BGI Law Magazine 2012

RENEWABLE ENERGY AROUND THE WORLD

BALMS GROUP INTERNATIONAL LAW MAGAZINE

www.bgi-law.com

CONTENTS

Argentina 5

Austria 13

Brazil 23

Bolivia 35

Bulgaria 45

England 57

France 63

Germany 75

Italy 85

Romania 97

Russia 107Spain 117

Uruguay 129

55

1. Law of Electricity

In Argentina, given the multiplicity of levels that the questionnai-re addresses, it encompasses regulations from the central, local and municipal governments. National Law 24,065 of 1991 defi ned the regulatory framework of the electricity sector. Th e Electricity Regulatory Agency (ENRE) oversees compliance with the law and the concession contracts. Compañía Administradora del Mercado Mayorista Eléctrico (CAMMESA), a privately run company, is responsible for setting wholesale prices and fi nancial transactions through the National Grid System. Law 26,190 of 2006 lays down the national system to promote use of renewable energy sources targeted at electricity production. Th e targets set through Law 26,190 are “to achieve a contribution of renewable energy sou-rces that reaches 8% of national electricity consumption within 10 years”. Over that period, the regulation envisages a system of investments to build new sites targeted at electricity production using renewable sources. Th e National Advisory Committee (pu-blic body) was created in Argentina to help and advise the autho-rity responsible for enforcing that law.

2. Securing the land

Th e need for a legal framework that ensures legal certainty in ownership rights is the main incentive behind investment in renewable energies, given that these depend on a physical site where technology can be installed to produce energy. Th e owner-ship rights over lands where technology is assembled to produce energy are essential for any renewable energy power plant. Th is is because if these rights are not properly established, it may be diffi -cult to execute a renewable energy project. Pursuant to article 127 of the National Constitution “the provinces own the natural re-sources that exist in their territory”. Consequently, the authorities in charge of environmental issues are the Provincial Authorities for those power plants within their territory.

3.Permits and Licenses

Offi cial approval for plants that produce biofuels will only be gi-ven to those plants that duly satisfy the requirements laid down by the applicable authority with regard to quality of biofuels and sustainable production. Consequently, the plant must submit the diff erent projects to an Environmental Impact Assessment (EIA) that includes treatment of effl uent and waste management. Once the EIA has been approved, the plant must be registered with the

Secretariat of Energy together with the approved hermetic nature and safety audits. Th e environmental impact assessment is a tech-nical-administrative tool of a preventive nature, targeted at iden-tifying, interpreting and preventing consequences or eff ects that public or private actions or projects could cause to the ecological balance, the maintenance of life quality and to the preservation of existing natural resources. Offi cial approval will not be authorised until the fuel production process is guaranteed, the fi nal installa-tions are deemed to correspond to those submitted and certifi ca-tion is obtained to show that the product obtained complies with the quality standards established by the appropriate authority.

4. Choosing a Business Structure

Th ere are public law and private law entities and those of mixed capital. In accordance with Law 26,093, only those plants that have been authorised by the applicable authority (Ministry of Fe-deral Planning, Public Investment and Services, through the Se-cretariat of Energy) will be able to produce biofuels. In Argentina, projects are prioritised to provide benefi ts in accordance with the following of promotional criteria: small and medium enterprises (SMEs), farmers and regional economies.Th e system is applicable to industries which, inter alia, satisfy the following requirements: are set up in Argentina; belong to mer-cantile, private, public or mixed companies, or cooperatives, set up in Argentina and exclusively authorised to produce biofuels; whose share capital is provided mainly by individuals in Argen-tina, in the city of Buenos Aires, in the provincial states, the mu-nicipalities, or natural persons or legal personalities involved in farm production; are in conditions to be able to produce biofuels; have reached the fi scal quota. Th e last one prioritises projects in accordance with the following criteria: small and medium enter-prises (SMEs), production of farmers and the promotion of regio-nal economies. Companies that engage in the production, blen-ding and/or marketing of biofuels, registered with the appropriate registers, pursuant to the regulations of Law 26,093, will pay the Inspection Fee defi ned in Law 11,672 for each litre of biofuel marketed in the domestic or foreign market. In accordance with Law 26,190, over that period the regulation envisages a system of investments to build new sites targeted at electricity produc-tion using renewable sources. Among the promotional benefi ts the law mentions the fact that companies can choose early reim-bursement of VAT (value-added tax) for those assets included in each project that are subject to depreciation (except vehicles) or, as an alternative, they can choose early amortisation of income tax for their investments. Th e Renewable Energies Trust Fund has also been created, administered by the Federal Electricity Council

ARGENTINA

6www.bgi-law.com

(CFEE), whose funds stem from a levy of 0.30 pesos/megawatt hour over the tariff s of distributors and wholesale market users. Decree 562/09 established the implementation of the Federal Pro-gramme for the Development of Renewable Energies, coordina-ted by the CFEE, which involves the National Government and the provincial authorities.

5. Equipment Purchase and Installation

Article 1 of Law 26,190 calls for “the production of electricity from renewable energy sources targeted at public services as well as research into technological development and the manufacture of equipment for that purpose to be declared of national interest”. Simultaneously, there will be a System of Investments for a period

of TEN (10) years for the construction of new sites targeted at electricity production using renewable sources. Th e benefi ciaries of the system will be those natural persons and/or legal perso-nalities that hold investments and concessionaires of new works for the production of electricity produced from renewable ener-gy sources, approved by the applicable authority and understood as within the scope laid down in article 2, throughout national territory, the production of which is to be sent to the Wholesa-le Electricity Market (MEM) or used to provide public services. With regard to Value-added Tax and Income Tax, the purchase of capital goods and/or performance of works that correspond to the aims of this system will be processed in accordance with Law 25,924 and its implementing regulations. Decree 562/09, which enacts Law 26,190, lays down in article 3 that: “Law 26,190 applies to all investments in electricity production based on the use of

7

renewable sources throughout national territory, whether these are new power plants or extensions and/or repowering of exis-ting production plants, carried out on new or used equipment in accordance with the regulations pronounced by the MINISTRY OF FEDERAL PLANNING, PUBLIC INVESTMENT AND SER-VICES, through the SECRETARIAT OF ENERGY, in accordance with the guidelines of the FEDERAL PROGRAMME FOR THE DEVELOPMENT OF RENEWABLE ENERGIES to be developed

with the provincial jurisdictions through the FEDERAL ELEC-TRICITY COUNCIL, including capital goods, civil engineering, electromechanical engineering and assembly and other associated services that make up a new production plant or are integrated into existing plants and which are essential overall given their functional aptitude for electricity production based on renewable energies defi ned against Section a) of Article 4 of Law 26,190”.

7

8www.bgi-law.com

6. Financing a Green Energy Project

In 1991, the Argentine government created the National Electri-city Fund (FNEE), partially funded by the tax on oil and partly through a surcharge on wholesale market sales. Th is fund, which is administered by the Federal Electricity Council (CFEE), provi-des funding for the following funds: Subsidiary Fund for Regio-nal Tariff Compensation to Final Users (FCT), to make tariff s the same throughout the country (this created a de facto subsidy for users in areas with higher electricity costs; Electricity Investment Development Fund (FEDEI), for production, transmission, and rural and urban distribution works. Th e Ministry of Science, Technology and Productive Information made two offi cial announcements to present R&D projects for

alternative energies: biomass and biofuels. Within the framework of the Energy Sector Technology Innovation Fund 2012 (FITS Energía 2012), public-private consortia are invited to tender for develop-ment projects concerning technological capacities to obtain energy from biomass and to improve current biofuel production processes. In the case of FITS 2012 Energía Biomasa, the products must be geared at the development of the technology required to produce thermal, mechanical and electrical energy from biomass waste as a raw material. Th e development of highly effi cient production sys-tems will be weighted using lower powers of up to 50 MW.Th e FITS 2012 Energía Biocombustibles invitation to tender will consider initiatives that support the creation or enhancement of biofuel production processes using rape, sunfl ower, sorghum and/or sugar cane as raw material.

99

7. Interconnection, Transmission and Selling Power

In Argentina there is a national grid system to which individual generators can feed in their surplus energy in return for remune-ration. Th is enables eff ective distribution of resources throughout the country. Decision 0035/1993 of the Secretariat of Energy, re-gulates the operation of the Argentine Grid System (SADI). Faced with the growing demand for electricity (more than 6%/year) and ever lower margins of reserves, the government of Argentina is in the process of commissioning huge projects, both in the produc-tion sector as well as in transmission. It is estimated that capacity needs to be increased by 1,000 MW/year to satisfy the growing demand. Many projects are funded by the government through trusts, while private initiative is still limited as the eff ects of the Argentine economic crisis are still being felt (1999-2002). Th e reforms put into practice at the beginning of the 1990s split the electricity sector into production, transmission and distri-bution. Production takes place in a competitive market that is mainly deregulated, with 75% of production capacity in the hands of private companies. In contrast, the transmission and distribu-tion sectors are highly regulated and far less competitive than the production sector.

8. Liability Concerns for Green Energy Development

Th e sanctions laid down in Law 26,093 may be summarised as follows: ■ Cautions; ■ Fines; ■ Disqualifi cation or prohibition from carrying out activities authorised by the applicable authority;

■ Disqualifi cation from inclusion in the registers concerning farming and agro-industry activity

■ Revocation, suspension or cancellation of benefi ts granted ■ Payment of unpaid taxes, plus interest and surcharges ■ Seizure of goods and products related to biofuel production

In Argentina, the types of sanctions are classifi ed into diff erent pla-yers: plants authorised to produce biofuels, taxpayers that are the benefi ciaries of the tax system and for those facilities where mixes are carried out. Th e types of sanctions are classifi ed into diff erent players: plants authorised to produce biofuels, taxpayers that are the benefi ciaries of the tax system and for those facilities where mi-xes are carried out. In turn, article 41 of the National Constitution must be taken into account, which lays down that “All inhabitants have the right to a healthy and balanced environment, suitable for human development and so that productive activities satisfy cu-rrent needs without compromising future generations; and they have a duty to preserve this. As a priority, environmental damages must be repaired, as laid down in law. Th e authorities will decree the protection of this right, the rational use of natural resources, the conservation of natural and cultural heritage and biological diver-sity, and environmental information and education. It is up to the State to introduce regulations that govern minimum protection, and the provinces will be responsible for introducing regulations that supplement these, without these changing the local jurisdic-tions. Waste that is or which could be hazardous or radioactive is forbidden from being brought into national territory.” Law 25,675, referred to as the “General Environment Law” which lays down the minimum premises to achieve sustainable and appropriate en-vironmental management, conservation and protection of the bio-logical diversity and implementation of sustainable development. Th e Argentine environmental policy is subject to compliance with the following principles: suitability, prevention, precaution, inter-generational fairness, progressivity, responsibility, subordination, sustainability, solidarity and cooperation.

10www.bgi-law.com

11

ELBERT VAGEDES ABOGADOSBALMS GROUP INTERNATIONAL

Elbert Vagedes Abogados Sociedad Civil (EVA) is a law fi rm providing comprehensive legal counsel to companies and businesses. We intend to supersede your expectations, off ering an agile, professional and creative service. Our three defi ning concepts: ■ International + Multicultural ■ Act local+ Th ink global ■ Specialists in You

INTERNATIONAL + MULTICULTURAL

Our professionals have worked and/or studied overseas. We believe that understanding diff erent cultures and languages is essential for meeting the needs of foreign individuals and companies. EVA has dedicated departments providing services in foreign languages, mainly German, English and Portuguese.

ACT LOCAL + THINK GLOBAL

As part of our professional commitment, we constantly update our transboundary legal and fi nancial information. Th rough our partner fi rms abroad we maintain a high-functioning international network. Working with bi-national chambers, embassies and professional associations we insure the progress of international projects, training and professional formation.

SPECIALISTS IN YOU

Personalized service is our defi ning trait. We seek to build long-term relationships and achieve a deep understanding of your business. Our clients see us not only as their trusted advisors, but also as strategic partners who tailor to their particular needs.

AREAS OF EXPERTISE

■ Business & Commercial ■ Civil ■ Corporate ■ Tax ■ Labor ■ Litigation ■ Foreign Investment ■ Telecommunications and Technology

■ Media ■ Intellectual Property ■ International Trade ■ Mergers and Acquisitions ■ New Energy ■ Agricultural and Financial Business

■ Banking ■ Administrative Law, Bids and Tenders, Antitrust

■ Sports and Sports Marketing ■ New Public Law

ELBERT VAGEDES ABOGADOS

Av. Olga Cossettini 1545, 4° PisoAla Sur (Puerto Madero)C1107CEK Ciudad Autónoma de Buenos AiresRepública Argentina

Tel: 00 54 11 5275 2500

[email protected]

PARTNERS

Cristian Ernesto Elbert Matías Alejandro Vagedes Santiago Viglierchio Juan Manuel Peire

13

1. Electricity act

1.1. Introduction to the Legal Framework of the Electricity Market

Since October 2001 the Austrian electricity market has been fully liberalised. Th e Electricity Act contains a wide spread of regulations which not only cover the electricity market, but also, for example, the gas market and the supply of District Heating. Based on the Federal Constitution, the authority to regulate elec-tricity is divided between the federal government and the states. Th e federal states have the power to regulate diff erent electricity concerns based on federal law. A very important Austrian Act in this fi eld of the law is the Fe-deral Electricity Act (ElWOG) which implemented the European Union Electricity Directive. Th e ElWOG contains common prin-ciples relating to electricity and its main purpose includes a cost-eff ective agreement for the Austrian community. More detailed electricity regulations can be found in the Electrici-ty Management and Organisation Acts of the nine Austrian states.Th e ElWOG and the Electricity Management and Organisation Acts in the federal states both provide regulations regarding the organisation and management of the Austrian electricity market.Since the gradual liberalisation of the European Union’s internal energy sector and the full liberalisation of the Austrian electri-city market, the legal conditions for electricity produced from renewable energy sources has also been further developed. Th ere-fore the Green Energy Act – another very important Austrian Act – should be mentioned as it focuses on renewable energy.

1.2. State Regulation of the Electricity Market

Due to Austrian legislation, regulatory authorities have been es-tablished in the electricity market. Some of the most important ones are the Federal Ministry for Economic Aff airs and Labour, E-Control GmbH and the E-Control Commission. E-Control GmbH is in charge of monitoring competition, supporting the E-Control Commission and controlling the grid. Meanwhile the E-Control Commission presents itself as a fully independent autho-rity closely related to jurisdiction.Since the full liberalisation of the electricity market in 2001, E-Control GmbH has been in charge of regulating the gas market as well.

2. Land conservation

2.1. Property Requirements and Rights in Renewable Energy Projects

Property requirements for implementing a Renewable Energy Project like a renewable-energy power plant can be found within the diff erent requirements of environmental law, building law, energy law and even, potentially, the Industrial Code as well. For instance, in the case of grids, the federal Act on Transmis-sion Lines in connection with the state-level Act on Transmis-sion Lines contains terms for the construction and operation of power lines on private property. In general, the state or district government’s approval may be required for the construction and operation of power lines.

