Best Project Finance Lawyers in Cuba

About Project Finance Law in Cuba

Project finance is a financial structure that enables the funding of large infrastructure or industrial projects using the anticipated cash flows from the project itself for repayment. This mechanism often relies on a combination of equity and non-recourse or limited recourse debt. In Cuba, project finance is particularly relevant for sectors such as renewable energy, tourism, transportation, telecommunications, and major public infrastructure developments.

The Cuban government maintains significant control and participation in most large-scale projects, often requiring collaboration with Cuban state entities or mixed enterprises. Foreign investment plays a vital role in project finance, and the legal framework in Cuba has been designed to encourage foreign capital in key economic areas while retaining state oversight and control.

Why You May Need a Lawyer

Project finance transactions in Cuba are complex and highly regulated. Legal counsel is frequently necessary to ensure all regulatory requirements are met, to protect your interests, and to manage risks associated with cross-border financing and partnerships with local entities. Here are some common situations when you may require legal advice in project finance:

• Structuring and negotiating joint venture or mixed enterprise agreements with Cuban state partners
• Diligence and compliance with Cuban investment laws and sector-specific regulations
• Drafting and reviewing contracts, such as construction, operation, concession, or supply agreements
• Securing government approvals, permits, and licenses
• Assessing and minimizing project risks, including political or regulatory risks
• Facilitating interactions with local authorities and resolving disputes
• Guidance on tax incentives, repatriation of profits, and currency exchange restrictions

Local Laws Overview

Cuban project finance is governed by a combination of domestic laws and bilateral agreements. The most notable legal instrument is Law No. 118 - the Foreign Investment Law - which provides the main legal basis for foreign participation in Cuban projects. This law outlines the forms of foreign investment permitted, the process for establishing joint ventures with Cuban entities, and the protections and guarantees offered to investors.

A few key aspects relevant to project finance in Cuba are:

• Foreign Investment Law: Allows for foreign investment through joint ventures, international economic association contracts, and wholly foreign-owned enterprises, subject to government approval.
• Government Approval: All project finance arrangements involving foreign entities must be approved by the Cuban Council of Ministers or another designated body. Approvals consider factors like strategic sector alignment and potential benefits to the Cuban economy.
• State Participation: State involvement is often mandatory for projects in strategic sectors, with Cuban state companies acting as key partners or shareholders.
• Currency Regulation: Foreign currency operations are closely monitored, and profit repatriation or capital transfers require compliance with regulatory procedures.
• Contractual Security: Contracts are enforceable under Cuban law, and investors are granted certain protections against expropriation or arbitrary changes in legal provisions, mainly through stabilisation clauses.
• Dispute Resolution: Parties can agree to resolve disputes through international arbitration, often stipulated in investment or financing contracts.

Frequently Asked Questions

What is project finance and how does it work in Cuba?

Project finance is a method of funding projects based on the projected cash flows of the project instead of the balance sheets of the sponsors. In Cuba, it usually involves the establishment of a joint venture with a Cuban state entity and securing financing based on the scope and expected revenues of the project.

Can foreign investors participate in project finance in Cuba?

Yes, foreign investors can participate in project finance deals, usually through joint ventures, international economic association contracts, or wholly foreign-owned subsidiaries, subject to governmental approval under the Foreign Investment Law.

What sectors are open to project finance in Cuba?

Key sectors include energy (especially renewables), tourism, infrastructure, transport, telecommunications, and agriculture. Some sectors are more open than others, and specific rules may apply depending on the project type.

What are the main steps for launching a project finance transaction in Cuba?

The main steps generally include identifying a local partner, performing due diligence, structuring the investment, negotiating contracts, securing government authorizations, arranging financing, and ensuring regulatory compliance.

What types of government approvals are required?

Project finance in Cuba requires approval from designated government bodies such as the Council of Ministers or sector-specific authorities. Approval processes evaluate the project’s potential benefits and compliance with Cuban law.

Is international arbitration available for dispute resolution?

Yes, parties can agree to resolve disputes through international arbitration, and this is common in project finance contracts with foreign investors to increase investor confidence.

How are profits and capital repatriated from Cuba?

Profits and capital can generally be repatriated, but must comply with Cuba’s currency exchange regulations and obtain authorization from the Cuban Central Bank or related authorities.

Are there any tax incentives for foreign-financed projects?

Yes, the law provides various tax incentives, including exemptions from profit tax and customs duties for initial investment periods, especially for projects considered of national interest.

What risks should investors consider?

Key risks include changes in Cuban law or regulations, limitations on currency conversions and transfers, potential delays in government approvals, and operational risks related to partnerships with state entities.

Can Cuban nationals participate in foreign-financed projects?

Cuban nationals are typically involved as employees or through state-owned entities. Direct private ownership by Cuban nationals in large project finance operations is rare and subject to strict regulation.

Additional Resources

For those seeking further information or legal advice on project finance in Cuba, the following resources can be valuable:

• Ministry of Foreign Trade and Investment (MINCEX): The principal government body overseeing foreign investment and project finance approvals.
• Special Economic Development Zone Mariel (ZED Mariel): Offers streamlined procedures and incentives for project finance within a key industrial zone.
• Chamber of Commerce of the Republic of Cuba: Provides guidance on foreign investment processes and potential project opportunities.
• Cuban Central Bank: Regulates foreign currency transactions and authorizations for financial operations.
• Local and International Law Firms: Firms with experience in Cuban project finance can facilitate each stage of the process, from structuring to dispute resolution.

Next Steps

If you are considering financing or investing in a project in Cuba, the following steps can help you move forward:

1. Define your project goals and identify potential Cuban counterparts or partners.
2. Consult with a qualified lawyer or law firm specializing in Cuban project finance. They can help clarify your options, outline the legal requirements, and assess project viability.
3. Gather and review the necessary documentation and perform due diligence on local partners and regulatory requirements.
4. Initiate a dialogue with relevant Cuban authorities to understand approval timelines and procedures.
5. Negotiate and draft contracts with the help of your legal advisor, ensuring that all rights and obligations are clearly defined and protected.
6. Secure government approvals and arrange project financing, taking care to comply with Cuban regulations.
7. Stay updated on legal developments in Cuba and seek ongoing legal advice during project implementation to minimize risks and address any regulatory changes.

Professional legal guidance is essential for anyone looking to navigate the complexities of project finance in Cuba. By securing expert advice early, you can maximize your chances of success and ensure compliance with all local laws.