LUXEMBOURG Law and Practice Contributed by: Andreas Heinzmann, Hawa Mahamoud and Eva Jean, GSK Stockmann
7.5 Risk Areas for Lenders A lender might incur certain risks related to the recov- ery of its rights against a security provider or a guar- antor in the process of insolvency. The transaction with the security provider or guarantor in the process of insolvency may be challenged by the appointed insolvency administrator. A conjectural cancellation could have one of the following legal consequences. If the transaction with the lender took place during the pre-bankruptcy suspect period (which is a period of six months and ten days preceding the opening of insolvency proceedings against the given security provider/guarantor), the court could, in theory, invali- date the transaction, if it is proved that the transaction took place while the parties were aware of the com- ing insolvency of the debtor. It is also possible that a creditor of the debtor might file an actio pauliana to challenge transactions that took place prior to the insolvency, irrespective of the suspect period, if the creditor can prove that it incurred damage, associated with the reduction of the estate of the insolvent debtor, and that the transaction took place in bad faith and deliberately to damage the creditor. The above-mentioned risks do not affect security rights obtained under the provisions of the Collateral Law. Project finance could be described as a technique for the design, financing, construction, management and exploitation of large infrastructure projects involving a promoter that sponsors and implements the financed project. The given project is typically financed through a legally and financially standalone project company (a special-purpose vehicle) with the promoter(s) being a strategic partner. Generally speaking, there is no specific legal frame- work governing project finance in Luxembourg. A financing may, however, be subject to a specific legal regime depending on the industry to which a given financed project would belong. Despite the forego- ing, the European Investment Bank (EIB) – being the largest multilateral financial institution in the world 8. Project Finance 8.1 Recent Project Finance Activity
and one of the largest providers of project finance, and having its headquarters in Luxembourg – and, more recently, the largest Chinese banks that set up their European hubs in Luxembourg, mainly focus on private sector and vital infrastructure development around the world, with a solid track record of financ- ing a variety of (infrastructure) projects focused on climate and the environment, development, innova- tion and skills, small and medium-sized businesses, infrastructure and cohesion. 8.2 Public-Private Partnership Transactions The concept of public-private partnership (PPP) com- monly refers to the use of private finance for infra- structure procurement and public service provision. Save for rules deriving from, among others, the Law of 8 April 2018 on public procurement, as amended, the Law of 3 July 2018 on concession contracts, building permits, environmental and health laws that should be taken into account in PPP transactions, there are nei- ther specific rules nor restrictions applicable to PPPs in Luxembourg. 8.3 Governing Law There is no statutory obligation which requires project documents to be governed by Luxembourg law. Thus, the parties are free to choose English or New York law as their governing law. Nevertheless, Luxembourg law has become more and more popular among financial participants. See also In principle, under Luxembourg law, there are no restrictions on the ability of foreign entities to have ownership rights on the surface and soil. It is also clear that such foreign companies can also have a lien thereon. It should, however, be noted that the legal title to natural resources is always held by the state. In this respect, should an entity discover the existence of natural resources it shall request a concession permit from the Luxembourg state. 8.5 Structuring Deals The main issues that should be considered when structuring a deal would strongly depend on the nature 1.3 The High-Yield Market . 8.4 Foreign Ownership
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