. A possessory pledge to secure commercial obligations is created by a private agreement. If, however, the secured obligations are civil liabilities instead of commercial liabilities, the pledge must be executed as a public deed or be registered. A possessory pledge will require the dispossession of the pledged movable assets outside the (physical) control of the pledgor. This requirement of dispossession is to be continuous, exclusive, public and unambiguous and an interruption in the dispossession of the pledged asset will affect the existence of the pledge. If the movable assets are held at the premises of a third party, it can be agreed that such third party acts as a third party pledge holder. The third party pledge holder will have to agree not to give the pledgor access to the pledged movable assets. In addition, the pledged movable assets must be kept separate and must not be commingled with any other assets. A creditor can have the benefit of a pledge on the borrower’s commercial business,
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which is similar to, but not the same as, a floating charge under English law. A pledge on the commercial business should secure credit operations and can initially only be granted to credit institutions having a banking licence in one of the EU countries and certain other financial institutions specified by law. A standard pledge on the business should cover, in practice, all movable assets relating to the business, e.g. clients, business equipment, brands, any rights under leasing contracts, furniture, tools, the sign board, receivables, bank accounts and inventory. Inventory can by law only be pledged up to 50% of the sale value of the inventory at the date of enforcement of the pledge. The lender does not need to take physical possession of the goods. A pledge on the commercial business must be registered with the tax authorities and subsequently recorded at the relevant mortgage keeper’s office. However, the new Act will significantly change the current legal framework for the creation, perfection and realisation of security interests on all kinds of movable assets, whether tangible or intangible, including universalities, such as a pledge on the commercial business. In particular, the new Act introduces, in addition to the traditional possessory pledge, a non-possessory pledge on movable assets, which will be created by means of a pledge agreement between the pledgor and the pledgee. The pledge will be perfected and effective towards third parties as of registration of the pledge in the National Register of Pledges. Registrations in the National Register of Pledges will remain valid for a (renewable) term of 10 years. A non-possessory pledge on a commercial business has the advantage that the assets, constituting the commercial business, do not have to be transferred out of the control of the pledgor. The previous restrictions with respect to a pledge on the commercial business will be abolished, and pledges on commercial businesses recorded in the mortgage register under the old rules will only keep their ranking if they are registered in the National Register of Pledges within a period of 12 months after the new rules come into force. 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?
Security on contractual claims and receivables is usually created either by way of a pledge, as part of a pledge on a commercial business, or as far as bank account receivables and certain other financial claims are concerned, by way of a security assignment. Silent pledges, i.e. pledges without any notification to the underlying debtors, are valid and it is not uncommon that parties agree that the pledgor shall also collect the pledged receivables until further notice. However, as long as the debtor is not notified or has no knowledge of the pledge (or assignment), the security will not be enforceable against it or against any bona fide creditors with a concurrent right over the same receivable (such as other pledgees or assignees). Once the security is notified or acknowledged, the debtor can no longer be discharged by making payment to the pledgor (or assignor), unless otherwise agreed. Upon notification or acknowledgment, the pledgee (or assignee) will be able to invoke its security against the bona fide creditors of the pledgor (or assignor) who have received payment from a bona fide debtor. Despite any notification or acknowledgment, the bona fide debtor will still be entitled to invoke against the pledgee (or assignee) any prior general defences available to it in relation to the pledged (or assigned) receivable. If a receivable has been pledged or assigned to several persons, the rights of the person whose interest is notified
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or acknowledged first will prevail. The same principles apply to security assignments of bank accounts.
each originally signed credit agreement or pledge agreement, if executed in Belgium.
The notification to the debtor is not subject to any specific formality. However, notice is usually given by registered mail, with an acknowledgment of receipt. There is no need for disclosing the security agreement itself, but rather only its existence.
In particular, in order to register a mortgage, a notarial deed is required to be filed with the tax authorities, triggering a 1% registration duty on the amount secured by the mortgage. In addition, mortgage inscription fees of 0.3% and notary’s fees, calculated on a fixed sliding scale according to the amount of the mortgage, will be payable. As a guideline, the total cost for creating and perfecting a mortgage will amount to approximately 1.4% to 1.5% of the amount secured by the mortgage. A pledge on a commercial business is created by a deed drawn up by a notary public or by private agreement. When perfecting a pledge on a commercial business, a registration tax of 0.5% will be due on the amount secured by the pledge on the commercial business, as well as notary’s fees (if applicable) and the mortgage keeper’s fees.
It is generally accepted that a security interest can extend to future receivables, provided they are identified or sufficiently identifiable at the time the security agreement is entered into. Contract terms may restrict the assignability of receivables. Finally, it is noted that as of the entry into force of the new Act, a perfected receivables pledge can also be realised by way of registration (and thus without the need to notify or obtain acknowledgement by the debtor). The creation of a perfected “possessory” pledge of receivables (i.e. a pledge that is not registered in the National Pledge Register) will as of then require that the pledgee has the right to notify the debtors of the pledge, which may be subject to certain contractual triggers such as the occurrence of an event of default. 2.4
Can security be taken over cash deposited in bank accounts? Briefly, what is the procedure?
