CDM in Africa

1
CDM in Africa
The Legal Context

• Claude Brown
• Clifford Chance LLP

CBC 7th Annual Banking Financial Services Forum
26 June 2008
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CDM in AfricaRegistered Projects (www.unfccc.int)
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CDM in Africa
 
4
Africa CDM Legal Challenges

• Assortment of legal regimes
• Common law jurisdictions (mainly English speaking
  / Anglophone countries)
• Civil Africa jurisdictions mainly French /
  Francophone countries
• Islamic law jurisdictions
• Roman-Dutch law mainly southern Africa (RSA,
  Botswana, Namibia)
• Some laws are anachronisms from colonial era
  Democratic Republic of Congo presidents
  permission needed to establish private company
• Some legal regimes either have several layers of
  laws applied or have gaps

5
Africa CDM Legal Issues

• Legislation relating to natural resources may not
  exist or may not contemplate emission reductions
  as a natural resource
• Who has title to emission reductions achieved?
• Will emission reductions require regulation under
  any domestic financial regulatory laws?
• Impact of environmental laws

6
Africa CDM Additional Challenges

• Bureaucracy and inefficient regulation could lead
  to delay in implementation of CDM Project
• New legislation may be required to implement CDM
  rules due to lack of existing laws specifically
  relating to environment/carbon credits
• Infrastructure
• lack of established DNAs
• DOEs insufficient regional experience
• lack of trained regional CDM consultants for PDD
  development
• Limited access to local finance by project
  developers

7
ERPA Issues

• Allocation of project responsibilities
• project day-to-day operation
• CDM aspects e.g. PDD, LOAs, contracting
  consultants and DOEs, validation, registration,
  verification and certification
• Legal title good title/unencumbered
• Delivery
• allocation between project participants
• additionality
• when is delivery achieved? - Annex 1 National
  Registry/temporary account in CDM Registry pre
  ITL linkage?
• Share of proceeds/registration fee projects
  hosted by least developed countries do not pay
  SOP (adaptation) or registration fee

8
ERPA Issues

• Project Participant status
• Focal Point communication/distribution
  instruction
• Force Majeure
• Change in law/Illegality
• Jurisdiction specific tax issues
• Enforcement of ERPA
• governing law
• dispute resolution
• recognition of judgement/arbitral award in host
  country

9
CDM in Africa Risk mitigation

• Due diligence
• compliance with domestic laws environmental,
  financial regulatory, project licence
  requirements, employment, health and safety,
  criminal/civil liabilities etc
• compliance with domestic CDM rules (to the extent
  they exist) and international CDM rules
• counterparty capacity and authority,
  creditworthiness etc
• ERPA
• reps and warranties prudent operator, good
  title, free and clear of encumbrances etc
• credit support/MAC clause
• delivery - performance guarantees/escrow
  arrangements
• events of default
• dispute resolution

10
Africa CDM - Opportunities

• Potential for development of CDM Projects does
  exist
• Limited availability of new CDM Projects in
  China/India/Brazil investors looking for new
  low hanging fruit
• EU ETS Phase 3 proposal encouraging least
  developed country hosted CDM Projects

11
CDM in Africa
The Legal Context

• Claude Brown
• Email claude.brown_at_cliffordchance,com
• Clifford Chance LLP

CBC 7th Annual Banking Financial Services Forum
26 June 2008