2.2. Types of Legal Agreements

In general, the diff erent state building laws require a permit to build a power plant. Since building laws fall within the competen-cy of the federal states in Austria, the regulations may vary from state to state.Overall, building laws include regulations about the construction of a building and the administrative permit process.Th e permit process includes the issuance of three diff erent docu-ments: a site permit, the building permit and the operating permit.

3. Permits and licences

3.1. Land Use and Operating Permits and Licences for Renewable Energy Projects

In Austria a quick planning process for renewable-energy power plants doesn’t exist.Several authorities are responsible for the process, mainly the sta-te government, and diff erent kinds of permits are required (i.e. ElWOG, landscape protection, regional development plan).Corresponding to Section 7 of the Green Energy Act, Renewable Energy facilities which are operating only on the basis of specifi -cally-listed renewable energy sources have to be approved by the governor of the state in which the facility is located.

AUSTRIA

13NEUMAYER, WALTER & HASLINGER

Rechtsanwälte-Partnerschaft

14www.bgi-law.com

Since the authority to regulate electricity is divided between the federal government and the states, all the state statutes contain diff erent regulations for permit processes and notifi cation requi-rements for renewable-energy power plants.In most cases, a permit relating to the applicable building law is required as well to build a renewable-energy power plant. Since the building law is also within the sole competency of the federal states, it also varies among the states of Austria.

3.2. Environmental Permits and Other Permits

Some types of renewable-energy power plants, e.g. certain wind power projects or certain hydro power plants, are subject to an environmental impact assessment permit process which is imple-mented by the state government of the federal state in which the power plant is located.Other permits can be related to regulatory requirements, for example, in the fi elds of water management, energy effi ciency, pu-blic land, water management and so on.

4. Choosing a business structure

4.1. Choosing the Business Enterprise: Introduction to the problems that aff ect the choice of business enterprise

Renewable-energy power plants are usually arranged as corporate entities such as public limited companies or private limited com-panies. But they also seem to appear as individual enterprises or business partnerships as well.

Th e diff erent legal forms of organisations each have their advanta-ges and disadvantages. Tax aspects corresponding to each type of legal business entities should be considered.Neither specifi c Austrian Acts like the Green Energy Act nor other Austrian regulations envisage a specifi c type of renewable-energy power plant.Certainly it should be mentioned that funding is available for smaller power plants – which can also be a determining factor in choosing the ideal type of business entity.

4.1.1. Personal Liability of Owners

Generally the liability of the owners is based on the statutes of each type of legal business entity.Within private limited companies, in general shareholders have a limited liability for obligations of the business. Th e company itself is solely liable with the company’s appointed equity. In public limited liability companies, shareholders are not perso-nally liable for the debts of the company. Th e company is solely liable with the assets of the company.

4.1.2. Tax Assessment Methods

Th e largest diff erences between the diff erent types of legal entities exist in connection with tax matters.Most notably is the extent of the taxable annual earnings. Th is aspect could also be relevant when deciding on the ideal business structure.

4.1.3. Complexity in Training and Operational Requirements and Impact on Incentives and Other Regulatory Restrictions

15

Renewable Energy facilities generate electricity only on the basis of specifi cally-listed renewable energy sources – i.e. solid or liquid biomass, biogas, wind and solar energy. If the Renewable Energy facility has been recognised as such under the Green Energy Act (such an offi cial recognition is issued by the state governor), it benefi ts from a purchase guarantee from the corresponding ad-ministrative centre (OeMAG) with guaranteed feed-in tariff s for a certain period of time.

4.2. Types of Business Enterprises

As already mentioned above, there is no specifi c Austrian regula-tion envisaging a specifi c business enterprise type for renewable-energy power plants.

5. Th e purchase of equipment and facilities

5.1. Tax and Customs Implications and possible Supply Limitations

Taxing non-renewable energy production could be a very effi cient way of encouraging renewable energy sources and has been under discussion since the 1980s. In 2000, the tax on gas and electricity increased due to budgetary reasons and there was no exemption for renewable energy sources. However, nowadays the higher prices of oil due to taxes make bio-mass more competitive.Section 15 of the ElWOG, along with the state-level Electricity Acts determines that grid operators shall grant access to their grids to all entitled parties thereto.

Th is has to be guaranteed on the basis of approved general terms and conditions and also in accordance with specifi c fees regulated by E-Control.

5.2. Safety requirements, Operation and Maintenance

Grid operators in Austria are committed to operating their facili-ties in accordance with technology regulations. Especially in the fi eld of gas, operators have to provide proof of liability insurance. Furthermore a safety commitment has to be admitted by the ow-ner of the facility as a requirement for the licensing process.Grid operators have to ensure the safety and the quality of their goods and services.

6. Financing renewable energy project

6.1. Financing Large Projects

As mentioned in Chapter 4, electricity production from renewable energy sources is supported by the Austrian policy through feed-in tariff s which are adjusted annually by law. Th e corresponding authority is committed to buying electricity from renewable ener-gy sources and pay therefore a feed-in tariff . Until 2011 the an-nual budget allocated for supporting renewable energy sources was €17 million for new electricity production from renewable energy sources. Th e yearly budget was divided into diff erent types of renewable energy sources (biomass, biogas, wind and other re-newable energies). Within these categories, funds were given on a “fi rst come, fi rst served” basis.Subsidies are also very important for the generation of electricity from renewable energy sources. Th ey exist for energy producers



16www.bgi-law.com

on the one hand as well as for energy consumers (households) on the other. Th e Green Energy Act contains specifi c regulations about inves-tment grants and subsidies for all kinds of renewable energy pro-ducers.

6.2. Negotiating Agreements with Lenders and Capital Investors

Federal subsidies for renewable energy producers such as fi rms, associations and public entities are adjusted mainly by the Kom-munalkredit (local loan authority). Th ese kind of federal grants usually establish an amount of eligible costs, are granted to bu-sinesses investing in small hydro plants and in modern biomass heating systems, and can also be combined with fi nancial aid from the local government.

7. Connecting to the grid, transmitting and selling electrical power

7.1. Connecting to the Grid. Government Regulation of Connection and Mandatory Connection under Public Utilities: Connection Procedures and Agreements

Since the liberalisation of the Austrian market in 2001, the Aus-trian energy sector has changed and market economy structures have been adopted. Th e ElWOG states that transmission grid ope-rators have to be either ownership unbundled or be set up as an independent grid operator or independent transmission operator.Due to Article 12 of the ElWOG, the diff erent state-level Electrici-ty Acts require diff erent authorisation and notifi cation conditions to build and operate a power plant. In general an authorisation from the federal state is needed for the construction and opera-tion of power plants. Furthermore Article 42 of the ElWOG states that the operation of a distribution grid within a federated state requires a licence.

7.2. Transmitting and Selling Power: Performance of Energy Purchase Agreements with Public Utilities

Th e ElWOG combined with the state-level Electricity Acts de-termines that grid operators have to enter into civil contracts for connection to their network with all individuals, legal persons or businesses supplying electricity to the grid.



18www.bgi-law.com

8. Liability in the development of renewable energy

8.1. Liability for Negligence

8.1.1. Liability for Negligence as a Renewable Energy Project Owner/Operator

Th e grid operators in Austria are committed to operating their fa-cilities in accordance with technology regulations. What is crucial is not the level of the technology but rather the current technolo-gy regulations which lead to greater safety for the grid operators and the public authorities.

8.1.2. Liability for Negligence as a Landowner of a Renewable Energy Project

Farmers in Austria play a central role when it comes to providing renewable energy sources such as wind and solar energy, geother-mal energy, biomass or biogas.Particularly in the rural environments, the most important re-newable energy source is biomass and the second is hydropower.Th e authority to regulate this special fi eld of the law concerning farmers is also divided between the federal government and the states. Based on an agreement between the federal government and the states, the states are committed to building adequate mea-sures. However there are no fi nes for this purpose.

8.2. Liability for Nuisance

Basically and essentially, it has to be assumed that, under special circumstances, a renewable energy project also may be defi ned as an energy management system as in administrative law and the-refore it also may need an industrial licence.

19

Th is regulation of the administrative law for special energy mana-gement systems has its own requirements and legal consequences. At the same time the regulations of the Austrian general civil law, corporate law, labour law and others can be relevant.

8.2.1. Personal Injury or Property Damage

In case of Personal Injuries, civil claims exist as well as claims under the labour law depending on the specifi c case. Regarding Personal Injuries of employees of an energy management system, the law of damages is modifi ed by the social law.If Property Damages are produced by an energy management sys-tem outside of the business establishment, the employer is fully liable to pay compensation.

8.2.2. Noise, Signal Interference, View Obstruction and Wildlife Protection

Due to all the aforementioned possible disturbances and interfe-rences, an industrial licence is required in most cases for building a renewable energy management system.Regarding View Obstruction, attention has to be paid to the re-gulations of the comprehensive regional planning including the zoning plan and the designation of the area.An energy management system as a localised institution requires a special permit if the emissions of the energy management sys-tem could have an infl uence on its surroundings or on the envi-ronment.



NEUMAYER, WALTER & HASLINGER LAW PARTNERSHIPBALMS GROUP INTERNATIONAL

Th e Neumayer, Walter & Haslinger Law Partnership was founded in 1997 by MMag. Dr. Johannes Neumayer (who has worked as a lawyer in Vienna since 1987) and by Mag. Ulrich Walter (who was a trainee lawyer in the same fi rm and qualifi ed in 1993). Mag. Dr. Wolfgang Haslinger, LL.M. has worked for the fi rm since 2004 and became a partner in 2007. Th ese three free-thinkers are united by their passion for handling challenging legal issues and their desire to off er the best solutions for their clients. Th is partnership of experts, specialising in diff erent areas of Commercial Law, enables Neumayer, Walter & Haslinger to off er professional legal services in a wide variety of specialised fi elds. Absolute dedication, along with personal commitment to their clients, has paved the way to success and allowed the team to grow, both in terms of legal expertise and as a successful enterprise. In this respect, this law fi rm constitutes a highly competent and dynamic team, one that is well prepared for rapid economic growth and the challenges that the future may bring.Neumayer, Walter & Haslinger is a co-founding member of Balms Group International, BGI. Th rough this association, the fi rm can off er the best possible legal support, even beyond the borders of Austria, granting clients access to the counsel of an almost worldwide network of law fi rms. Regular, personal contact among the associated law fi rms that make up the network ensures that clients are supported with the same level of commitment from other members of BGI as provided by Neumayer, Walter & Haslinger.Off ering high-quality legal support to clients is of prime importance to Neumayer, Walter & Haslinger. In order to achieve this goal, the fi rm has access to a comprehensive legal research library, augmented by modern computer resources and a carefully selected supporting network of external consultants and tax experts.Th e main aim of our actions is to develop our skills and expertise further, ensuring that clients receive the best support possible from associated fi rms, and always giving our clients the clearest picture of the way matters are being handled on their behalf, based on a strict policy of transparency. Th is is what Neumayer, Walter & Haslinger stands for.

AREAS OF EXPERTISE

■ Business Law/International Trade Law

■ Taxation/International double taxation

■ Company Law ■ Competition Law, copyrights,trademarks, etc.

■ Intellectual property ■ Media Law ■ Cross-border company direction and fi nance

■ Financial and banking matters ■ Company foundation ■ Construction Law ■ Agents Law ■ Joint ventures and take-overs in Eastern countries

■ Seminars in Media Law, Intellectual Protection Law, Label Laws and reputation

■ Protection for companies and managers

■ Real estate transactions ■ Public permissions ■ Labour Law and foreign employee matters

■ Corporate Law ■ Branch offi ces in foreign enterprises ■ Trade Law ■ Civil Law ■ Administrative Law/framework of economical regulations

■ Zoning Law ■ Criminal Law in economic off ences ■ Town and rural planning

NEUMAYER, WALTER & HASLINGER LAW

PARTNERSHIP

A-1030 Wien, Baumannstraße 9/11

Austria

Tel: 00 43 1 712 84 79 Fax: 00 43 1 714 52 47

[email protected]

PARTNERS

MMag. Dr. Johannes Neumayer Mag. Ulrich WalterMag. Dr. Wolfgang Haslinger, LL.M.

23

1. Electricity Act


Th e basic legislation of the electrical sector in Brazil comprises articles of the Constitution, complementary and ordinary laws, decrees, inter-ministerial and ministerial (MME) ordinances and resolutions brought by regulatory agencies (ANEEL, ANA) and councils (CONAMA). Bases for a new model of the Brazilian Electrical Sector are supported by Laws 10847 and 10848, and by Decree 5163, of 2004.


Th e Law of Concessions of Public Services, of 1995, and Law 9427 (creation of ANEEL), of 1996, confi gured the government’s withdrawal from the role of investor. In 2002, the government of Brazil created a Programme of Incentives for Alternative Sources of Electricity (PROINFA), focusing on wind, biomass and small-scale hydro projects as Autonomous Independent Producers.

2. Land Conservation

2.1. Property Requirements for Renewable Energy Projects

Foreign individuals or foreign-owned companies may acquire real estate in Brazil under the same conditions as Brazilian individuals or companies. However, according to Internal Revenue Service Order (IN) 200, non-resident individuals or organisations must be registered with the General Registry of Corporate or Indivi-dual Taxpayers (CNPJ or CPF) prior to purchasing any real estate in Brazil. Furthermore, special conditions apply to ownership by foreign individuals or companies of property located in coastal or frontier zones, and in certain specifi cally designated national security areas. Essentially, issues relating to real estate property in Brazil are governed by the Brazilian Civil Code (CCB).

2.2. Property Rights in Renewable Energy Projects

Th e two most signifi cant concepts relating to real estate are the right of possession and the right of ownership. Th e right of pos-session stems from use of the land by an agent as if he were its owner; when the said agent acting on his own behalf behaves as if he were the owner, he assumes the right of possession. Th e most relevant of all property rights – rights of ownership – are defi ned

by the Civil Code as the right of an individual to use, enjoy and dispose of his goods, and to recover them from whoever may unlawfully have taken possession of them. It is an absolute and exclusive right. Ownership rights may be restricted in the public interest, or in respect of the property rights of third parties, in the following situations: (i) expropriation of real estate properties by the government (ownership of private property is transferred to the expropriating authority upon payment of fair compensation); (ii) restrictions on urban land use or zoning, including building codes, limitations on the location of industrial plants, established by a municipality master plan; (iii) restrictions imposed in the interests of national security, including limitations on the sale of private land in coastal areas or within 150 kilometres of national borders; and (iv) the restrictions to the right of the proprietor to freely dispose of his goods, arising from insolvency, bankruptcy or composition with creditors, with a view to protecting creditor’s rights.