A lender can have the benefit of (i) a pledge on bank accounts (more precisely, a pledge on the pledgor’s claims for repayment of the credit balance on the bank account from time to time), or (ii) a security assignment of bank accounts. There are no specific formalities as to the creation of a pledge or security assignment of bank accounts in addition to what is explained under question 2.3 above. Bank accounts can also be part of a pledge on a commercial business. Pledgees (or assignees) of bank accounts will typically seek the consent of the account-providing banks to waive any contractually agreed set-off or similar rights in connection with the accounts. If not, these will prevail over the pledgee’s (or assignee’s) rights. 2.5
Can security be taken over shares in companies incorporated in Belgium? Are the shares in certificated form? Briefly, what is the procedure?
Security on shares can be created by way of a pledge or by way of a security assignment. A Belgian project company will normally issue registered (op naam/nominative) shares, which are registered in the share register of the Belgian company. The creation and perfection of a pledge on shares requires an agreement between the pledgor and pledgee. No notarial deed is required. For registered shares, the pledge should be entered in the share register of the company. There are no specific or formal requirements regarding the wording of such an entry in the share register, although it should clearly identify the pledgee and the date of the pledge for ranking purposes. Security over dematerialised or indirectly held book-entry shares requires the crediting of these shares to a special pledge account. 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)?
In general, a nominal stamp duty of (usually) EUR 0.15 applies to
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Loyens & Loeff
For mortgages and pledges on the commercial business, the taxes and fees will depend on the amount secured. In order to reduce the burden of registration duties, as well as notary’s and mortgage keeper’s fees, the parties may agree to only take a mortgage or pledge on commercial business for a certain percentage of the loan to be secured and to grant a mandate for the balance. A mortgage mandate will allow the beneficiary to vest a mortgage for this balance at any time he deems fit, and only at such time will the 1% registration duty and 0.3% mortgage inscription duties be due. The same applies for a pledge on a commercial business mandate, in which case the 0.5% registration duty will only become due upon vesting the pledge on the commercial business. However, the mandate does not, by itself, confer a security right. Security for the increased amount will only be created, perfected, and take rank, when the mortgage deed or pledge on the commercial business is executed and filed with the relevant mortgage keeper’s office. Suspect or hardening period issues can arise at such time. Registration duties under the new Act are not yet known. 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?
For immovable property, it will take approximately three to four weeks to create a mortgage. This period includes an obligatory twelve-day period for the notary public to confirm with the tax authorities and the social security office whether there are any outstanding direct or indirect tax and social security liabilities due. Prior lien searches can take from one week up to one month depending on the location of the property or business. For movable property no notarial deed is required and security can be created by private agreement. Security over movable assets can generally be immediately perfected. The perfection of a pledge on a commercial business may take about a week. 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.?
In general, no regulatory consent is required with respect to the creation of a security over real property. Exceptions may apply, however, if the real property is owned and/or governed by (semi-) public authorities (e.g. real estate on public domain by means of concession). We also note that several plots of land in Belgium, which were previously owned by government entities and sold off to companies
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over time, are encumbered by pre-emption rights by those government entities. These pre-emption rights could be exercised upon subsequent sales or granting of rights in rem on such properties.
3 Security Trustee 3.1
Regardless of whether Belgium 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?
With the exception of pledges on securities, bank accounts and certain other types of financial collateral, which can be granted to a security agent under Article 5 of the Belgian Financial Collateral Act, the prevailing view in Belgium is that security can only be granted to creditors acting in their own right, and not to representatives. Parallel debt structures are widely applied, although there is no case law yet on this subject. A security created in favour of a parallel debt will not, however, confer any right in rem on the underlying lenders and the lenders will not be able to realise that security other than through the intermediary of the security agent, as holder of the parallel debt. Upon realisation, the lenders will only have a contractual claim against the security agent for the remittance of any proceeds. The new Act referred to in question 2.1 above includes a provision which will make it possible to grant security on movable assets to representatives. 3.2
If a security trust is not recognised in Belgium, 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?
