Thought leadership from our experts

The nature of project finance lawyers

Phillip Fletcher, Milbank, US

Over the last 30 years, I have had the good fortune to work on a broad range of project financings with many of the lawyers named in this guide. We have debated the nuances of stabilisation clauses in concession agreements, negotiated long-term offtake arrangements, argued over intricate financial and other covenants in term sheets, and struggled to implement untested collateral security packages across the globe. In doing so, we have been exposed to industrial markets as wide ranging as mining, liquefied natural gas, petrochemicals, satellites, and even nuclear power, and we have done all of this in cities as disperse as Tokyo, Bogota, and Sana'a as well as, of course, London and New York. Although not every lawyer embraces the breadth of challenges presented by the work we do, I have come to appreciate the characteristics that are common to those that do.

Project finance lawyers tend to relish travel and new experiences. We seem to be most at home and most frequently encounter each other at the British Airways lounge at Heathrow or the Captain's Bar at the Mandarin Oriental Hotel in Hong Kong. We are at our jolliest when invited to join a due diligence trip to a country never before visited. I claim 64 countries to date, although my colleagues challenge whether placing one foot ashore in Zambia whilst rafting on the Zambezi really qualifies. In many of these countries, I have called on the leading local law firms and frequently have been welcomed by them as a colleague. This has provided unique insights into local customs and practices – not to mention the comfort of knowing that these new colleagues afford a safety net for my children as they venture about the globe during gap years and holidays.

Project finance lawyers are a diverse group, drawn from a wide range of nationalities and backgrounds. In addition to being experienced commercial lawyers, most are sensitive to cross-cultural subtleties and able to converse in multiple languages. They are also able to assess economic and political issues with competence. If you need to know where to dine in Rio or what Indonesia's prospects for growth are, you can usually get a sensible view from a projects lawyer.

As project finance deals tend to take a long time to close, projects lawyers have ample opportunity to get know one another. Whether it be the 13 years invested in completing the financing of the Birecik hydroelectric facility in Turkey or the more modest six years for the Tapada IPP in Portugal, the process can be drawn out. Even when transactions reach financial close, there are invariably waivers, refinancings, and even restructurings to attend to for years to follow. Although the principals in a deal may change, often as a result of normal rotations in banks and other lending institutions or as the original developers sell down their equity interests, the identities of the lawyers generally remain static. Most of us have come to realise that a tactical victory over opposing counsel today may result in an intransigent response to an issue down the road when negotiating leverage may have shifted, and thus we tend to avoid grandstanding and belligerence, preferring to resolve issues over a quiet drink or dinner.

This group of lawyers has put a great deal of thought into our practice. There are two comprehensive texts, one edited by Graham Vinter for Smith & Maxwell and the other by my partner John Dewar for Oxford University Press. Other lawyers in this guide have contributed thoughtful articles to various legal and trade journals, and this has helped us develop a consensus as to how deals should be structured. Whether the question is how to draft sharia compliant financings or how to navigate the intricacies of intercreditor relations amongst bond holders, export credit agencies, and multilateral lenders, one can find guidance in the articles and texts addressing the issue.

A unique feature of our business is that most of the leading firms active in the field have at some stage been designated the 'Team of the Year' by at least one trade journal. When I am furnished credentials from one of those firms, the accolades that they recite tend to be familiar. The joy of being seen as the best at one awards dinner is usually closely followed by applauding the accomplishments of another at the next.

Although the identity of those at the pinnacle of our profession may change each year, our market as a whole is, however, remarkably stable. Clients tend to know which firms and lawyers know how to navigate the complexities of multisourced financings. They may, of course, tell us that their selection is based on the quality of our biscuits rather than the sophistication of our covenants, but, nonetheless, the most complicated deals tend to be placed into the hands of the most accomplished lawyers. And when we encounter new firms, whether international or local, the individual lawyers leading their teams are often alumni of one of the established project finance practices, and, as a consequence, their approach to deals is generally consistent. Our shared experiences and the stability in our ranks have done much to enable this group of lawyers to negotiate and document extraordinary deals, and the diverse and interesting nature of the individuals drawn to our profession helps make doing so an enjoyable experience.