Under Brazilian law, ownership of real estate property is consti-tuted upon the registration of the public or private instrument (deed) whereby the sale was eff ected at a Real Estate Registry in the jurisdiction where the property is located. Any instrument in-volving real estate property that has not been duly registered at the respective Real Estate Registry is only binding between the parties to the sale agreement and, thus, is not enforceable against third parties. Aside from specifi c requirements relating to the transfer of immovable property, Brazilian law requires for all types of con-tracts that parties to a sale agreement be capable of fulfi lling the transaction. Th ey must be of full legal age, in sound mental health or duly represented. Under Brazilian law, rural property ranges from rustic buildings to continuous areas, regardless of location, devoted to farming, agro-industry, or stock raising, whether in the hands of the private sector or under public land tenure po-licies. Acquisition of rural property by foreigners who have per-manent residence in Brazil or by foreign companies authorised to operate in Brazil is regulated by Law 5709/71

3. Permits and Licences

3.1. Land Use Permits

3.2. Operating Permits for Renewable Energy Projects,

3.3. Environmental Permits and

3.4. Other Permits

23

BRAZIL

24www.bgi-law.com

A number of federal agencies comprise a system for enforcing environmental legislation in Brazil. Th e Brazilian Environmental System (SISNAMA) is comprised of the Brazilian Environmental Council (CONAMA), a normative, consultative and decision-ma-king agency; the Ministry of the Environment, responsible for the coordination, supervision and control of Brazilian Environmental Policy; and the Brazilian Institute of Environment and Renewable Natural Resources (IBAMA), its executive agency. SISNAMA also includes other federal agencies, public foundations that work with environmental protection, and state and municipal bodies (secre-tariats of the environment, etc., including CETESB/FEEMA/CO-PAM/IAP/CRA) in their respective jurisdictions. Law 6938 of 31 August 1981, known as the Brazilian Environmental Policy Law, marked the introduction of an entirely new approach to the en-vironment. No environmental damage is exempted from redress and, strictly speaking, no pollutant emissions are tolerated. Th e legislation encompasses the concept of strict liability, which sta-tes that damages ought not to be borne by the community. Th e subtle diff erence is that even if a company abides by all standards of legal pollution standards, it may nonetheless be held liable for any residual damages. All that is needed is proof of a causal rela-tionship between the company’s activities and specifi c environ-mental damage suff ered. Th is, in essence, is the concept of ob-jective liability: it is no longer acceptable to evade the obligation to redress environmental damage by claiming that all activities were carried out in compliance with current pollution standards. Federal Constitution art. 21 establishes that services relating to electric power and the use of waterways for electricity production should be exploited by the Federal Union. Th e execution of these services can be carried out directly or by means of authorisation, concession or licence. Th e Union is authorised to delegate pro-vision of these services, mainly through concessions or licences, to corporate entities of private law with competence to provide them. Authorisation is a unilateral, discretionary administrative act whereby the Public Authorities delegate the provision of pu-blic services to the private sector, and which may be revoked at any time. A concession entails a formal administrative contract, awarded by means of a tender procedure under the call for bids

modality, upon which the delegation of responsibility for provi-ding the service is legally transferred by the Public Authorities to a company or a consortium that, for its part, assumes the risks inherent to the business for the duration of the contract, and is remunerated by tariff s charged to users of the services. Th e afore-mentioned contract is further intended to fulfi l conditions of regu-larity, continuity, effi ciency and moderate tariff s, in the provision of services. Standards for public service concessions are provided by Law 8987/95, with the alterations introduced by Law 9648/98. Permission to provide a public service, as previously emphasised, is a simple, discretionary and ephemeral unilateral deligation by the public authorities, through a contract of adhesion that can be revoked at any time or to which the public authorities can impose new conditions to the grantee.


4.1. Introduction to the problems that aff ect the choice of business enterprise


To bring into eff ect the environmental protection provisions of the 1988 Federal Constitution. Law 9605, of 12 February 1998, establishes criminal sanctions applicable in cases of activities that damage the environment. It does not repeal Law 6938/81, which provides for civil responsibility in cases of environmentally da-maging acts.


Th e Brazilian Federal Constitution, promulgated on 5 October 1988, confers upon the Federal Union, the States and the Munici-palities the authority to levy taxes. Taxation may be instituted by any of the three levels of government, in accordance with specifi c powers conferred under the Constitution. Only the Federal Go-vernment may levy the following taxes: Import Duties (II); Export

25

Duties (EI); Income and Capital Gains Tax (IR); Tax on Industria-lised Goods (IPI); Tax on Credit, Exchange and Insurance, or on Securities Transactions (IOF); Tax on Rural Land (ITR); and Tax on Large Fortunes (IGR). Th e Federal Government may also levy the following charges (or social contributions) to fund social pro-grammes: (i) Social contribution on corporate profi ts (CSL); (ii) Social contribution for funding Social Security (COFINS); (iii) Contribution toward the Social Integration Programme (PIS); (iv) Payroll charges for Social security contributions (CINSS).

4.1.3. Complexity in Training and Operational Requirements

Th e Brazilian legal structure provides for forms of association whereby parties may form corporate entities and other forms of incorporation which do not imply corporate structure. Th e lat-ter group includes consortia and other forms of legal businesses whereby parties do not relinquish their status as individuals. In-corporation of a company, on the other hand, entails a written agreement, either private or public, in which the contracting par-ties express their aims either individually or as a partnership (so-ciedades personifi cadas or não personifi cadas). Th e latter include sociedades em comum and sociedades em conta de participação.

4.1.4. Impact on Incentives and Other Regulatory Restrictions

Foreign capital in Brazil is governed by Law 4131 (the Foreign Ca-pital Law) of 3 September 1962, and Law 4390 of 29 August 1964. Both of these laws were put into eff ect by Decree 55762 of 17 Fe-bruary 1965 and subsequent amendments. According to the Fo-reign Capital Law, “foreign capital is considered to be any goods, machinery or equipment that enters Brazil with no initial foreign exchange disbursement, intended for the production of goods and services, and any funds brought into the country for use in economic activities, provided that they belong to individuals or corporate entities domiciled or incorporated abroad”. Foreign ca-pital must be registered by means of an Electronic Statement of Registration – Foreign Direct Investment Module (RDE-IED), on the Central Bank Information System (SISBACEN). For the pur-poses of the Electronic Statement of Registration, foreign direct

investment is defi ned as permanent holdings in Brazilian compa-nies or, in accordance with common market practices, long-term ownership by non-resident investors, individuals or corporate en-tities residing, domiciled or incorporated abroad, through owner-ship of shares or stock in Brazilian companies, or investments in foreign companies authorised to operate in Brazil. According to rules currently in eff ect, the party responsible for the foreign di-rect investment must register with SISBACEN, prior to registering on the RDE-IED Module. He is then issued a permanent num-ber, and all subsequent changes and additions must be recorded under this same registration. According to provisions of Circular 2997/00, foreign investments to be eff ected and registered are not subject to preliminary review or verifi cation by the Central Bank. All foreign investment must be registered with the Central Bank. Such registration is required for remittances abroad, repatriation of capital and for registration of reinvestment of profi t. Generally speaking, there are no restrictions on the distribution of profi ts and their remittance abroad. Profi t remittances must be registe-red as such through the RDE-IED Module, considering the stake held by the investor in the total shares or stock as a proportion of paid-up corporate capital in the company. Reinvested earnings are registered in the currency of the country to which such earnings are to be remitted, whereas those reinvestments in Brazilian cu-rrency are registered in Brazilian currency (Article 20 of Circular 2997). Such reinvestments must be registered as foreign capital (in the same manner as the original investment) and thereby increa-se bases for tax assessment on any future repatriation of capital. Repatriation of foreign capital registered with the Central Bank of Brazil to its country of origin requires no prior authorisation. In the specifi c case of repatriation of capital, it should be noted that the Central Bank of Brazil generally examines the net worth of the company involved, as shown on its balance sheet. If the net worth is negative, the Central Bank of Brazil may deem that a dilution of the investment has occurred, and may thus deny authorisation for repatriation of part of the investment in proportion to said ne-gative result. Th e foreign purchaser is entitled to register the same amount of capital as the registration previously held by the selling company, regardless of the price paid for the investment abroad.

25

26www.bgi-law.com

Nonetheless, the registration number on the RDEIED Module of the Central Bank of Brazil should be changed to refl ect the name of the new foreign investor, essential to allow the new investor to remit/reinvest profi ts and to repatriate capital. Foreign capital investment is prohibited in activities involving nuclear energy. Following the 1995 constitutional reform, Brazilian companies (even if foreign-owned) may now acquire, operate and lease rural lands. However, acquisition of rural lands by foreigners residing in Brazil or by foreign-based corporate entities authorised to ope-rate in Brazil is subject to certain conditions prescribed by law and to congressional authorisation. Furthermore, for reasons of national security, certain limitations apply to the acquisition of properties by foreigners in border areas. Purchase of such lands requires authorisation from the General Secretariat of the Natio-nal Security Council.


Th e law attributes corporate status to companies upon registra-tion with the competent pubic registry, which thus become legal entities, and their liability is separate from that of their partners. Brazilian law also provides for associations, foundations and co-operatives. Such forms of association are not-for-profi t, either due to their charitable nature or in view of their particular cha-racteristics and aims, and are thus diff erent from commercial organisations, regardless of whether they generate revenue. A joint stock company (Sociedade Anônima – SA or Companhia), as described in article 1088 of Brazilian Civil Code and Law 6404 of 15 December 1976, partially amended by Law 9457 of 5 June

1997, and by Law 10303, of 31 October 2001, is fundamentally a legally constituted business corporation, with capital stock repre-sented by shares. Th e principal purpose of companies is to ge-nerate profi ts for distribution among the shareholders. Th ere are two kinds of SAs: publicly traded companies which obtain funds through public off erings and subscriptions and are supervised by the Brazilian Securities Commission (CVM); and closed capital companies which obtain the shareholders own capital or that of subscribers, in which case the accounting and administration is simpler. Capital stock is represented by shares. Depending on the nature of the rights or advantages that these conferred upon their holders, shares may be common, preferred or fruition shares. By means of a Shareholder’s Agreement, the shareholders may de-cide issues relating to the purchase and sale of their shares, esta-blish preferential acquisition rights, or exercise voting rights. All obligations set forth in Shareholders Agreement are binding, and must be respected by the Company. An SA may be managed by its Board of Directors and Administrative Council, or exclusively by a Board of Directors, as determined in Law or in its Bylaws. An Administrative Council is a collegiate decision-making body. Such councils are optional for closed-capital corporations, and mandatory for open-capital or authorised-capital corporations. Th e Administrative Council must be comprised of at least three members, who must be individual shareholders, resident or non-resident in Brazil. Th e Board of Directors is the executive body of an SA. Th e Board is composed of no less than two directors, that may or may not be shareholders, who must be individuals resi-ding in the Brazil, elected for a maximum term of three years. Th e shareholders may supervise corporate management by means of

27

the Fiscal Council. Such supervision may be permanent or perio-dic. In certain cases, members of a Fiscal Council represent speci-fi c categories of shareholders. In the context of Brazilian corpora-te legislation, however, a consórcio is an association between two or more companies for the purpose of pursuing a specifi c project. Th e parties thus preserve their corporate identity, while pooling their eff orts to achieve specifi c objectives. Although based upon a contract, the resulting consortium does not have corporate standing, since the parties only bind themselves under the terms of the consortium agreement. Each party is liable for its specifi c obligations as established therein, without presumption of joint liability before third parties, except in regard to labour relations. If the parties to the consortium are SAs, the consortium agreement must be approved by their general meeting. If they are not SAs, the consortium agreement must be registered before the compe-tent authorities. Th e consortium agreement and any subsequent amendments must be fi led before the Board of Trade within the jurisdiction the head offi ce is located. Law 11079 of 31 December 2004, sets rules for Public-Private Partnerships (PPP). Th ese new rules enable the transfer of responsibility for execution of public works and delivery of public services to the private sector. Fur-thermore, in addition to the common public service concessions described in the previous section and governed by Public Services Concession Law 8987/95, two new modalities were created. Th e fi rst of these is the sponsored concession (Concessão Patrocina-da) whereby the private concessionaire is remunerated not only by tariff s paid by users of the services, but also transfers of fun-ding from the public partner. Th e second is the administrative concession (Concessão Administrativa), undertaken by means of

a service provision contract, when the Public Administration is the direct or indirect benefi ciary of the service (as in the case of construction and management of public buildings), even if it in-volves execution of works or supply and installation of goods. Th e diff erence between these new modalities of concession and the common concession (alluded to earlier) is the possibility of direct payments to the private partner by the Public Administration. For the signing of a PPP contract it is necessary to establish a Special Purpose Company, for the sole purpose of implementing and ma-naging the PPP project. Th e law now also foresees the possibility of arbitration in disputes arising from a PPP contract.

5. Th e Purchase of Equipment and Facilities

5.1. Tax and customs implications

See Chapter 4, I, 2.

5.2. Possible Supply Limitations

Without expertise and innovation, especially on new and modern energy sources, Brazil will have great diffi culty in meeting its ri-sing electricity demand. As demand increases, the need for viable systems, coherent policies and alternative sources have brought equipment suppliers into a prominent role in the nation’s energy sector.

27

28www.bgi-law.com

4.3. Safety Requirements

According to the Consolidated Labour Act (CLT), activities and operations that, by their nature, conditions or work methods, ex-pose workers to agents hazardous to the health, above the tole-rance limits defi ned according to the nature and intensity of the agent and the time of exposure to its eff ects, are considered hazar-dous activities or operations. Th e Consolidated Labour Act also determines that the Ministry of Labour must approve the list of hazardous activities and operations and adopt rules on the criteria for the characterisation of health hazards, the tolerance limits of aggressive agents, protection measures and the maximum time of the workers’ exposure to these agents. Currently, such regulation is established by Regulation 15 (NR 15) of the Ministry of Labour and Employment.

6. Financing Renewable Energy Projects


BNDES is the major supporter of renewable energy projects. Th e Bank fi nances implementation, expansion, modernisation and increasing production capacities, but does not fi nance the acqui-sition of land and real estate, nor swaps assets. Private companies of any size, with headquarters and administration set up in Brazil, and individual business persons can obtain fi nancing from the BNDES. Public Administration and individuals are also fi nan-ced, in specifi c cases. Foreign companies with headquarters and administration set up in Brazil can be fi nanced, as well as Brazi-lian companies with controlling capital abroad. A company with

headquarters and administration overseas may be fi nanced in the buyer’s credit modality. Information on investments of foreign companies in Brazil can be obtained through the Brazilian Tra-de and Investment Promotion Agency (Apex Brazil). Minimum requirements apply, including full compliance with tax and socio-environmental legislation (and the Bank´s own related policies). Energy projects should prove their contribution to saving power, the increase in the global effi ciency of the power system or the replacement of fossil fuels with renewable sources. Investment Banks are specialised in temporary equity interest transactions and production fi nancing, providing fi xed and working capital, and management of third-party assets.


Th e most notable characteristic of electricity agreements is their primordially fi nancial nature. Th is means that the agreements in-tend to supply electricity to the electrical and distribution grid as a whole, and not exactly to the client/buyer. Likewise, the elec-tricity acquired will be removed from the electrical and distri-bution grid, and not directly from a client/seller. As such, these agreements do not represent in fact a supply and consumption di-rectly established between the contracting suppliers/consumers. Another characteristic that is should be highlighted is that the agreements related to the Regulated Environment, resulting from electricity sale auctions, contain a specifi c validity period for each type of auction.