Belgium duration of the actual sale proceedings may also be influenced by applicable environmental law (e.g. in the case of soil contamination). As regards former public domain property, on which the relevant public authority has granted rights in rem, the enforcement of the security interest will be subject to the conditions imposed by that public authority at the time of the granting of such security interest. Unless otherwise agreed, a pledgee of securities, bank accounts or other financial collateral, is entitled, without prior court approval or even prior notification, to foreclose on the collateral by selling it and applying the proceeds thereof to the secured obligations. The proceeds should be applied first to any interest payable and subsequently to any remaining principal amount. Provided that the parties agreed thereto, a pledgee may also appropriate the collateral in accordance with the valuation rules and procedures agreed between parties. No such appropriation is permitted if such valuation rules and procedures have not been agreed. The sale must not be conducted by public auction and the parties do not need to wait until any additional time period has elapsed. Assignees of securities, bank accounts or other financial collateral can apply the value thereof to the secured liabilities, having regard to the agreed eligibility and valuation rules. The courts have the right to verify whether the conditions for realisation of the collateral and the agreed valuation rules have been properly adhered to. If the pledgee wishes to foreclose on a pledge on a commercial business or assets that are not securities, bank accounts or other financial collateral, it must seek a prior court order. Nevertheless, a pledgee will have the right to collect payments under any pledged receivables, as explained above. The new Act referred to in question 2.1 above provides for a private sale and/or appropriation of pledged assets outside court. Accordingly, more flexible enforcement mechanisms will be available under the new law. In particular, in the event of a payment default, the new Act allows for immediate enforcement of a pledge, without prior court approval, if the pledgor is not a consumer. Prior notification to the debtor and the other pledgees is required. 4.2
Do restrictions apply to foreign investors or creditors in the event of foreclosure on the project and related companies?
Please see question 3.1 above. No specific restrictions apply to foreign investors.
4 Enforcement of Security 5 Bankruptcy and Restructuring Proceedings 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?
When enforcing a mortgage over real estate, a notary public will be appointed by the court and charged with effecting the sale (generally by public auction or, exceptionally, by private sale). There is nothing to prevent the secured creditor from bidding at the auction, although setting off the secured liabilities against the sale price is, in principle, not allowed, unless stated otherwise in the sale conditions as drafted by the notary public. Generally, a mortgage can be foreclosed within approximately two to three months. However, the length of time will depend on the debtor’s attitude and the court’s duties (attachment proceedings, opposition proceedings by the debtor, proceedings on the merits of the case). Further, the
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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?
An intervening bankruptcy judgment or an application by the project company for judicial reorganisation will delay and impact the enforcement of security since they have the effect of suspending the enforcement rights of individual creditors for debts incurred before the judgment. However: (a)
the enforcement of pledges or security assignments of financial collateral (such as securities) will not be affected by bankruptcy or judicial reorganisation proceedings, with the exception of, in case of judicial reorganisation, a pledge over bank account(s), which can only be enforced if there is a payment default or if it is granted to secure derivatives transactions. In case there is no payment default or in case the pledge is not granted to secure derivatives transactions,
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(b)
(c)
5.2
for creditors holding security interests on specific movable assets and for mortgagees, any suspension of enforcement under bankruptcy will usually be limited up to the closing of the first minutes of the verification of the claims by the trustee in bankruptcy, but could, at the request of such trustee, be extended by up to one year from the bankruptcy judgment (it is disputed whether such suspension also applies to a first-ranking mortgagee who already initiated enforcement proceedings prior to the opening of the bankruptcy); and pledges on receivables which have been specifically pledged to the benefit of third parties will not be affected by a judicial reorganisation. Are there any preference periods, clawback rights or other preferential creditors’ rights (e.g. tax debts, employees’ claims) with respect to the security?
As regards the ranking of claims, in general, only court costs for administering the enforcement/insolvency procedure will prevail over the rights of secured creditors. Certain acts must (automatic clawback events) or can (discretionary clawback events) be declared unenforceable if they were done by the company after it had already ceased payments, e.g. during the “suspect period”, which can be backdated by court order up to six months before the date of the initial bankruptcy order. Automatic clawback events include (i) gifts and undervalued contracts (including security interests without consideration or a waiver of rights), (ii) payments of undue debts (including waiver of payments or payment terms), (iii) payments in kind of due debts (including assignment of receivables, delegations), and (iv) any security interest granted for previous debts. Discretionary clawback events include (i) a mortgage, validly granted before the suspect period but registered during the suspect period more than 15 days after the signature of the agreement, (ii) any other transactions for valuable consideration if they take place during the suspect period and if the third party was aware of the cessation of payments of the company, and (iii) any acts or payments, whenever performed, that are fraudulent and to the detriment of the creditors (actio pauliana). The Financial Collateral Law has adopted certain overriding exceptions to the clawback regime with respect to netting agreements and security over securities, bank accounts or other financial collateral. 5.3
Are there any entities that are excluded from bankruptcy proceedings and, if so, what is the applicable legislation?
Public authorities are excluded from bankruptcy proceedings, as are non-commercial companies and individuals who are not merchants. Civil corporations with a commercial form can, like commercial companies, enter into a procedure of judicial reorganisation. Individuals who are not merchants can apply for a collective debt restructuring. 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 explained under question 5.1, point (a), pledges or security assignments of securities, bank accounts or other financial
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collateral will not be affected by the opening of bankruptcy proceedings (subject to conditions mentioned under question 5.1, point (a)) and can thus be enforced immediately either by selling or appropriating the collateral in accordance with the valuation rules and procedures agreed between the parties. For other assets, a creditor must go to court to obtain an enforceable title. Notarial deeds, however, also qualify as an enforceable title to the extent the notarial deed clearly identifies the amount of the debt due at each point in time. The new Act referred to in question 2.1 above provides for a private sale and/or appropriation of pledged assets outside court. Accordingly, more flexible enforcement mechanisms will be available under the new law. 5.5
Belgium
the enforcement will be suspended by the judicial reorganisation. Any sale of securities might be subject to limitations in the articles of association or by contract, which can cause delays;
Belgium
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?
