Best Project Finance Lawyers in Bhutan

About Project Finance Law in Bhutan

Project finance is a method of funding large-scale infrastructure and industrial projects. In Bhutan, project finance is crucial for the development of sectors such as hydropower, renewable energy, roads, telecommunications, and tourism infrastructure. This approach generally involves raising funds to support a particular project, with repayments structured around the future cash flows of the project itself. Stakeholders may include banks, financiers, sponsors, developers, contractors, and government entities.

Bhutan’s growing focus on sustainable development and self-reliance has increased the importance of project finance. The nation encourages private sector involvement, foreign direct investment, and public-private partnerships (PPP) within the framework of environmental protection and the Gross National Happiness development philosophy.

Why You May Need a Lawyer

Project finance deals can be complex, involving numerous stakeholders, extensive documentation, and strict regulatory frameworks. You may need to consult a lawyer specializing in project finance in Bhutan for several reasons:

• Reviewing or drafting partnership, consortium, and financing agreements
• Ensuring compliance with local laws, including environmental regulations and permitting requirements
• Negotiating terms with lenders, sponsors, and government agencies
• Managing project risks, guarantees, and dispute resolution clauses
• Structuring investment to maximize tax efficiency and legal protection
• Conducting due diligence on project viability and legal risks
• Handling import-export law for materials and technology
• Facilitating foreign direct investment approval and licensing

A lawyer helps safeguard your interests, minimizes risks, and ensures your project adheres to local regulations from planning through execution and operation.

Local Laws Overview

Project finance in Bhutan is influenced by a range of local laws and policies. Here are some key aspects:

• Companies Act of Bhutan: Governs the formation, operation, and regulation of business entities including project companies and special purpose vehicles (SPVs).
• Foreign Direct Investment Policy: Regulates the participation of foreign investors and outlines approval procedures for foreign investments in large infrastructure projects.
• Public-Private Partnership Policy: Sets the framework for PPPs, including risk allocation, project selection, due diligence requirements, and contract management.
• Procurement Rules and Regulations: Detail the procedure for public procurement to ensure transparency and fairness in selecting contractors and suppliers.
• Land Act and Environmental Regulations: Projects may need land acquisition or environmental clearances. Compliance with environmental impact assessment (EIA) and other permits is often mandatory.
• Taxation Laws: Covers corporate taxation, import duties, and possible tax incentives for priority sectors.
• Financing and Collateral Laws: Laws regarding secured lending, including mortgages, charges on assets, and recognition of foreign securities.
• Dispute Resolution: Guidance on arbitration and litigation, often included as contractual provisions in project finance agreements.

Frequently Asked Questions

What is project finance, and how does it differ from corporate finance?

Project finance is funding based on the projected cash flows of a specific project rather than the balance sheet of the project sponsor. In contrast, corporate finance relies upon the overall assets and creditworthiness of the company. In project finance, lenders have recourse only to the project's assets and revenue.

Which sectors in Bhutan commonly use project finance?

Hydropower, renewable energy, road infrastructure, tourism facilities, and large-scale telecommunications projects frequently utilize project finance structures in Bhutan.

Can foreign investors participate in project finance projects in Bhutan?

Yes, Bhutan’s Foreign Direct Investment Policy allows foreign investors to participate in eligible sectors, subject to certain restrictions and approval processes.

What approvals are required for a project finance deal in Bhutan?

Approvals may include permits from relevant ministries, the National Environment Commission, the Ministry of Economic Affairs, and local authorities. FDI projects may also need clearance from the Foreign Direct Investment Division.

What security or collateral do lenders usually require?

Lenders may require security over project assets, revenue streams, land leases, and sometimes government guarantees or support letters, depending on the risk and value of the project.

What environmental and land regulations apply to project finance?

Projects must comply with the Land Act and obtain requisite leases or titles. Environmental clearance and EIA approval are usually necessary for infrastructure and energy projects.

How is revenue risk managed in Bhutanese project finance deals?

Revenue risks are often mitigated through long-term offtake agreements, supply contracts, and minimum revenue guarantees, as permitted by Bhutanese law and regulation.

Is arbitration available for resolving project finance disputes in Bhutan?

Arbitration is commonly adopted in project finance contracts, and Bhutan recognizes both domestic and certain international arbitration processes as dispute resolution methods.

What are the typical tax considerations for project finance vehicles?

Project companies may be eligible for sector-specific tax incentives. However, all income, import, and corporate taxes apply as per the Revenue and Customs laws unless exemptions are granted.

What role do government incentives play in project finance?

The government may offer incentives such as tax holidays, reduced import duties, or viability gap funding for priority projects, especially in the hydropower and renewable energy sectors.

Additional Resources

If you seek more information or need to engage with relevant authorities, consider the following resources:

• Ministry of Economic Affairs: Responsible for investment promotion, energy, and industry regulation
• Directorate of Services for Public-Private Partnership
• Bhutan Chamber of Commerce and Industry
• National Environment Commission
• Royal Monetary Authority of Bhutan
• Bhutan Power Corporation (for energy sector partnership)
• Bhutan Bar Council (for lists of licensed lawyers and legal professionals)

Next Steps

If you need legal assistance for a project finance matter in Bhutan, consider these steps:

• Clearly define the scope and scale of your project
• Identify potential project partners, stakeholders, and sources of funding
• Consult with a licensed lawyer who has specialized experience in project finance and Bhutanese law
• Prepare a summary of your objectives, planned structure, and any specific concerns or questions
• Work with your lawyer to conduct due diligence, draft and negotiate agreements, and ensure you meet all local regulatory and permitting requirements
• Monitor compliance through the project lifecycle and engage legal counsel promptly if any issues or disputes arise

Taking proactive steps with legal support can protect your interests and help ensure your project in Bhutan proceeds smoothly and successfully.