7. Connecting to the Grid, Transmitting and Selling Power

7.1. Connecting to the Grid

A. Government Regulation of Connections

Th e regulation of the sale of electricity in Brazil was created by Law 10848 of 2004, by Decrees No. 5163 and No. 5177 of 2004, and by ANEEL Normative Ruling 109 of 2004, which created the Electric Power Commercialisation Convention. Th is legislation establis-hes that the commercial relationships among the participants of this market must be established by electricity sale contracts, with mandatory registration with the Electric Power Commercialisa-tion Chamber (CCEE), within the National Interconnected Sys-tem. For any type of contracting, the registration must include the parties involved, the quantities of electricity agreed and the pe-riod of electricity supply. Th e prices stipulated in private dealings are, naturally, not registered before the CCEE. One of the CCEE’s functions includes the accounting of the diff erences between the quantities produced and the quantities eff ectively consumed, in relation to the contracts executed. Th e positive or negative diff e-rences are settled in the Short Term Market and valued by the Price of Settlement of the Diff erences, determined weekly for each load level and for each submarket. Th e Ministry is responsible for establishing a list of the new ventures that may be put up for ten-der, for licensing quantities of electric power to be contracted to meet the needs of the Brazilian market, and for preparing a list

29

of new generation ventures to be tendered. For their part, it is incumbent upon generation and distribution companies, traders and individual consumers to inform the Ministry as to the energy needed to meet the needs of their respective markets.

B. Mandatory Connection under Public Utilities: Connection Procedures and Agreements

Law 10848/2004 forbids control or association of generation concessionaires and other parties authorised to use the intercon-nected system with companies engaged in distribution activities. Likewise, distribution companies may no longer: engage in gene-ration and transmission activities; sell energy to individual con-sumers, excepting consumers located in their concession areas; perform activities beyond the scope of the concession; or main-tain direct or indirect interests in other companies (with a few ex-ceptions). Generation and transmission activities may continue to be vertically integrated. Th e law also sets a deadline for companies to implement separation of activities.

7.2. Transmitting and Selling Power: performance of an energy purchase agreements with public utilities

Law 9648/1998 provided for the following contractual models for transactions in the energy sector: (i) freely negotiated bilate-ral contracts, under which the amounts not covered by the initial contracts or those contracts subject to a progressive liberalisation may be negotiated. Article 12 of Law 9648/98 stipulates that ener-gy purchase and sale operations within the scope of the electric interconnected systems should be eff ected within the MAE; and (ii) short-term spot contracts, enabling the sale of power actua-lly produced or demanded that has not been subject to either

initial or bilateral contracts. Th us the MAE was the environment in which processing and fi nancial settlement of operations not covered by contracts took place, subject to a number of pricing mechanisms and the periodic clearing and settlement of the tran-sactions. Th is system of free negotiation among agents is balanced against a defence mechanism in favour of the consumer’s interest, namely, a system of ”normative values” which limits transfers to freely-negotiated prices for the purchase of electric power. Law 10433 of 2002, that provided for the creation of MAE under the regulatory authority of ANEEL, established that purchases and sales of all energy not subject to bilateral contracts should be conducted according to MAE Convention and Market Rules defi -ned by ANEEL. Since 2002, the distributors have been obliged to contract energy exclusively by means of public auctions, and have been excluded from free market negotiation. With regard to trans-mission and distribution activities, there follows a brief descrip-tion of the functioning of specifi c contracts. In the transmission segment, lines comprising the Interconnected Electrical System Network are made available to ONS by transmission concession holders by means of Contracts for the Provision of Transmission Services. Th e ONS, for its part, then signs Contracts for Use of Transmission Systems with representatives of the concession hol-ders. A Connection Contract with the respective transmission concession holder is necessary, to determine responsibility for the implementation, operation and maintenance of connection facilities. In the distribution segment, a Contract for Use of the Distribution System (CUSD) and a Contract for Connection to the Distribution System (CCD) must be signed with the local dis-tribution concession or permission holder. ANEEL sets tariff s for the use of transmission facilities and for the use of electricity dis-tribution systems, in line with applicable resolutions. Th e current model introduced signifi cant changes into the energy trading system. It has created two energy trading environments: the Free Trade Environment (Ambiente de Livre Contratação – ALC), and

29

30www.bgi-law.com

3131

the Regulated Trade Environment (Ambiente de Contratação Re-gulada – ACR) or Pool. All the players are now required to trade energy within the interconnected system, either in the ALC, or in the Pool. Th e purchase – by concessionaires, permission holders and authorised public utilities – of electric power from the Inter-connected System for distribution to regulated markets must be eff ected through the Pool by means of auctions and distributors must guarantee full service to their markets through regulated trading. Purchases and sales are eff ected under bilateral contracts known as the Energy Trading Contract in the Regulated Envi-ronment (Contrato de Comercialização de Energia no Ambiente Regulado – CCEAR), between each concessionaire or authorised power generator and the distribution companies. Such contracts may specify a quantity of energy or availability of energy. Th e distributors must provide guaranties and contracting is eff ected by means of a tender organised either directly by ANEEL or by CCEE. Furthermore, supply tariff s are strictly regulated in this environment and must be ratifi ed by ANEEL. Contracts for the purchase and sale of energy through the Pool necessarily involve long-term supplies. Independent Producers (both of hydroelec-tric and thermoelectric power) and Self-Producers that have sur-plus electricity to sell, may participate in the Pool, in the ALC, or in both simultaneously. If they participate and contract energy in the Pool, they become subject to all of its rules, whereas their activities in ALC are at their own expense and risk. In the ALC environment, the only operations that con be conducted entail the purchase and/or sale of electric power, involving concessionaires and authorised generation agents, traders, importers of electric power and individual consumers. Trading in the ALC is eff ected by means of bilateral contracts freely negotiated by the parties, in accordance with specifi c rules and trading procedures. Th e CCEE is responsible for the registration and settlement of contracts. Th e CCEE is also responsible for the registration and settlement of purchases of energy in the spot market (not covered by bilateral contracts), and the CCEE shall set forth the price of liquidation of diff erences that shall be valid for these operations. Contracts registered with the CCEE do not imply the actual delivery of elec-tric power, and energy sales by any agent must have as collateral energy generation or purchase agreements. Under the new model, any disputes among members of the CCEE’s are resolved by arbi-tration. Th e present model does not off er prospects for privatisa-tion of the federal government owned companies, which hold the major energy generation and distribution concessions

8. Liability in the Development of Renewable Energy


8.1.1. Liability for Negligence as a Renewable Energy Project Owner/Operator.

8.1.2.. Liability for Negligence as a Landlord of a Renewable Energy Project

Power dealers are responsible for the supply of electricity only up to the point of delivery, located on the limit of the public road with the property. Th is determination is described in article 9 of ANEEL Resolution 456/2000, and is intended to prevent the

dealer from being held liable for any problems which may take place in the user’s internal electricity grid, considering that it is the user who is responsible for keeping the property’s wiring in good conditions. Th e civil liability imposes on the agent the legal obligation to hold the victim of the damage harmless, repairing the damage or redressing the losses caused by its illegal conduct. Today, contrary to what the classic legal teachings said, the dama-ge to be repaired will not necessarily be material, even if it may be expressed in monetary amounts for indemnifi cation purposes. In civil liability, we fi nd the least strict system of them all, while in criminal and administrative law only fraudulent intent is punis-hed and exceptionally the fault, in civil liability it is only required intent, being unnecessary the demonstration of the fraudulent in-tent. Based on a system where the rule of thumb was subjective liability, the trend has lead to the ample acceptance of the idea of objective liability for certain cases, upon the provision of spe-cifi c situations for the presumption of fault and liability with no fault. Currently, with respect to Civil Liability, the system adop-ted is two-fold, with the following general rules: one of subjective liability (Civil Code, art. 186) and the other of objective liability (art. 927, sole paragraph). In this sense, as per article 12 of the Consumer Defence Code, article 10 of Resolution 456/2000, and article 10 of Resolution 61/2004, all from ANEEL, power dealers are objectively liable for the damages caused.

8.2. Liability for Nuisance.

8.2.1. Personal Injury or Property Damage 2. Noise 8.2.3. Signal Interference 8.2.4. View Obstruction 8.2.5. Wildlife Protection

See Chapter 3.

ReferencesAlmeida et al (s.d.) Almeida Corporate Law. ‘Legal Review on the Brazilian Power Sector’, http://www.almeidalaw.com.br/almei-dalaw/upload/noticia/Brazilian%20Power%20Sector_Legal%20Review_ing.pdfAlmeida, E.L.F.d. and Pinto, H.Q., (2005). ‘Reform in Brazilian electricity industry: the search for a new model’. International Journal of Global Energy Issues, 23 (2/3):169-187ANEEL, (2009). ‘Agência Nacional de Energia Elétrica’, http://www.anel.gov.br.Brazil. Ministry of External Relations. Centro de Estudos das So-ciedades de Advogados (CESA). Legal Guide for Foreign Inves-tors in Brazil / Ministry of External Relations. – Brasília: MRE: Brazil Trade Net, 2007. 228p. ISBN 85-98712-71-XElectricity sector in Brazil. Globserver Global Economics, http://www.globserver.com/en/press/electricity-sector-brazil.Lock, R., (2005). ‘Th e New Electricity Model in Brazil: An Ins-titutional Framework in Transition’. Th e Electricity Journal, 18 (1):52-61

32

333333

ALBRAE – ALIANÇA BRASILEIRA DE ADVOCACIA EMPRESARIAL

Av. Dom Luís, 880 sala 602Ed. Top Center Aldeota CEP 60160-230 Fortaleza-CE Brazil Tel: 00 55 85 3198-9990 www.albrae.com.br

AREAS OF EXPERTISE

■ Administrative Law ■ Sport Law ■ Social Security ■ Inheritance Law ■ Civil Law ■ Company Law ■ Civil Procedure ■ Labour Law ■ Commercial Law ■ Real Estate Law ■ Criminal Law ■ Tax Law ■ Consumer Law ■ Mining Law ■ Intellectual Property ■ Maritime Law ■ Transport Law ■ Off shore

PARTNERS

Santos e Rodrigues Advocacia e Consultoria S/S – AcreMoura Rossiter Sociedade de Advogados – AlagoasSaul Quadros Advogados Associados – BahiaCid Marconi Advocacia S/S – CearáSmaniotto, Cury, Castro & Barros Advogados– Distrito FederalZouain, Rizk & Advogados Associados – Espírito SantoDi Rezende Advocacia & Consultoria – GoiásRhelmson Rocha Advogados Associados – MaranhãoLeite & Ceconello Advogados Associados – Mato GrossoHilário C Oliveira Advogados Associados – Mato Grosso do SulHomero Costa Advogados – Minas GeraisAbdulmassih Advogados Associados – ParáSolon Benevides & Walter Agra Advogados Associados – ParaíbaVictor Marins Advogados Associados – ParanáProf. Dr. Mario Neves Baptista & Advogados Associados – PernambucoMezzomo Advogados – Rio de JaneiroAdvocacia Rocha – Rio Grande do NorteArruda Advogados – Rio Grande do SulLima, Gsellmann & Souza Advogados Associados – RondôniaRosa e Balsini Advogados Associados – Santa CatarinaLucon Advogados – São PauloMonteiro Nascimento Advogados S.C. – Sergipe

Balms Group International (BGI) continues its international expansion with the association of Aliança Brasileira de Advocacia Empresarial (ALBRAE). A legal leader in Brazil, ALBRAE consists of 22 offi ces in major cities across Brazil, providing legal support to all sectors of the country’s business Marketplace. ALBRAE has more than 450 lawyers and 900 professional and although it is regarded as a multidisciplinary fi rm, its area of expertise lies in Corporate Law.

ALBRAE – ALIANÇA BRASILEIRA DE ADVOCACIA EMPRESARIAL BALMS GROUP INTERNATIONAL

35

1. Electricity act

1.1. Introduction to the legal framework of the electricity market

Since the enactment of the Electricity Law (Law 1604) on 21st December 1994, regulations, explanatory and complementary standards have been passed to improve the effi cient operation of the electricity industry in its activities of generation, transmis-sion and distribution, with the aim of improving the protection of consumer rights, since this protection was previously dispersed over several diff erent laws. Th e objectives of the Law on Electricity were to improve the effi ciency in the sector, promote competition and encourage investment.Electricity Law No. 1604 regulates the activities of the electricity industry, establishing the principles governing the operation of the sector, its institutional organisation, the structure of the in-dustry, the system of granting of rights for the exercise of the power industry, the principles for pricing and tariff s, the sys-tem of violations and sanctions and other provisions regarding specifi c topics. It contains twelve regulations that complement the regulations established in the same: Regulations on Electricity Market Operations; Regulations on Prices and Rates; Regulations on Concessions, Licences and Provisional Licences, Regulations on the Use of Public Proper-ty and Constitution of Easements; Regulations on Air Quali-ty; Regulations on Distribution Quality; Regulations on Rural Electricity Supply; Regulations on International Marketing and Interconnections of Electricity; Regulations on Public Service Electricity Supply; Regulations on Violations and Sanctions; and Regulations on Article 15 of the Electricity Law.


Th e legal framework of the activities of the electricity industry in the Plurinational State of Bolivia includes the following laws: Th e New Bolivian Constitution, since it is the supreme law of the Social Unitary State of Plurinational Communitarian Law, is to be applied in preference to any existing regulations in the country, in this case concerning Electricity. Electricity Law No. 1604 of 21st December 1994, which de-fi nes the principles, institutional organisation, operational structure and economic model of the Bolivian electricity sectorRegulations which sets out in expanded form as a complement to the Electricity Law, the operational and economic treatment of the electricity market

Operating Standards that are developed by the National Load Dispatch Committee and approved by the Superintendency of Electricity with the aim of setting out detailed procedures for the coordination and administration of the electricity market, which currently is called the Authority for Taxation and Social Control of Electricity


2.1. Property requirements for renewable energy projects?

Th e use of energy must be multiple, rational, integral and sustain-able, subject to the legislation relating to the environment which is applicable to the sector.Th e regulations of Law 1604 establish the obligation for envi-ronmental impact assessment studies to be performed for any

35

BOLIVIA

36www.bgi-law.com

electrical project, except for small-scale transmission, pollutant-free or directly environmental projects (Supreme Decree 27173, of 15th September 2003).On the expiry of the period of validity of the fi rst environmental licences (10 years), by means of Supreme Decree 28592, of 17th

January 2006, additional rules were adopted that updated the in-stitutional framework and established the procedure for the up-dating of environmental permits.


Th e right to property consists of being able to use, enjoy and dis-pose of the land; on issues of electrical regulation, the owner has the right to use, free of charge, the surface, subsurface and air space in the public domain that is required exclusively for the object of the Concession or Licence. (Art 36 of Law No. 1604)Th e current standard does not provide economic incentives for generation from renewable sources at a domestic level but the company Hidroeléctrica Boliviana has qualifi ed for access to car-bon credits for four consecutive years. Th ere are companies on the way to following this initiative and a planned project for the in-stallation of 14 wind turbines of 1.5 megawatts of electricity each presented to Tarija as a commission from the People’s Republic of China, as stated by Luis Paz, alternative energy consultant of the Government. Th is project would be the fi rst of its kind nationally and would po-sition the department as a pioneer in alternative energy in Bolivia, to which end, he said, work is being done on making two 70 to 80 metre high wind measurement towers.