Except for formal insolvency proceedings such as bankruptcy and judicial reorganisation, a project company in distress can enter into an amicable arrangement with two or more of its creditors. To the extent the amicable arrangement (i) has been agreed upon for the purpose of remedying the company’s financial situation or reorganising the company, and (ii) has been filed with the relevant commercial court, the amicable arrangement and its implementation will be protected against certain Belgian law clawback rules that could otherwise apply if the company is subsequently declared bankrupt. These clawback provisions include payments of undue debts, payments in kind of due debts and acts or payments whereby the third party was aware of the cessation of payments of the company. 5.6
Please briefly describe the liabilities of directors (if any) for continuing to trade whilst a company is in financial difficulties in Belgium.
In general, although the unjustified pursuit of a loss-making activity, or the conducting of a commercial activity without having the required financial means, has given rise to liability in the past, there is no obligation to put an end to the activity when the company faces financial difficulties, provided it has a reasonable chance of avoiding bankruptcy. If no such chance exists, the court might consider the continuation of the activity negligent and consequently hold the directors liable. If the chances of recovery appear unreservedly weak, and improvement of the financial situation cannot be reasonably expected, directors must either file for bankruptcy or resort to measures which will avoid bankruptcy, having considered both the company’s and the creditors’ interest. In case the net assets of NV/SA or BVBA/SPRL fall below 50% of its share capital, a general shareholder meeting needs to be held within two months. Before such general meeting, the board of directors needs to present a report to the shareholders proposing measures for repairing the company’s financial situation. If no such meeting is held or no such report is presented, directors may be held jointly and severally liable to the company and to third parties for all damages resulting from the failure to hold such meeting or present such report. The court has the discretionary competence to order the directors jointly or individually to pay part or all of the liabilities. Directors may also be held liable for tax prepayments, VAT or social security payments if the failure to pay such tax prepayments, VAT or social security payments was due to a fault in the performance of their management tasks.
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6 Foreign Investment and Ownership Restrictions
Belgium
7 Government Approvals/Restrictions 7.1
Belgium
6.1
Are there any restrictions, controls, fees and/or taxes on foreign ownership of a project company?
Under Belgian law there are in general no restrictions, controls, fees and/or taxes which are applicable to foreign ownership of a project company located in Belgium. On the contrary, Belgium encourages foreign investors to invest in Belgian companies by means of incentives, grants, subsidies, etc.
Under the influence of the European Union’s liberalisation and free market policy, Belgium has allowed the private sector to become involved in public utilities. Various industries have been privatised and/or liberalised, for example the electricity sector, telecommunications, public transport and postal services.
However, it should be noted that a foreign entity will be subject to the Belgian anti-money laundering legislation set out in the Belgian law of 11 January 1993 on preventing the use of the financial system for money laundering and financing terrorist activities, as well as criminal liability of money laundering under Article 505 of the Belgian Criminal Code. As such, foreign investors will be required to provide certain “know your customer” information.
Many variables, such as the project sector and the location, will determine which government agencies need to be consulted in relation to a given project. For instance, in the energy sector a rather complex division of rules, regulations and regulators exists between the federal and regional authorities.
6.2
Are there any bilateral investment treaties (or other international treaties) that would provide protection from such restrictions?
Belgium is part of the Belgo-Luxembourg Economic Union (BLEU), which has signed approximately 80 bilateral investment agreements with countries around the world (e.g. India, China, Thailand, United Arab Emirates) in order to promote and protect investments. These agreements guarantee the fair and equitable treatment of the investors’ investments, stipulate an obligation to compensate in case of expropriation, guarantee the free transfer of income and create a legal framework for resolving investment disputes and for using international arbitration systems. They also include numerous social and environmental provisions. Belgian and EU merger control rules could apply, meaning that certain transactions that constitute a “concentration” and that exceed certain jurisdictional turnover thresholds must be notified to either the Belgian Competition Authority or the European Commission. 6.3
What laws exist regarding the nationalisation or expropriation of project companies and assets? Are any forms of investment specially protected?
Generally speaking, no legislation exists in Belgium with respect to nationalisation of project companies. As such, the Belgian government cannot decide to nationalise foreign-owned Belgian companies. We refer, however, to the superseding bilateral investment treaties in question 6.2. As regards expropriation, Article 16 of the Belgian Constitution states that expropriation (of an individual’s or a company’s assets) is allowed, if the expropriation is (i) done for reasons of public interest, (ii) done according to due process of law, (iii) subject to prior compensation, i.e. before the actual expropriation, and (iv) accompanied by the payment of adequate, effective and prompt compensation.