Easement: gives the holder the right to use the land necessary for works, dams, landfi lls, sedimentation tanks, water accumulation tanks, pressure chambers, pipes, pipelines, hydroelectric, geother-mal and thermal plants with outbuildings, access roads and, in general, all the works required for hydropower, geothermal, wind power plants and the right to water discharge and the use of ma-terials from the surrounding area.


3.1. Permits for land use

Granted by the Authority for the Taxation and Social Control of Forest and Lands (ABT) which has the following among its func-tions: to establish a register of permits and authorisations for the use and exploitation of forest and soil resources, as well as a public record of the authorisation of permits for the use of forest and soil resources and all the users thereof.

3.2. Operating permits for renewable energy projects

Granted by the Vice-Ministry of Environment, there is no specifi c regulation about it.

3.3. Environmental permits

Environmental Impact Statement: Th is is a document authorising, from the environmental stand-point, the operation of a project or a new activity.Environmental Licence: the authorisation granted by the compe-tent environmental authority for the execution of a works project or activity, subject to compliance by the licensee with the require-ments that are established therein with regard to the prevention, mitigation, correction, compensation and management of the en-vironmental eff ects of the authorised work or activity.Th ey are also granted for short periods and are of a special nature. Th ey are granted for the generation, disposal, treatment, dis-charge and fi nal disposal of hazardous substances, solid waste, and/or contaminants.

3.4. Other Permits

Environmental Manifesto: Th is is the document that informs the Competent Environmental Authority on the environmental status of an operation.

37

Certifi cate of Dispensation Category 4 (CD-C4) and Certifi -cate of Dispensation Category 3 (CD-C3): Granted in particular for mining activities.

4. Choice of Business Enterprise

4.1. Choosing a Business Structure:

Introduction to the problems that aff ect the choice of business enterpriseBolivian law states that diff erent types of partnerships or compa-nies can be constituted, whether domestic or foreign. Th e Law on Investment in force gives foreign investors the same duties, rights and guarantees as Bolivian investors. Consequently, to form a company with foreign capital in Bolivia, no prior authorisation is required and once formed the compa-ny must obtain legal status, thus being subject to the laws of the Plurinational State of Bolivia.However, when starting a business legally in Bolivia, the main problem is the bureaucracy, since several procedures must be car-ried out before FUNDEMPRESA (Concessionaire of the Com-mercial Registry), the National Tax Service and the municipal councils of each municipality.

4.1.1. Personal liability of owners

Responsibility varies depending on the type of company which is formed; below is a list of the types of companies and the form of liability of the partners:Partnership: Th e partners answer jointly, severally and without limits.Limited Liability Company: Liability is based on their shares in the equity of the company. Th ere is no joint and several liability.

Corporation: Liability is based on the amount of shares they hold. Th ere is no joint and several liability.Simple Limited Partnership: Company formed by one or more partners who are only liable for the capital they are obliged to contribute, and by one or more partners who respond to the company’s obligations in a joint, sev-eral and unlimited manner, whether or not they make contribu-tions to the company equity.Limited Partnership By Shares: Company formed by two or more people called “partners”. Its partners are responsible for the social obligations of a company in a subsidiary, joint, several and unlimited manner, based on the number of shares that each one holds. Only the contributions of limited partners are represented by shares.Accidental Company: Unlimited joint and several liability.


All taxes are to be paid that are imposed in accordance with Law 843 based on the main activity carried out by the company, but always paying the following: Value Added Tax (VAT), VAT Supplementary Regime (RC-IVA) (Th e company merely acts as a withholding agent), Transaction Tax (IT) and Company Income Tax (UIE). In the event that the company has assets it must also pay the Tax on Real Estate Property, Motor Vehicles (IPBIVA). Th e fi rst four are paid to the National Tax Service and the last to the Municipal Council of each municipality.

4.1.3. Complexity in training and operational requirements

All commercial companies are constituted by means of a consti-tutional contract which specifi es the number of partners, type of

37

38www.bgi-law.com

company, company share capital, duration of the company and the purpose of its establishment, and this contract is registered by a Notary Public along with the general power-of-attorney that is granted to the legal representative, aft er which the necessary arrangements are made to register the company before FUN-DEMPRESA (Concessionaire of the Commercial Registry), the National Tax Service and the Municipal Council.Concessions and licences can be obtained in the electricity sector, depending on the activity that is to be performed, giving the fol-lowing requirements: Th e identifi cation of the Owner; Description of the use and ex-ploitation of natural resources, where appropriate; the Basic Specifi cation and drawings of the project; the Schedule of Works; Project Budget, Specifi cation of the Required Easements; Delinea-tion of the area of the public service concession and the area for the development and use of natural resources for the Licence, as appropriate; the Environmental Impact Study and Guarantees, as established by the regulations.

4.1.4. Impact of Incentives and other restrictions

Bolivia is rich in hydrocarbons and hydroelectric potential. Investment in the electricity sector in its generation, transmission and distribution has ensured that Bolivia has a modern and reli-able electricity sector. Foreign investors have the same rights, duties and guarantees as domestic investors, as well as having the right to own prop-erty, being guaranteed a regime of free foreign exchange, with no restrictions on the entry and exit of capital, nor for the send-ing abroad of dividends, interest and royalties due to technology transfer and/or other business concepts, as well as freedom of pro-duction, marketing, import and export of goods and services, and free determination of pricing. Exporters of goods and services receive a refund of excise taxes and duties paid on inputs and capital goods incorporated into merchandise for export.

Bolivia has an attractive and uncomplicated tax system. Under reciprocal international agreements with many countries, the payment of taxes on profi ts in Bolivia avoids double taxation overseas. As regards electricity, the current standard does not provide eco-nomic incentives for energy generation from renewable sources at a domestic level, but establishes as a sole restriction the failure to comply with existing environmental regulations.

4.2. Types of business enterprises

Sole Proprietorship Company: Th is is a company in which one person is the owner and is respon-sible for the company liabilities generated thereby. Th e size of the company is determined by the contributions which are made.Limited Liability Company (SRL): A company formed by two or more people called “partners”, in which the partners are responsible for the company’s obligations in line with the amount of their capital contributions to the com-pany. Th e pool is divided into shares of capital in cash. Th is type of com-pany may not have more than twenty-fi ve partners.General Partnership (SC): A company whose constitution is equal to that of an SRL but with the diff erence that its partners are liable for the company’s obliga-tions in a subsidiary, joint, several and unlimited form based on the amount of their contribution.Simple Limited Partnership: Company formed by one or more partners who are only liable for the capital they are obliged to contribute, and by one or more partners who respond to the company’s obligations in a joint, sev-eral and unlimited manner, whether or not they make contribu-tions to the company equity.

39

Corporation (SA): A company formed by two or more people called “partners”. Th e capital of this company is represented by shares and the li-abilities of its partners are limited to the number of shares that each one holds.Limited Partnership By Shares (SCA): Company formed by two or more people called “partners”. Its partners are responsible for the social obligations of a company in a subsidiary, joint, several and unlimited manner, based on the number of shares that each one holds. Only the contributions of the limited partners are represented by shares.Accidental or Joint Accounts Association: Characterised by the accidental or joint account partnership agreement, in which two or more people take an interest in one or more specifi c or temporary operations, to be fulfi lled by means of common contributions, with the operations being car-ried out by one, two, three or up to all partners, as agreed in the contract, or by the partners responsible for operations, acting on their own behalf. Th ird parties acquire rights and assume obligations only in re-spect of these partners and their liability is joint and unlimited. Partners who are not liable for the operation do not have the right to take direct action against third parties.On energy issues, companies may be involved in Generation, Transmission and Distribution and may be dedicated to only one of these activities

5. Purchase of equipment and facilities

5.1. Taxation and customs implications

A purchase is generated, which creates a tax credit for the tax-payer equal to the total amount of the invoice (13%), and this tax credit is off set by sales made by the taxpayer, in the next fi scal year.

5.2 Possible limitations in the supply

It is possible that consumers of humble origin who live in re-mote areas may not be able to meet the requirements of Articles 6 (valid ID document, being in possession of the property and having no electricity debts) and 7 (having a connection, meter, test report and certifi cation of calibration and enough physical space in which to install the equipment) from the Regulations on Public Electricity.Performing the maintenance of connections and meters in re-mote areas can be diffi cult.

5.3 Safety requirements

Th e requirements must be met of ISO 9001:2001, NC 14001:2004 and Industrial Safety regulations and labour laws in force.

5.4. Operation and maintenance

Th e operation is carried out through concessions (distribution and isolated systems) and licences (generation, transmission and generation transmission).Th e distributor has the obligation to maintain connections and meters on his/her property, if the deterioration or partial destruc-tion of connections and meters owned by the distributor occurs and it is the responsibility of the regulated consumer, the latter shall pay the cost of repair and/or replacement thereof, in turn the regulated consumer is required to carry out the maintenance of medium voltage connections and meters owned by the regulated consumer and to change them when necessary, with the involve-ment of the distributor. (Art 23 of the Regulations on Public Service Electricity Supply)

6. Funding of renewable energy projects

6.1. Funding large-scale projects

Regarding electricity, the current standard does not provide eco-nomic incentives for energy generation from renewable sources at

39

40www.bgi-law.com

the domestic level, however funding can be sought from interna-tional organisations for the fi nancing of large-scale renewable en-ergy projects, in addition to making the necessary arrangements with the Ministry of Environment and Water, which is the body of the Director which is in charge of these eff orts.

6.2. Negotiating agreements with lenders and capital investors

Th is needs to be done following the guidelines established in the Civil Code (interest must not exceed 3% per month, unless the lender is a bank which regulates its interest in accordance with the Law on Banks and Financial Institutions).

7. Connecting to the grid, transmitting and selling energy

7.1.1 Government regulation on connections

Th is is regulated in Article 15 of Law No. 1604, which provides that Utility Companies in the National Grid must be disaggre-gated into Generation, Transmission and Distribution Compa-nies and dedicated to only one of these activities and in Supreme Decree No. 24651 of 13th June 1997, which regulates Article 15 of the Electricity Law.

7.1.2. Mandatory Connection under Public Utilities:

Connection procedures and agreementsTh ere are Regulations on Public Service Electricity Supply which establish the requirements for access to service, service contracts, the content of the electricity supply contract, the conclusion of the

provision of service, the service connection mechanism and all the points relating to the subject indicated above.

7.2. Transmission and sale of power: implementation of power purchase agreements with service

Th e Regulations on Public Service Electricity Supply state in Ar-ticle 28 that measurement must fi rst be performed every 30 days of consumption, following the rules laid down in Article 30 of the same, then to proceed to the billing of the service, which must be paid according to the parameters laid down in Articles 34, 35, 36, 37, 38 and 39 of the Regulations. Importantly, there is an electricity supply contract governed by Articles 11 to 14 of the Regulations.


8.1 Liability for negligence

Supreme Decree No. 24043, of 28th June 1995, contains the Reg-ulations on Violations and Sanctions, which establish sanctions both for service providers and consumers.

8.1.1. Liability for negligence as Owner/Operator of a Renewable Energy Project

Th ere are no specifi c regulations in this regard, however the provi-sions can be applied of Article 23 of the Regulations on Violations and Sanctions from Supreme Decree No. 24043, of 28th June 1995.

41

8.1.2. Liability for negligence as owner of the land used for a Renewable Energy Project

According to the Bolivian Constitution, the use is to be made in accordance with its capacity for the greatest use, organisa-tion and occupation of the space, considering its biophysical, socioeconomic, cultural and political-institutional character-istics (Art. 380, II). Th e conversion of forest land use will only be possible on le-gally allocated spaces.Th e Environment Act refers to soil resources, aimed at the proper management and conservation of the resource, as pro-vided in the previous case although the provisions may apply of Article 23 of the Regulations on Violations and Sanctions of Supreme Decree No. 24043, of 28th June 1995, in the absence of specifi c legislation thereon.

8.2. Liability for nuisance

In the absence of regulations the provisions are applied of Articles 117 and 118 of the Bolivian Civil Code, which provide as follows:Th e owner must avoid penetrations of odours, smoke, soot, heat, neon lights, tremors or other unwanted noise emissions to the surroundings when they exceed the obligations of ordinary neighbourhood. Th e nature of the places and the status and fate of the property shall be taken into account, in all cases reconciling property rights with the needs of development. Similarly, the owner of an estate is not permitted to dig or create pits which are likely to cause ruin or collapse in adjoining heritage buildings or to harm the plantations existing on them, and may be required to keep the distance necessary for the safety of the neighbour, in addition to repairing the damage.

8.2.1. Personal injury or property damage

Damage caused must be compensated, in accordance with the provisions of Articles 344 and following of the Civil Code.

8.2.2. Noise

Th e Regulations on Atmospheric Pollution establish the legal technical regulatory framework of the Law on the Environment, concerning the quality and prevention of pollution. It establishes the systems and means of control of the diff erent sources of pollution, as well as setting the permissible limits of substances generally present in the diff erent emission processes.Th e permissible limit for stationary sources of noise is 68 dBA from 6 am to 10 pm and 65 dBA from 10 pm to 6 am, in the envi-rons of the property. In the event of the source being located near hospitals, schools or nursing homes, the limit shall be 55 dBA.

8.2.3. Signal interference

Supreme Decree No. 24711, of 17th July 1997, contains the Regula-tions on Transmission Quality, which contain specifi c rules with regard to this matter.

8.2.4. Obstruction of views

In the absence of regulations the provisions are applied of Articles 124 and 125 of the Bolivian Civil Code, which provide as follows:It is not permitted to have windows or openings with views or balconies or other similar projections over the neighbouring es-tate, closed or unclosed, nor over its roof, if there is less than two metres between the wall where they are made and said estate.Neither can be there oblique views over the neighbouring estate at less than sixty centimetres away.Th e distances referred to in the preceding article are measured in direct view from the outside line of the wall where they are locat-ed or from the overhangs, where appropriate, and in the oblique views, from the separation line between the two estates to the side closest to the window or opening.

8.2.5. Protection of wildlife

Bolivia has no laws in reference to the protection of wild fl ora and fauna, since legislation has been passed regarding the protection of wild fauna, with regulations dating from 1832 to 1964.Th us more than seven laws are known, without numbering, which for various periods prohibit hunting of the chinchilla, whose habi-tat is the Andes mountain range, and the vicuna, which still runs free in the Sajama National Park, to name but two species of ani-mals.A clear example is Supreme Decree 6883 of 1964, which prohibits the hunting or capture of several species of mammals, birds and reptiles for a period of three years in the departments of Chuqui-saca, Tarija, Beni, Pando and mountain province of Santa Cruz.

41

42

434343

RATIO LEGIS S.C. SUCRE

c/Abaroa 358CP: 130 – Bolivia

Tel: 00 591 46452313Fax: 00 591 46437181

SANTA CRUZ

Av. San Martin C/Los Lirios Nro 100 (Zona Equipetrol)CP: 457 – Bolivia

Tel: 00 591 33419804Fax: 00 591 33419828

POTOSI

Av. Boullevard Esq. MatosEdif. La Merced Of. 5Bolivia

Tel: 00 591 26227891Fax: 00 591 26227891

LA PAZ

Av. El Prado Edif. Hermann, piso 8Bolivia

Tel: 00 591 33419804 Fax: 00 591 33419828 [email protected]@ratio-legis.com.bo

www.ratio-legis.com.bo

PARTNERS

Miguel Ignacio Mardoñez Barreros

AREAS OF EXPERTISE

■ Intellectual property.(Registration and protection of trademarks, patents, etc.)

■ Commercial. (Constitution and dissolution of companies, subsidiaries, franchises, etc.)

■ Tax. (Counseling, doubletaxation, resources, etc.)

■ Recruitment ■ Labor and social security ■ Constitutional Law andInternational Law

■ Market and competition ■ Real estate ■ Litigation and arbitration ■ Commercial and fi nancialcommittee

■ Civil and Criminal Law ■ Foreign trade and internationaltaxes

We are a group of independent professionals, who off er our clients a high quality law and legal service. We believe in our vocation, quality eff ective and effi cient service. We have built a relationship of loyalty and trust with our clients. Under the supervision of experts in the various fi elds of law and arbitration, this consulting is structured in diff erent work teams, with an eff ective communication between the diff erent teams, which allows us to off er timely, comprehensive and appropriate services to the needs of each customer. Our areas of expertise are: Intellectual Property, Commercial, Recruitment, Labor and Social Security, Constitutional Law and International Law, Market and Competition, Real estate, Litigation and Arbitration, Commercial and Financial Committee, Tax, Civil and Criminal Law.

RATIO LEGIS.S.C.BALMS GROUP INTERNATIONAL

45



Th e Bulgarian energy law regulates social relations associated with the activities of production, import and export, transmis-sion, transit, transfer and distribution of electricity, heat and gas; transport of oil by pipeline; trading electricity, heat and gas; and also the jurisdiction of the government bodies in formulating energy policy, regulation and control.Th e regulation of activities in the energy sector is carried out by the State Commission for Energy and Water Regulation (SCEWR).Th e production, transmission, distribution and sale of electricity; the organising of the electricity market; the management of the electrical grid; and the public supply of electricity are subject to licensing under the Bulgarian energy law.Th e Council of Ministers determines the government policy in the fi eld of energy production. Th e Council of Ministers adopts the Energy Strategy of the Republic of Bulgaria on proposal by the Minister of Economy, Energy and Tourism. Said proposal sets out the basic objectives, stages, tools and methods for energy pro-duction. Th e Energy policy of the country is managed by the Minister of Economy, Energy and Tourism.National Action Plan for Energy from Renewable Sources One of the important documents introduced by the Agency for Electricity from Renewable Sources (AERS) is the National Ac-tion Plan for Energy from Renewable Sources (NAPERS) which must be accepted by the Council of Ministers. SCEWR determi-nes the preferential prices for purchase of energy from renewable sources and the annual power capacity which can be connected to the grid. NAPERS covers the period 2010-2020 and gives a prognosis for the total energy consumption for that period. Th e Minister of Economy, Energy and Tourism provides the European Commis-sion a report every 2 years regarding the execution of the actions listed in the NAPERS. Th e report is public. AERS sets the basic rules for connection of the producers of ener-gy from renewable sources to the grid.

1.2. State regulation of the electricity market

All energy projects throughout the country are connected and operate in a unifi ed electrical grid with a common mode and a continuous process of production, transformation, transmission,

distribution and consumption of electricity. Electricity produc-tion can be carried out by energy companies, licensed to produce electricity. Th e transmission of electricity is carried out by a transmission com-pany/owner of the transmission network, licensed for electricity transmission. Th e licensee may award a contract for the operation and maintenance of the transmission network only to the electrical grid operator, having a licence to manage the electrical grid. Th e Electrical Grid Operator provides: A. Operation of the elec-trical grid and proper functioning of the transmission network; B. Transit of electricity over the transmission network; C. Main-tenance of facilities and equipment of the transmission network in accordance with technical requirements and safety at work. D. Maintenance and development of auxiliary networks.Th e distribution of electricity and the operation of distribution networks are carried out by distribution companies/owners of distribution networks within a specifi ed area, licensed for distri-bution of electricity to the corresponding area.”


Land Conservation

When the construction or expansion of energy facilities shall be made on private state property or private municipal property, the competent state or municipal authorities establish in favour of the person who will operate the energy facility, a real right to build on the land without auction or tender.When the construction or expansion of energy facilities shall be made on private property, the energy company is obliged to acquire ownership of or right to build on the land. If the land on which the project shall be built is agricultural, the designation of the land must be changed. Under Bulgarian law, any project to build on agricultural land shall be made possible only aft er the municipality has approved a Detailed Development Plan (DDP) / Plan for Regulation and Construction (PRC) in re-gard to the change in this land designation, that determines the new land designation as other than farming and aft er this appro-val the DDP for this specifi c land property shall take eff ect.If any easements arise while expanding existing and building new overhead and underground power lines, ground and under-ground hydro technical engineering facilities for the production of electricity, heat, gas, petroleum and petroleum products in fa-vour of energy companies, the easements shall be recorded in the cadastre.

BULGARIA

45

46www.bgi-law.com

Th e easements are: 1. right of crossing of people and equipment in favour of energy companies; 2. right of building overhead and un-derground power lines, of ground and underground facilities for producing hydro technical facilities for production of electricity, heat, gas, petroleum and petroleum products in favour of energy companies; 3. reduction in the use of land adjacent to the energy sites and facilities. In exercising the easements, energy companies acquire the right to: a) build overhead and underground electricity power lines, heat and gas pipelines, petroleum and petroleum transit pipeli-nes; b) representatives can enter and pass through the serving es-tate and carry out activities thereon, when linked to the operation of energy facilities, including the right of passage of machinery through the serving land for the construction and maintenance of overhead and underground lines.”

3. Permits and Licenses

Licences and permits related to renewable energy projects are is-sued to a legal entity registered under the Commercial Law, which: 1. Have technical and fi nancial capabilities, material and human resources and organisational structure for meeting the regulatory requirements for the implementation of activities under the licence; 2. Enjoy real rights over energy facilities through which the acti-vity takes place; 3. Present evidence that the energy facilities, which will operate under the licence, comply with regulatory requirements for safe operation and environmental protection.

Land Use Permits

Th e construction of power plants is permitted if the land used is categorised as category 4 at the most. Th e land used for energy projects could be the property of the owner of the energy project

or state or municipality property where the state gives to the ow-ner of the energy project real rights to build on such land. Th e area required for construction of energy projects for electri-city and heat is determined by specifi c technical studies. Th e area required for the construction of electrical substations is: 1.0 ha with a voltage of 110 kV, up to 15.0 ha with a voltage of 220 kV and up to 25.0 ha with a voltage of 400 kV. Th e area shall be deter-mined upon an approved project.

Operating Permits

In the following table are listed the permits and licences needed for developing a renewable energy project in Bulgaria.1. Agreement for using the land 2. Statement from the Regional Inspectorate for Environment

and Waters 3. Statement for grid connection 4. Health impact assessment approved by the Ministry of

Health 5. Statement from regional Fire Department and Civil Defence6. Statement from the Ministry of Defence 7. Statement from the State Agency for Information Technolo-

gies and Communications8. Statement from the Civil Aviation Department 9. Statement from the Cultural heritage department 10. Statement from the Road Infrastructure Agency 11. Statement from the Regional Water Supply 12. Statement from NGO associations (hunting, tourism, local

ecological groups, agriculture, etc.) 13. Statement on the risk of landslides 14. Statement for permits for searching and exploring under-

ground resources from the Bulgarian Ministry of Environ-ment and Water

15. Statement with a map with environmental information inclu-ding Natura 2000 areas, nature reserves and wildlife habitats from the Bulgarian Ministry of Environment and Water

4747

16. Project geodetic survey17. Approved project for “Building site” from the Ministry of

Agriculture18. Approved project for “Change of master plan”19. Approved project for “Detailed urban plan” 20. Agriculture change of land use designation 21. Geodetic survey for external cable routing22. Project and approval for external cable routing from the

Ministry of Agriculture23. Project and approved change of master plan 24. Geodetic survey for internal cable routing 25. Project and approval for internal cable routing from the

Ministry of Agriculture 26. Project and approval for change of master plan 27. Project and approval for internal road construction from

the Ministry of Agriculture28. Project and approval for change of master plan 29. Permission for starting an industrial design 30. Preliminary contract for grid connection31. Power production licence from the State Committee for

Energy and Water Regulation

Environmental Permits

Usually, Bulgarian law imposes a requirement for an environ-mental impact assessment of a renewable energy project, if its construction could aff ect the prevention, limitation and control of the pollution of the diff erent components of the environment. In other cases, permits are required with the aim of ensuring the eff ective and sustainable use of respective natural resources. Th e main environmental permits, as required by the eff ective Bulga-rian legislation, include a permit for greenhouse gas emissions. As of October 2005, the building and the operation of new and existing facilities, as listed in the Environmental protection Agency (EPA) (such as combustion thermal power plants with an installed capaci-ty from 20 to 50 MW; crude oil refi neries, etc.) are admissible aft er the issuance of the above permit. A regulation issued under the EPA sets the procedure on the issuance of the permit.”


4.1. Choosing a Business Enterprise: Introduction to the problems that aff ect the choice of business enterprise

Even though, the most common form of organisation is that of limited liability company (OOD) or single limited liability com-pany (EOOD), there is no requirement under law for the type of the legal entity that may be an energy enterprise. It should be a legal entity and therefore it may not be in the form of a personal company (ET), which is a natural person/merchant. Th e require-ments are that the legal entity be registered in Bulgaria and that it has the possibilities and organisation to meet the requirements for the implementation of the activity for which it is licensed.Th e answers to all points below depend on the type of the establis-hed legal entity.

4.1.1. Personal Liability of Owners:

1. Is restricted to the participation in the capital of the com-pany (in case the legal entity is in the form of a limited liability partnership (KD), limited liability partnership with shares (KDA), OOD, joint-stock company (AD), EOOD or single joint stock company (EAD);

2. Is not restricted (in case the legal entity is in the form of a unlimited liability partnership (SD), KD or KDA).

4.1.2. Tax Assessment Methods:

the company must be registered in Bulgaria, must be a legal Bul-garian entity and is taxed for all its incomes from Bulgaria and abroad. Taxes in Bulgaria are assessed, depending on the type of tax, as follows:VAT (20 %) – on the respective deal;

48www.bgi-law.com

Corporate tax (10 %) – on accounting profi ts;Withholding tax (10 % or 5 %) – on the paid amount.

4.1.3. Complexity in Training and Operational Requirements:

Complexity in training increases in the following order, starting from the least complex – SD, KD, EOOD, OOD, EAD, KDA, AD.

4.1.4.

Type of Business Entity does not aff ect the legal requirements linked to the construction or use of the renewable energy plant.

4.2. Th e types of business enterprises in Bulgaria are:

■ unlimited liability partnership (SD) ■ limited liability partnership (KD) ■ limited liability partnership with shares (KDA) ■ limited liability company (OOD) and single limited liability company (EOOD)

■ joint-stock company (AD) and single joint-stock company (EAD).””


Th e Purchase of Equipment and Facilities

Tax and Customs Implications

Th e tax and customs implications on the equipment used in the renewable energy projects depend on the country from where the

components are imported. If the equipment comes from a mem-ber of the European Union, no VAT taxation or customs taxes shall be applied. If the components are imported from a non Eu-ropean country, the owner of the renewable energy project shall pay taxes in accordance with Bulgarian legislation.Th e most convenient way for a foreign investor to operate a re-newable energy project in Bulgaria is to create a Bulgarian entity in order to avoid double taxation.

Safety requirements

Th e safe functioning of the equipment shall be controlled and mo-nitored. Th e most important requirement of the system is to ensu-re the safety of the components of renewable energy power plants, in conditions of strong winds, turbulence or negative eff ects of the grid, which can lead to their rapid deterioration or damage. Th ere are specifi c types of control of the equipment, such as pitch control, etc., that guarantee the proper functioning of the plant. During the operation, the control system records all parameters and compares them with the specifi cations set for each stage. When abnormal adjustments occur and if the system cannot co-rrect the deviation alone, it generates an error message and sends it to the operator on duty. If damage or deviation from standard operating conditions compromises the security of the generator, the system suspends all activity. In turn, the operator analyses the data and, if necessary, changes the settings or takes other actions.Safety requirements are imposed with the certifi cates, permits and licences, issued before and during the construction of the re-newable energy plant.

49

Compliance with safety requirements is ensured through the work of the construction inspection companies and by performing tests on the operation of the renewable energy plant or 72 hours aft er its complete construction.

Maintenance

Th ere are no specifi c legal requirements concerning the opera-tion and maintenance of the renewable energy plant. Th e general terms and provisions for maintenance are applicable.”


Th e production of electricity from renewable energy sources in Bulgaria is promoted by: 1. Providing guaranteed access of electricity produced from

renewable sources to the transmission and distribution electrical grids;

2. Guaranteeing the transmission and distribution of electrici-ty produced from renewable sources;

3. Ensuring the construction of the necessary infrastructure and electricity capacities for the purposes of regulating the electrical grid;

4. Setting as a priority the dispatching of electricity produced from renewable sources;

5. Purchasing of electricity produced from renewable sources for a fi xed period of time;

6. Determining preferential prices for the purchase of electri-city produced from renewable sources.

Th e activities related to renewable energy source are subject to fi nancing through the fi nancial resources of the “Energy Effi -ciency and Renewable Sources Fund” (EERSF). EERSF fi nances investment projects for energy effi ciency and supports the deve-lopment of the market for energy effi ciency projects in Bulgaria. EERSF has the functions of a funding institution providing credits and credit guarantees, as well as a consultation centre. EERSF as-sists Bulgarian companies, municipal entities and private persons in preparation of investment projects for energy effi ciency. Th e fund provides fi nancing, co-fi nancing or guarantees against other fi nancial institutions. Th e main principle in the management of EERSF is the public-private partnership. Th e fund follows orders and rules, developed by the technical assistance, provided by the World Bank and approved by the Bulgarian Government.Th e Energy Effi ciency and Renewable Sources Fund (EERSF) was established through the Energy Effi ciency Act adopted by the Bul-garian Parliament in November 2008. All energy effi ciency pro-jects approved and supported by the Bulgarian Energy Effi ciency and Renewable Sources Fund (EERSF) should meet the following eligibility criteria: Th e project should involve the application of well-proven technology; the project cost should range between BGN 30,000 and BGN 3,000,000 although exceptions are possible if strongly justifi ed; at least 10% of the capital contributed should be from a “EERSF-commercial bank” co-fi nancing scheme and 25% from EERSF stand-alone fi nancing; Th e project must have a payback period of up to fi ve years. EU programmes also ensure fi nancing for RES activities through diff erent operational programmes.Th e Bulgarian Investment Promotion Act introduces a system of investment promotion measures, in compliance with Commis-sion Regulation (EC) No. 1628/2006 on the application of Articles

49

50www.bgi-law.com

87 and 88 of the Treaty to national regional investment aid. De-pending on the amount, investments are divided into two clas-ses, with diff erent threshold amounts. Th e threshold amounts are as follows: Class A: BGN 32 million (€16.3 million) and Class B: BGN 16 million (€8.2 million). According to the procedure es-tablished by the Investment Promotion Act, the key promotion measures are as follows: Faster administrative services: Class A and Class B; Personalised administrative services for implementa-tion of the investment project: Class A; Sale or establishing against consideration of limited real rights on private, state or municipal property, without a tender or an auction on market or lower than market prices: Class A and Class B; Sale or establishing against consideration of limited real rights on plots with constructed phy-sical infrastructure, state property, up to the borders of the site, without a tender or an auction on market or lower than market prices; Financial aid for construction of physical infrastructure elements: Class A; Financial aid for staff training in order to attain professional qualifi cation: Class A and Class B; Opportunities for other forms of state aid, institutional support, public-private part-nerships or joint-ventures for investment projects of high priority; Diff erent types of transactions between the investor and a legal entity established for the purposes of construction and develop-ment of industrial zones.Eligibility criteria under the Investment Promotion Act (IPA)Th e investment must be related to the setting-up of a new com-pany, extension of an existing company or activity, diversifi cation of the output of a company or activity with new additional pro-ducts or to a fundamental change in the overall production pro-cess of an existing company or activity.Th e following business sectors are eligible: 1. Industry: manufacture and production of electricity from re-newable energy sources; 2. Services: activities in the fi eld of computer technologies, scien-tifi c research and development, as well as education and human healthcare.