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What are the relevant government agencies or departments with authority over projects in the typical project sectors?
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For example, the federal government is responsible for the transmission of electricity at high voltage, whereas the three regional governments are responsible for the local transmission of electricity at 70 kilovolts or less. CREG is the federal energy regulator and VREG, CWape and BRUGEL are the regional energy regulators in Flanders, Wallonia and Brussels respectively. 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?
In principle, there are no substantial requirements for the legal documentation to be filed, notarised or registered. With respect to the financing agreements and mortgages, please refer to section 2. Any transfer of real estate must be done through notarial deed, which will need to be registered at the mortgage registry and will trigger registration duties (10% in Flanders, 12.5% in Brussels and the Walloon Region). Reduced duties are available under certain conditions. If the building is considered a new building, VAT will be applicable. Traditionally these costs are borne by the buyer. With respect to project documents, construction contracts, electricity contracts and the like, the Belgian market has not yet developed a standardised contract although FIDIC based contracts and DBFM contracts are increasingly being used in the Belgian market, with the Flemish PPP Knowledge Centre pushing for uniformity on the latter. There is no general regulatory framework for PPP contracts under Belgian law. The Flemish PPP Knowledge Centre has however published a DBFM manual, containing clauses for DBFM contracts under Belgian law. This manual is nonbinding, but is an authoritative tool for government entities, contractors and investors. For government entities, a public tender process, governed by the public procurement rules, implemented by Directives 2004/17 and 2004/18 and which entered into force on 1 July 2013, is required. General terms and conditions for contracts with government entities will apply (GTC) which are set out in the annex to the Royal Decree dated 14 January 2013. Contracting authorities are allowed to derogate from the GTC under certain conditions.
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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)?
Depending on its nature, the size of the project, its location, the environmental and town planning impact, and whether the investor is a government agency or private party, a project may require a number of licences, permits and consents at the federal, regional (Brussels, Flanders, Wallonia), provincial and/or municipal level. For energy projects, the federal or regional laws and regulations also provide for certain requirements. Procurement laws and European Regulations apply to public sector projects, depending on their size. Please refer to question 7.9 for further details of the permits required under environmental, health and safety laws. Foreign investments are not subject to stricter approval requirements than domestic investments. 7.4
Are there any royalties, restrictions, fees and/or taxes payable on the extraction or export of natural resources?
In general, there are no export duties on the export of natural resources. The extraction of natural resources might be subject to municipal, provincial or regional taxes depending on the type of resource, the location and potential harm to the environment. 7.5
Are there any restrictions, controls, fees and/or taxes on foreign currency exchange?
As Belgium is a member of the IMF, Article VIII, section 2 of the IMF’s Articles of Agreement applies, which prohibits currency restrictions that do not have the prior approval of the IMF. For now, Belgium has not requested any exemption from that rule. We note that financial institutions may impose fees on currency exchanges and anti-money laundering rules may apply. 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?
There are no restrictions under Belgian corporate legislation as to the remittance and repatriation of investment returns or loan payments. As a general tax rule, dividend and interest withholding tax applies at the rate of 25%, but there are exemptions available (subject to the conditions set forth being met) for companies established in EU and tax treaty countries. Belgium recently introduced a 5:1 thin cap rule for intragroup financing (there is an exemption inter alia for loans granted by financial institutions and in relation to PPP projects which are compliant with public procurement rules). 7.7
Can project companies establish and maintain onshore foreign currency accounts and/or offshore accounts in other jurisdictions?
Project companies can open onshore and offshore accounts. The project company will, however, have to provide its annual accounts in Euro and conversion rates will need to be applied on a daily basis when logging entries in the accounting system.
Belgium 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 Belgium or abroad?
In general, the shareholders of a Belgian company can freely allocate the profits and available reserves reflected in its last approved annual accounts. However, no dividend distribution can be made, i.e. 5% of the annual net profits of a Belgian SA/NV company must be allocated to the legal reserve until the latter is equal to 10% of the share capital of the company. It cannot be used for the distribution of dividends, nor can dividends be distributed, if to do so would cause the company’s net assets to drop below the amount of its share capital, including the blocked reserves.
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In addition, distribution restrictions may also be inserted in the articles of association of the company. Finally, it must be noted that certain legal scholars and some case law have taken the view that a dividend distribution can only occur if such distribution would not be detrimental to the company, or would not have a negative effect on the corporate interest. 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?
The three regions (the Flemish, Walloon and Brussels Capital Region) have jurisdiction over environmental matters, except for product standards, the protection of the maritime environment, and the transit of waste and radiation protection which remain under federal jurisdiction. All three regions have adopted their own legislation to protect, maintain and manage the environment. Although EU environmental law tends towards harmonisation, there are differences in environmental law between the three regions, particularly with respect to soil pollution. For instance, in Flanders and Brussels, but not Wallonia, the transfer of real estate must, in principle, be preceded by a soil survey when hazardous activities have taken place on the site. The federal government has jurisdiction on health and safety matters. Building sites must comply with the requirements of the Health and Safety at Work Act dated 4 August 1996 and of the Royal Decree of 25 January 2001 on Mobile or Temporary Sites. This legislation requires a safety coordinator to be appointed for each building site above a certain size. The safety coordinator must draw up a health and safety plan prior to the start of the building works. During the works, he or she must submit regular reports on the health and safety aspects and must ensure that the health and safety rules are followed to protect the employees, the subcontractors and any third parties present on the site. When the site’s works are completed, he or she deposits a “postintervention file”, containing a set of plans and information on the structural elements of the building and the specifications of the products and materials used. If the project is being executed by a chain of contractors and subcontractors who fail to pay the minimum regulatory salary to the employees, the project company or the contractor can be held jointly liable for the payment of the salary and social security contributions thereon. 7.10 Is there any specific legal/statutory framework for procurement by project companies?
In order to avoid any confusion, a distinction must be made between:
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PPPs of a purely contractual nature, in which the partnership between the public and the private sector is based solely on contractual provisions, such as the award of a DBFM agreement by the contracting authority to the private partner; and PPPs of an institutional nature, involving cooperation between the public and the private sector with a distinct entity. In the first case, when the contract is subject to the public procurement rules, these rules must apply. In the second case, if the assignment awarded to the entity is a public contract fully covered by the public procurement rules, the procedure for selecting the private partner of this institutionalised PPP is determined by those rules. For both kinds of PPP, if the public procurement rules do not apply, equal treatment is a general principle which requires that the award of the contract/the choice of the private partner will take place through a competitive and transparent process. Besides PPPs, project companies may also need to take public procurement rules into account in certain specific instances defined by law. For example, a project company for an offshore wind park can only obtain a (partial) financing for the installation of a submarine cable on the basis of tender prices obtained by applying public procurement rules.
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?
Belgium conditions must be fulfilled. An employment authorisation and work permit are usually granted in two to four weeks.
10
10.1 Are there any restrictions, controls, fees and/or taxes on importing project equipment or equipment used by construction contractors?
Goods entering the European Union from third countries will, in principle, be subject to both import taxes and customs controls (phytosanitary controls, export controls, REACH controls, etc.). Depending on the type of goods, the import of goods in Belgium will trigger import duties, agricultural levies, excise duties and VAT. In specific cases goods may also be subject to antidumping, countervailing duties or quotas. The applicable import duty tariffs will depend on the type of product (classification) and the origin of the product. Under certain circumstances, importers may apply for duty suspension regimes. Contractors who temporarily import equipment into the EU can, for example, rely upon the temporary importation regime which suspends the payment of duties and VAT. 10.2 If so, what import duties are payable and are exceptions available?
See question 10.1 above.
11 As a general rule there are no restrictions on insurance policies provided by foreign insurance companies for project assets. However, for insurance companies established in a Member State of the European Economic Area, it is required that the regulatory authorities of their home State submit a file with certain data to the Belgian regulator. An insurance company established outside the European Economic Area needs to obtain authorisation from the Belgian regulatory authority. 8.2
Are insurance policies over project assets payable to foreign (secured) creditors?
Yes. Insurance policies over project assets may be payable to 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?
Before a project company can employ foreign workers (non EEA nationals), it must apply for an employment authorisation. Once this is granted, the employee will receive a work permit. Subsequently, the employee must obtain a valid residence permit to reside in Belgium for more than 90 days. The project company must apply for the employment authorisation and work permit with the relevant immigration service. The application file must contain a series of documents and, depending on the category of employee (technician, executive), several
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Equipment Import Restrictions
Force Majeure
11.1 Are force majeure exclusions available and enforceable?
Pursuant to Articles 1147 and 1148 of the Civil Code, a debtor cannot be condemned to pay damages for a breach of contract, if such breach is the result of force majeure or cas fortuit (and is thus not attributable to such debtor). Since the matter is not considered to be one of public order, the parties may, in principle, freely exclude or agree on the scope of force majeure (e.g. by determining the events that will be deemed to constitute force majeure) and the consequences thereof.
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?
The Belgian Criminal Code contains provisions prohibiting active or passive corruption/bribery of public officials and private individuals. Active or passive corruption of public officials (Article 246 of the Criminal Code) is committed when a person exercising a public office receives from another person (active corruption, committed by the latter), or solicits or accepts (passive corruption), a direct or indirect proposal to commit or omit a deed which is part of his/her function, or is facilitated by his/her public office. Such corruption is punishable by fines and/or imprisonment, and such penalties are increased if active corruption is followed by passive corruption.
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There is corruption of a private individual (Article 504bis of the Criminal Code) if a person exercising a position in a private legal entity (director/manager), or a representative or agent of a natural person or private legal entity, receives from another person (active corruption, committed by the latter) or solicits or accepts (passive corruption) a proposal/promise/advantage, for his/her own benefit or for that of a third party, to commit or omit a deed which is part of his/her office or is facilitated by such office, without the knowledge or permission of the relevant body or person (board of directors, general meeting of shareholders, employer, etc.). Such corruption is punished by fines and/or imprisonment, and such penalties are increased if active corruption is followed by passive corruption.