At least 80 per cent of the future total revenue of the company benefi ting from the investment incentive should come from the eligible investment project.Th e period for investment implementation shall not exceed three years from the date of commencement of work under the project until the date of project completion.Th e total investment in one project should not be lower than the minimum thresholds specifi ed in the Act, with the exception of: 1. Up to three times lower for economically disadvantaged regions, provided that the investment is implemented entirely within the administrative boundaries of such a region; 2. Up to three times lower for investments in certain high-technology activities of the industrial sector of the economy, as specifi ed in the Regulations for Application of the Investment Incentives Act; 3. Up to fi ve ti-mes lower for certain investments in high technology activities of the services sector, as specifi ed in the Regulations for Application of the Investment Incentives Act.At least 40 per cent of the eligible costs of the investment must be fi nanced by the investor’s own or borrowed resources, excluding any form of public support.Th e investor must create and maintain employment which fulfi ls cumulatively the following conditions: 1. the employment shall be directly related to the implementation of the investment project; 2. the investment project shall lead to a net increase in the number of employees in the establishment/organisation concerned, com-pared with the average number of employees over the previous 12 months; 3. the employment created shall be maintained during a minimum period of fi ve years in the case of large enterprises and a minimum period of three years in the case of SMEs.Th e investment shall be maintained for a period of at least fi ve years or for three years in the case of SMEs, eff ective from the date of its completion.

51

Th e tangible and intangible fi xed assets acquired shall be new and purchased on an arm’s length basis from parties not related to the investor.Th e investment must meet all other criteria as set out in Chap-ter One and the special provisions of Chapter Two of Regulation (EC) No 800/2008.

Negotiating Agreements

Th ere are no specifi c requirements in the Bulgarian energy legis-lation concerning the negotiation process.”


Producer, the connecting highor medium-voltage transmission power lines should be built by the transmission or distribution company, respectively, and it is the company’s property.Grid connection procedure:Th e submission of grid connection applications must be in com-pliance with the information for annual power capacity, regions and voltage level. Applications shall be examined in the order of their submissions. Within 14 days the operator shall resolve the admissibility of the application and if positive, the operator researches the possibili-ties and provides its standpoint; Any applications submitted aft er the annual power capacity has been reached in the respective region shall be rejected. Th e investor shall pay a guarantee in the amount of BGN 5,000 per MW at the moment of submission of the grid connection application. Th e guarantee is refundable in case the application is not admissible or rejected.

Th e investor shall submit a request for a preliminary grid con-nection contract within 6 months as from when the standpoint is determined. If the investor does not observe the term, if it with-draws its application or if the preliminary contract is declared un-reasonable, the investor will lose the guarantee paid. Th e investor shall make an advance payment of (i) BGN 25,000 per MW for projects with an installed capacity of 5 MW or less each; or (ii) BGN 50,000 per MW for projects with an installed capacity of more than 5 MW each. Th e advance payment is due at the moment of executing the preliminary grid connection contract. Th e term of the preliminary grid connection contract is not more than 1 year. Th is is the term for written request for conclusion of fi nal grid connection contract. Th e term of fi nal grid connection contract is not more than 2 years if the project shall be put into operation in one stage.

B. Mandatory connection

According to the Law on energy from renewable sources, stricter requirements are being introduced for transmitting and/or distri-buting companies when joining an electrical grid. Transmitting/distributing companies are required to give priority to producers of RES electrical power wishing to be connected to the grid and which meet the specifi c conditions for joining the grid, as set out in the Regulation on connecting producers and consumers of electrical power to the electrical grid. Th e producer of RES electrical power has to fi le a motion to the relevant transmitting or distributing company to get information about the conditions and the way to connect the energy plant to the grid. Th is information has to be provided within 90 days. Both parties may then enter into a preliminary contract of grid connec-tion. Th e term for the connection is determined by a contract and must be no longer than what the producer has indicated as a time limit for the implementation of the project.

51

52www.bgi-law.com

53

RES power producers may be connected to the grid using the lo-cation closest to the location of the RES power site. In the terms and conditions for connection, the transmitting/distributing company is obliged to provide a connection scheme in which they anticipate that the connection should be done using the closest possible point, as well as a preliminary amount of connection. Th e distributing company is obliged to provide an option for bu-sinesses to join the facilities of those RES producers who have al-ready been connected, or are in the process of being connected. Th e RES producer has to bear the connection costs to the point of ownership of the electrical facilities, whereas the grid company bears all other costs including building new and repairing old ca-bles. Th e producer has to pay a connection fee, which only inclu-des direct overheads that the distributing company has incurred, in relation to the connection. Th ose direct overheads are defi ned by the Regulation on the adjustment of the prices for electrical power. Th e overheads incurred during the expansion and/or the reconstruction of the electrical grid, in relation to the connection of the energy site of the producer, are to be covered by the trans-mitting/distributing company and are not included in the fee. According to Article 25 of the Regulation on the adjustment of the prices for electrical power, the connection fees for producers are individual and include actual expenditures for building the facilities to join the relevant grid. If the connection of a producer requires expansion or reconstruction of the transmitting/distri-buting grid, the joining fee includes the expenditure required for this expansion/reconstruction.

II. Transmitting and Selling Power

Th e transmission of electricity is carried out by a transmission com-pany/owner of the transmission network, licensed for electricity transmission. Th e licensee may award a contract for the operation and maintenance of the transmission network only to the Electrical Grid Operator, issued a licence to manage the electrical grid. Th e tariff price for public/end suppliers is formed on the basis of the confi rmed forecasted required annual income, in accordance with article 10 of the Regulation on adjustment of the prices for electrical power and the confi rmed forecasted quantity of elec-trical power for sale. It is up to each of the energy businesses to determine at what price they sell the electrical power for a defi -ned period of time. Th e business must request the Commission of Water and Energy Regulation’s approval of the required income and prices for the relevant period.Preferential prices Preferential prices will be determined by EWRSC until the 30th of June each year. Th e preferential energy purchase price for the respective project shall be fi xed as the preferential price valid at the moment of cons-truction completion proved by the issuance of Act No. 15. If the project is planned to be put into operation in one stage and this is not completed within 2 years as from the execution of the fi nal grid connection contract, the preferential price shall be fi xed as the preferential price valid at the moment the project is put into operation.

Th e preferential price fi xed shall be applicable for the entire term of the energy purchase agreement. Aft er expiration of the term the preferential prices are not applicable. General terms for energy purchase agreements are 12 years for wind projects or 20 years for solar projects, as from the date of putting into operation. Th is is not valid for projects which are put into operation aft er the 31st of December 2015.”


Liability for Negligence

1. Th e Liability for Negligence, as an energy project owner, is en-gaged only for his actions or failure to act. Th ere are however, spe-cifi c cases of liability, provided in the Bulgarian energy legislation for the energy project owner:A project owner or legal entity that operates under the Energy Law without a licence, when such is required, shall be fi ned from BGN 100,000 to BGN 150,000. An energy company that violates the conditions of the issued li-cence is subject to property penalty ranging from BGN 20,000 to BGN 1,000,000. 2. Th e Liability for Negligence as a landlord, in the event he is not the owner of the renewable energy project (rights), is limited to the general Liability for Negligence, according to Bulgarian legis-lation. Th is general liability is engaged only for actions or failure to act on behalf of the owner of the land himself.

Liability for Nuisance

In case of personal injury or property damage the off ender is sub-ject to penal and/or civil liability. According to the Bulgarian Environment Protection Act, Re-newable Energy Projects need a prior environmental impact as-sessment, issued and approved by the Minister of Environment and Waters. Th e environmental impact assessment report stipula-tes the terms regarding the parameters of noise, view obstruction, wildlife protection, etc. with which the renewable energy project owner must comply during the construction and operation of the renewable energy power plant. Once approved, these parameters shall be strictly monitored and complied with while the renewable energy power plant is running.Renewable energy projects must have a detailed investigation on signal interference. Th e cases where liability is sought for noise, signal interference, view obstruction and/or wildlife protection, the renewable energy project owner may be held accountable where:1. he has not complied with the provisions governing the issued environmental impact assessment report and the certifi cate from air traffi c authorities;2. he has violated the terms of the issued environmental impact assessment report and the certifi cate for signal interference.

53

BALMS ABOGADOS BULGARIA SOFIA2ª, Gen. Totleben Blvd. Fl. 4, ap. 101606 Sofi a, Bulgaria Tel: 00 359 2 411 0004 Fax: 00 359 2 411 0005Móvil: 00 359 879 008 72100 359 889 677 [email protected]

BURGAS37 A, “Aleksander Veliki”Str., ap. 98000 Burgas, Bulgaria Tel: 00 359 56 84 11 50Fax: 00 359 56 84 11 [email protected]

www.balmsbulgaria.com

PARTNERS

Juan Luis Balmaseda de Ahumada y DíezJulio Aguado Arrabé Katja Blackmer

Óscar Gómez Monasterio Jorge Martín Losa

MANAGER

Delian Grivichki

ASSOCIATES

Yovka Dimitrova IvanovaOrlin Stefanov DenkovKaterina Dimitrova Ivanova

Maria Kirilova PironkovaGalia Stefanova Grivichki

AREAS OF EXPERTISE

■ Foreign Investments ■ Real Estate, constructionsdevelopments, urban and Planning Law

■ Corporate Law (companyformation and administration)

■ Merge in and Acquisition Law ■ Public procedures ■ Concessions ■ Taxations ■ Contracts Law ■ Banking and Insurance Law ■ Competition Law ■ Employment Law ■ Registration and protection of trademarks, patents, designs and copyright

■ Receivership and insolvency procedures

■ Civil and commercial, litigation and arbitration, dispute resolution

■ Business representation ■ Legislation regarding renewable energy

Set up in January 2006, Balms Abogados Bulgaria LLC is a Bulgarian law fi rm and a member of Balms Group International. Balms Abogados Bulgaria is currently also a member of the Bulgarian-Spanish Business Council, Bulgarian-British Chamber of Commerce and American Chamber of Commerce and since 2010, a founder of the Bulgarian-Chinese Chamber of Commerce.Balms Abogados Bulgaria off ers its clients a wide range of top-quality legal services, tailored to satisfy their needs and expectations. We are best known for our profound knowledge and expertise and the bridge we provide between the local environment and the international business community. Balms Abogados Bulgaria also acts as a tax representative for our clients and their companies, off ering tax, fi scal and legal advice, not to mention the elaboration of documents and agreements and fi scal representation. Furthermore, we have a Litigation Law Department that investigates and provides solutions whithin all types of judicial procedures. Balms Abogados Bulgaria off ers the presentation of public bids for infrastucture projects using European funds. Th e professionals who work for the fi rm are renowned for their familiarity with Bulgarian legislation, local culture and traditions. Th e expertise of the team members allows us to fi nd the best legal solution in accordance with the proposals and objectives expressed by the client.Th e main offi ces at Balms Abogados Bulgaria are located in the key downtown area of Bulgaria’s capital city, Sofi a, close to the courts, government offi ces and other public authorities. We also have a second offi ce in the city of Burgas, one of the largest and most important ports in the country.

BALMS ABOGADOS BULGARIABALMS GROUP INTERNATIONAL

57


1.1. Introduction to the Legal Framework of the Electric Industry

Th e Utilities Act 2000 reformed the regulation of the electricity industry and the legislative parameters dictating the structure of the Industry. Th ese changes were made to the Electricity Act 1989 which remains the centre-piece legislation governing the indus-try. Th e framework governs generation, transmission, distribu-tion and supply of electricity to customers.

1.2. State Regulation of the Electric Industry

Th e supply market in the UK was opened up to private competi-tion at the end of the 1990’s. Th e State regulates the distribution of electricity by introducing a statutory requirement for distribution to become a separately licensable activity. Th e government also has a role together with the independent regulator in determining the terms of the electricity trading arrangements. Th e government Renewables Obligation requires all electricity supplies licensed under the Electricity Act 1989 to produce reports to the Regulator (Ofgem) that they have supplied customers in Great Britain with a certain amount of electricity generated from renewable sources.

2. Securising the land

Th e Renewable Energy Directive 2009 applies to large scale re-newable energy projects and also residential and commercial construction projects where micro-regeneration or distributed energy is likely to be useful. Th e Directive is changing the way buildings are designed and in time will change construction and engineering methods in the UK. Th e Joint Contracts Tribunal in-troduces sustainability provisions into its standard forms of con-tract in 2009.


Th e current energy policy of the United Kingdom is set out in the Energy White Paper of May 2007 and the Low Carbon Transition Plan of July 2009. Th e current focus of policy are on reforming the electricity market, rolling out smart meters and improving the energy effi ciency of the UK building stock through the Green Deal. Th e UK Planning and Environmental Laws remain in force and formal planning applications are required for all energy rela-ted projects

57

ENGLAND

58www.bgi-law.com


4.1. Choice of Business Entity: General Overview of Issues Aff ecting Entity Choice

Th e primary business entities will be either private limited com-panies, limited liability partnerships or public private partners-hips depending on the mix of private or public funding.


With limited liability companies and limited liability partners-hips, stakeholders liability is limited to the amount contributed to capital.

4.1.2. How Taxes Are Assessed

Taxes will be imposed at the new corporation tax rate for private limited companies.

4.1.3. Complexity of Formation and Operation Requirements

Other than private public partnerships, private limited company and limited liability partnerships are capable of being incorpora-ted quickly with low capital injection requirements.