13
Project agreements are typically governed by Belgian law. 13.2 What law typically governs financing agreements?
Belgian law or English law typically govern loan and inter-creditor documents. Security documents are governed by local law. 13.3 What matters are typically governed by domestic law?
Practice shows that the majority of matters are governed by Belgian law, including security, rights in rem, permits and project documents.
Jurisdiction and Waiver of Immunity
14.1 Is a party’s submission to a foreign jurisdiction and waiver of immunity legally binding and enforceable?
In general, a Belgian company can submit to the jurisdiction of Belgian or foreign courts, although such submission may be limited, inter alia, by the rules on exclusive jurisdiction set out in the Brussels I and Ibis Regulations (the latter is already in force but will only apply to proceedings within the EU from 10 January 2015) and, in case of a submission to a non-EU Member State jurisdiction, may be denied if there is no close connection to the case at hand and a hearing in such country appears impossible or unreasonable. In the absence of any bilateral or multilateral treaty, an enforceable judgment of a court of a non-EU Member State will, in principle, be recognised and declared enforceable in Belgium. However, the Belgian courts do have the authority to verify whether the merits of the case meet certain minimum standards.
15
In the case of a valid arbitration agreement, a Belgian court will need to declare that it has no jurisdiction, but it cannot do so on its own initiative. The argument of absence of jurisdiction must be raised by a defendant in limine litis. An arbitral award is not immediately enforceable, and, in the first instance, the unsuccessful claimant or defendant must be given the opportunity to comply with the arbitral award voluntarily. If that does not happen, separate proceedings before a judicial court to enforce the arbitral award are required. 15.2 Is Belgium a contracting state to the New York Convention or other prominent dispute resolution conventions?
Applicable Law
13.1 What law typically governs project agreements?
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International Arbitration
15.1 Are contractual provisions requiring submission of disputes to international arbitration and arbitral awards recognised by local courts?
Belgium is a member of the ICSID Convention and a contracting state to the New York Convention, to which it has made the following reservation: “this State will apply the Convention only to recognition and enforcement of awards made in the territory of another contracting State”. 15.3 Are any types of disputes not arbitrable under local law?
Belgian public entities are in principle only allowed to agree to an arbitration clause if it relates to the settlement of disputes with regard to the formation or performance of contracts (and thus not with regard to their interpretation or validity). Unless prohibited by special law, public legal entities may conclude arbitration agreements in relation to (i) the conclusion and performance of contracts, and (ii) all other matters defined by law or by royal decree (Article 1676, 2, §2 of the Judicial Code). Concerning employment contracts, Article 1676, §5 of the Judicial Code states that an arbitration agreement concluded prior to any dispute that falls under the jurisdiction of a Labour Court will automatically be null and void (see Article 13 Law of 3 July 1978 concerning employment contracts). However, an arbitration agreement is always possible and valid when it concerns an employee whose annual salary exceeds EUR 65,771 (indexed amount for 2014). Furthermore, an arbitration agreement may be concluded, and is fully valid once the dispute has arisen. The above is also applicable to insurance contracts. A clause stating that the parties to an insurance contract undertake to submit disputes which may arise from the contract to an arbitral tribunal, is considered to be null and void. The parties may only agree to arbitration when the dispute has already arisen (Article 36 §1 of the Law of 25 June 1992 on insurance contracts. This rule does not apply in certain situations; see Royal Decree of 24 December 1992). In addition, arbitration agreements are not admissible in the case of disputes with regard to exclusive distribution agreements of indefinite duration and consumer contracts. 15.4 Are any types of disputes subject to mandatory domestic arbitration proceedings?
No, no types of disputes are subject to such proceedings.
In general, disputes are arbitrable (i) if they are capable of being resolved by settlement, and (ii) if arbitration is not prohibited by law. This typically relates, however, to disputes concerning nationality, parental authority, marriage and prosecution.
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Belgium
16
Change of Law / Political Risk
18
Other Matters
16.1 Has there been any call for political risk protections such as direct agreements with central government or political risk guarantees?
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 Belgium?
Not to our knowledge. According to the website of the Belgian export credit agency, political risk is given the lowest score on their colour code.
Governmental authorities will require that PPP transactions are ESA95/ESA2010-neutral (Eurostat, European System of Accounts – ESA 1995/ESA2010) (IPSAS are not applicable to Belgian federal and regional accounts). If a government guarantee is being considered, it will in principle be taken into account to determine the ESR neutrality (i.e. risk allocation assessment).
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?
Interest is, as a general rule, subject to 25% withholding tax. Exemptions are, however, provided by some of the major tax treaties entered into by Belgium (UK, Germany, Netherlands, Luxembourg, USA) and by domestic law. In this respect it is worthwhile to mention that dividends paid to foreign pension funds that are not subject to tax in their state of residence, interest paid to credit institutions established in a treaty country as well as interest paid on registered bonds subscribed by non-residents, subject to certain conditions (which is the preferred financing for some institutional fund providers), all benefit from a withholding tax exemption in accordance with domestic provisions. N.B. Upon a sale of real estate (by enforcement of a mortgage or otherwise), registration duties will be due. See question 7.2, third paragraph. 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?
Foreign creditors may benefit from various withholding tax exemptions on Belgian source interest (see question 17.1 above). Foreign corporate investors should be entitled to benefit from repatriation without tax leakage due to the extension of the dividend withholding tax exemption contained in the Parent-Subsidiary Directive, to all treaty countries (subject to the same conditions). Foreign pension funds usually also benefit from a dividend withholding tax exemption under Belgian domestic law. At project level, the Belgian tax burden may be further reduced under the notional interest deduction, the investment deduction (depending on the asset concerned – mainly for renewable energy projects) and the deduction of interest charge. With respect to the last of these, please note that arm’s length interest is, as a rule, deductible; intragroup interest must comply with the Belgian thin capitalisation rule, which provides for a favourable 5:1 debt-to-equity ratio. This thin capitalisation rule does not, however, apply to PPPs if the public procurement rules are complied with. Mortgages are costly as they are subject to 1% registration duties and 0.3% mortgage tax calculated on the amount secured. The same registration duties apply in case a mortgage is transferred further to the transfer of the underlying receivable in the absence of adequate structuring at the moment the mortgage is granted.
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In order to benefit from the exception to the 5:1 thin capitalisation rule, the public procurement rules must be complied with. Another legal issue relates to the creation of rights in rem, such as long-term leases or rights to build, in the public domain. In the Flemish region, the Decree on PPPs of 18 July 2003 allows for the creation of such rights under certain conditions. 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.
There are no specific legal impositions with respect to the issuance of ordinary bonds by Belgian limited liability companies, aside from the fact that (i) the decision to issue the bonds must be made by the board of directors/managers, and (ii) there should be at least two genuine bondholders. The issuance of equity instruments/kickers, such as convertible bonds and warrants, which can only be issued by a Belgian public limited liability company (naamloze vennootschap/société anonyme), on the other hand, is subject to stringent rules. Finally, if a Belgian company wants to offer regular bonds or equity instruments by means of a public offering, the rules set out in the law of 16 June 2006, which implements the European Prospectus Directive, will apply. This law also permits non-compliance with the prospectus requirements under the private placement exemptions.
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 Belgium.
This is not applicable. 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?
This is not applicable.
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Belgium
This is not applicable.
Acknowledgment The authors would like to acknowledge the assistance of their colleagues Stephanie Blommaert, Ariane Brohez, Thomas Chellingsworth, Stefaan Deckmyn, Linde Dedrie, Bert Gevers, Eveline Hellebuyck, Pelin Ildeniz, Julien Lecler, Dirk Slagmolen, Ahmed Tayane, Robbert Jacobs and France Vlassembrouck in writing this chapter, with a particular word of thanks to Koen Panis who gave much valuable help in its preparation.
Marc Vermylen
Christophe Laurent
Loyens & Loeff Neerveldstraat 101-103 1200 Brussels Belgium
Loyens & Loeff Neerveldstraat 101-103 1200 Brussels Belgium
Tel: Fax: Email: URL:
Tel: Fax: Email: URL:
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Marc Vermylen (1966), attorney-at-law, heads the Banking and Finance Practice Group in Belgium and the Benelux multidisciplinary Project Finance Team. He is one of the two members of the Belgian Management Team. Marc is particularly renowned for his expertise in the financing of large projects. In addition, he has in-depth experience in financial restructuring, secured financing, derivatives, clearing and settlement and securitisations. His clients include both investors and lenders.
Belgium
19.3 Could the inclusion of an interest payment obligation in a loan agreement affect its validity and/or enforceability in Belgium? If so, what steps could be taken to mitigate this risk?
+32 2 743 4305 +32 2 743 4340
[email protected]
www.loyensloeff.com
Christophe Laurent (1969), attorney-at-law, heads the Real Estate Practice Group in Belgium and is a member of the General Tax Practice Group. His field of expertise includes advising on all aspects of real estate investments in Belgium, as well as the tax aspects of structured finance and pre- and post-M&A tax restructuring.
Loyens & Loeff is the natural choice for a legal and tax partner if you do business in or from the Netherlands, Belgium and Luxembourg, our home markets. You can count on personal advice from any of the advisers based in one of our offices in the Benelux region or in key financial centres around the world. Thanks to our full-service practice, specific sector experience and thorough understanding of the market, our advisers comprehend exactly what you need. Our firm has the perfect blend of legal and tax expertise for project finance transactions. Our unique approach has made us a leading player in this rapidly developing market. Because we regularly act for lenders, borrowers and investors, our approach is multi-faceted and we are able to foresee potential questions and risks well in advance. This enables us to come to a balanced agreement for all parties.
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