Th e Health and Safety laws in the UK relating to renewable ener-gy equipment is extensive. Th e Building Regulation 2000 are split into 14 parts and set a number of safety rules and regulations that will need to be followed. In addition to the above the Health and Safety Act 2012 will apply. Please note that various trade asso-ciations have added their own consumer codes. Th e Renewable Energy Association has its own Consumer Code dealing with safety and consumer regulation.


Th ese are exciting times for renewables in the UK. Th e introduc-tion of the Feed-In-Tariff s last year and the Renewable Heat In-centive this year has made a diff erence but borrowing money for renewable projects is not straight forward. Th e process of getting renewable fi nances in the UK is the same as any other corporate or project fi nance. Banks need to be convinced by all the bells and whistles of a full business plan, information memorandum, fi nan-cial models, due diligence and bespoke legal contracts.


59

In the UK Power Purchase Agreements (PPA) are legal contracts between the electricity generators and a power purchaser (typi-cally a utility). Contractual terms may last anywhere between 5 and 20 years. Typical agreements require the generator to warrant compliance with the Renewables Obligation Order 2009 and the Electricity (Guarantees of Origin of Electricity Produced from Renewable Energy Sources) Regulation S1 2003/2562 (REGO) which governs the Sources of Supply rules.


Th e Environmental Liability Directive (ELD) came into force in 2004 and is aimed at the prevention of environmental damage. It is based on the “polluter-pays” principle. Operators will be strictly liable for environmental damage caused to species and habitats, water and land where there is signifi cant risk of adverse eff ects to human health. Operators are required, if in breach, to carry out immediate remedial action. Th is supports existing UK environ-mental and negligence laws.

59

60

616161

CORREN TROEN

35 Catherine PlaceSW1E 6DY London, United Kingdom

Tel: 00 44 207 592 8900Fax: 00 44 207 592 8901

[email protected]

PARTNERS

Paul Corren Per Troen Neil Abbott Mads Birkeland Nicola Woolf Elizabeth Jones

AREAS OF EXPERTISE

■ Employment ■ Company Purchases ■ Company Sales ■ Property ■ Litigation ■ Brand Management ■ Clean Teach ■ Charity ■ Tax ■ Wills & Probate ■ Trust Management ■ Family & Divorce

Corren Troen are an English law fi rm based in London with specialist knowledge of the Nordic and International Markets. Founded in 2002 by Paul Corren and Per Troen, we have grown into a strong team of over 20 people off ering a full range of legal services to our many United Kingdom, Nordic and intenational clients.Our aim is to provide our clients with a tailored service that meets both their personal and business legal needs, meaning they are always at the centre of our business. We provide clear legal advice to resolve our client’s situation with the least amount of fuss and stress. Our focus is not just on the deal, we are also keen to build long term relationships with our clients.For our Private clients we act for a number of successful families and high net worth individuals based in the United Kingdom, the Nordic countries and Europe. Th is allows us to excel at working with both, United Kingdom and foreign domiciles and deal with diff erent legal systems and cross border tax issues. We also act for a high number of wide ranging Business clients, from start-ups, to large listed companies. We pride ourselves on delivering tailor made solutions, whatever the size of the business and wherever it is located.

CORREN TROENBALMS GROUP INTERNATIONAL

63

1. Electricity Act

1.1. Introduction to the legal Framework of the Electricity Market

In France electricity was mainly supplied by EDF, which, as a pu-blic body, had a monopoly.Two European Union directives opening up the electricity mar-ket to competition were transposed by law no. 2000-108 of 10 February 2000 and law no. 2004-80 of 9 August 2004, amended by law no. 2003-8 of 3 January 2009 and law no. 2006-1537 of 7 December 2006.As such, since 1July 2007, the whole electricity market has been open to competition.

Th is is also when France began its work on ecological and sustai-nable development through a major national debate known as the “Grenelle de l’environnement”.Among its goals is for renewable energies to reach 23% of total energy consumption.


Th ere are many state regulations concerning Renewable Energy including, for example, the following:French programme law no. 2005-781 of 13 July 2005, establis-hing energy policy guidelines, implements Directive 2001/77/EC of 27 September 2001 on the promotion of electricity from re-newable energy sources in the domestic electricity market. France committed to a target of 21% of gross domestic energy consump-tion from renewable energies by 2010.Th is target was then revised upwards by article 2 of the planning law of 3 August 2009 on the implementation of the “Grenelle de l’environnement” under the terms of which France committed to bringing the proportion of renewable energies to at least 23% of its fi nal energy consumption in accordance with the targets of Di-rective 2009/28/EC of 23 April 2009.Moreover, article 10 of law no. 2000-108 of 10 February 2000 in-cludes the obligation to purchase electricity from all renewable means of generation and, in particular, the photovoltaic, wind and biomass industries so as to boost their growth.

2. Conserving land

2.1. Property Requirements for Renewable Energy Pro-jects

In France, the development of renewable energies is subject to the environmental restrictions stipulated in the Urban Planning Code and the Environmental Code related to: ■ the impact on the landscape with the regulations governing the location of wind farms and photovoltaic power stations with a view to integrating them into the landscape;

■ the architectural impact according to the specifi c characteris-tics of each building;

■ the impact on the soil, particularly with regards to the setting up of wind farms and photovoltaic power stations on agricul-tural land.

63

FRANCE

64www.bgi-law.com


Aside from the administrative authorisations that are required in accordance with chapter 3 of the Environmental Code, it is re-commended that operators own the site on which the photovol-taic or wind power station, for example, will be set up.If the developer does not own the land, they must enter into an agreement with the owner, whether public or private, for a mini-mum term of 20 years, corresponding to the term of the electricity standing off er agreement entered into with EDF or a non-natio-nalised distributor.


As it is important for the developer to maintain ownership of the completed facility, they should favour long-term consecutive te-nancy agreements with rights in rem. Th e choice of legal agreement will depend on: ■ Th e legal nature of the site (private or public property) ■ Th e physical characteristics of the site and its use (vacant

land, roofi ng) ■ Th e consequences of the legal agreement for the parties.When projects are set up in the public domain, agreements made should be compatible with the state ownership regime (long-term lease, temporary occupancy authorisation, tenancy at will).In cases where there is no state ownership, the preferred arran-gements are the long-term lease or the building lease.


3.1. Land use Permits

First of all, the developer of a renewable energy project must stu-dy the local urban planning rules applicable on the site on which they are planning to undertake the project, and particularly, the rules governing whether the construction and occupancy are authorised or prohibited.

6565

Power stations on the ground come clearly under the scope of the building permit.Rules on urban planning or other more specifi c laws such as Mountain law no. 85-30 of 9 January 1985 or Coastal law no. 86-2 of 3 February 1986.Projects that are set up in buildings will, in principle, require prior authorisation particularly based on the criteria of how well they will fi t into the landscape.

3.2. Operating Permits for Renewable Energy Projects

According to law no. 2000-108 of 10 February 2000 on the mo-dernisation and development of the public electricity service, any new plans to generate electricity whether from renewable energy sources or not, must be subject to an operating licence granted by the energy minister.Power stations where the installed capacity per production site is less than or equal to 45 MW are deemed to be authorised when a declaration has been sent to the energy minister who then checks its compliance.Power stations with a capacity of less than or equal to 250 kW will not be subject to any formalities.

3.3. Environmental Permits

Article L.122-1 of the Environmental Code stipulates that any sur-veys conducted prior to constructing or improving power stations

which require offi cial authorisation (building permit, scheme for power stations that are listed for environmental protection, for example) and which, due to their size or their impact on the natu-ral habitat, may be damaging to their surroundings, must include an environmental impact assessment (impact on the landscape, sound, air quality, fauna and fl ora).According to article L414-4 of the Environmental Code, the same is true of the impact that such a project might have on Natura 2000 sites (network of natural sites aimed at conserving endan-gered species and habitats in Europe) and the impact on water under law no. 92-3 of 3 January 1992.

3.4. Other permiting issues

Th e power station must be connected to the public electrical grid in order to distribute the electricity generated by the station. Connec-tion works, carried out by the system operator, must be preceded by a connection request and a connection agreement with the system operator. Th e connection request is the key stage of this process in that it makes it possible to join the connection queue provided that the project is at an advanced stage in its development.Th e conditions and practicalities of this type of connection stipu-lated by the decree of 23 April 2008 on general technical instruc-tions for designing and carrying out the connection of generation stations to the public electricity grids and other decrees of the same date.

66www.bgi-law.com




Th is point is covered in detail in chapter 8.


For the tax authorities, producing electricity for resale is a com-mercial activity which, for tax purposes, is considered profi t-ma-king.It is of little importance whether the electricity producer is a com-pany or individual (who is a company for the purposes of taxa-tion). From a legal point of view, this output, even if it is for a single client, is considered to be commercial in nature under article 110-1 of the Commercial Code.Nonetheless, in relation to the production of renewable energies by means of photovoltaic power stations, the doctrine states that individuals who sell all or part of their output are not conducting a business activity under 1° bis of I of article 156 of the General Tax Code.As such, unless they opt for the regime based on actuals, indivi-duals with earnings of under 81,500 euros before tax are subject to the micro-enterprise tax regime under article 50-0 of the General Taxation Code.

For income tax due on the sale of goods, under this regime the tax owed is calculated on 71% of the turnover, except in the specifi c case of tax exemptions related to the income from photovoltaic energy production under article 35 ter of the General Tax Code.For organisations or individuals that cannot or do not wish to opt for the micro-enterprise regime, the regime based on actuals applies. Th e project sponsor will then be able to choose between corporation tax and income tax depending on whether they are planning to operate as a company or not according to the usual criteria.With regard to other tax, articles 1380 and 1381.1° of the General Tax Code introduce the principle of Real estate tax for buildings and facilities that are comparable to buildings because they are made up of masonry work which takes the form of real buildings.Th is is the case, in particular, for wind turbines as masonry works. Nevertheless, article 1382.12° of the General Tax Code specifi es that capital assets for the production of electricity from a photo-voltaic source are exempt from real estate tax.As for VAT, the general regime will be applied, with the excep-tion of individuals who produce energy and the delivery of heat produced mainly from biomass, ground-source energy, waste or recovery where a reduced rate of 5.5%. is applied.


Law no. 2000-877 of 10 February 2000 introduced various legal tools allowing new generation facilities to be installed by anyone with the necessary technical, economic and fi nancial capabilities.

6767

Article 311-5 of the Energy Code, based on Decree no. 2011-504 of 9 May 2011 amending article 6 of the aforementioned law, sti-pulates that any new electricity generation operations, whether they use renewable energies or not, must have a licence.Similarly, there is a specifi c regime for issuing licences under the regulations on facilities that are listed for environmental protection (IPCE) or water regulations.

4.1.4. Impact on incentives and other regulatory restrictions

In addition to the incentives already set out under 5.1, 5.2, 6.1 and 7.2, other more specifi c subsidies have been put in place to boost the production of renewable energies: ■ Th e Heat Fund, launched in 2008, under article 19§1 of First Grenelle Act no. 2005-781 of 13 July 2005 to support the production of heat from renewable sources and energy recovery.

■ Specifi c subsidies to improve the heat effi ciency of old buil-dings occupied by low-income families implemented by the National Housing Agency.

■ Th e interest-free green-loan makes it possible to improve the return of projects that reduce energy consumption or incorporate measures for generating renewable energy and was introduced in the 2009 budget. It applies to owner/oc-cupants, tenants, companies that are not subject to corpo-ration tax and of which at least one of the associates is an individual.

■ White Certifi cates (CEE) introduced by law no. 2005-781 of 13 July 2005, are based on the requirement for retailers of electricity, gas, domestic fuel, liquefi ed petroleum gas and heating and cooling networks to make energy savings.


As seen previously under point 4.1.2, the activity of producing energy for resale is a commercial activity and therefore only commercial companies will be eligible, the main types being: ■ Ordinary trading partnership ■ Limited partnership ■ Private limited company ■ Public limited company ■ Partnership limited by shares ■ Simplifi ed joint stock company


5.1. Tax and customs implications

In France, certain types of work to improve energy performan-ce and energy generation facilities benefi t from a reduced rate of VAT at 5.5% instead of 19.6%.Th is measure applies to all individuals or organisations.Th e tax brief of 8 December 2006 and ruling no. RES 2007-50 of 4 December 2007 stipulate that the reduced VAT rate applies for photovoltaic power stations where the installed capacity is less than 3kWp.Above this capacity, the normal VAT rate of 19.6% applies.

68www.bgi-law.com

Similarly, the Finance Law of 2005 created a tax credit granted to individuals who are tax-residents in France and who invest in equipment to boost energy savings and sustainable development in their main home or, since 1 January 2009, in unfurnished pro-perty that is older than two years that they are renting out or com-mit to rent out as a primary residence (article 200 quater of the General Tax Code).In addition to this tax credit, the following may also benefi t from a tax break and specifi c reductions: ■ owners of photovoltaic power stations with a capacity of less

than 3kW (exempt from tax measures linked to the resale of electricity generated),

■ farmers (tax breaks on the income from the resale of electri-city generated by a photovoltaic power station or a biomass power station).

Moreover, articles 39AA and 39AB of the General Tax Code sti-pulate that facilities for renewable energy production may be sub-ject to accelerated or exceptional depreciation over 12 months.

5.2. Possible supply limitations

Th e various tax cuts and exemptions given for investing in equi-pment and electricity generation facilities using renewable ener-gies, are revised regularly to take into account the evolution of the market and methods. A standardised list of equipment and apparatus is set out under article 18 bis of annex IV of the General Tax Code. It has been amended successively by several decrees including, most recently, a decree of 30 December 2011 which amends the performance criteria applicable to certain heat pumps that are eli-gible for tax credits, for example.

5.3. Safety requirements

Texts imposing safety restrictions are few and they are scattered between diff erent sources.As such we can highlight decree no. 2010-301 of 22 March 2010 amending decree no. 72-1120 of 14 December 1972 pertaining to the control and certifi cation of the conformity of interior electri-cal installations with safety regulations and standards in force, or the specifi c employment law provisions relating to the employer’s obligations in terms of employee safety or provisions that require project managers undertaking the construction or improvement of buildings that are to house workers who design and build elec-trical installations.

5.4. Operations and Maintenance

In addition to the draconian standards that are imposed on equip-ment or apparatus before it is marketed, France has specifi c labels created to meet the requirements of the European directive on the certifi cation of installers. (Article 14, paragraph 3, of directive 2009/28/EC).Th is is the case for Qualit’EnR under which installers of renewable energy systems agree to comply with a quality charter, a QUALIBAT certifi cate and a Qualiforage certifi cate for geothermal drilling.


6.1. Financing large projects

Other than the domestic tax on the consumption of oil products which is based on Council Directive 2003/96/EC of 27 October amended by agricultural framework law no. 2006-11 of 5 January 2006, incentives have been implemented to encourage funding for renewable energies. Th is funding varies according to the industry in which businesses wish to operate. Indeed, the incentives implemented by the administration take into account the technical and economic variations in the diff e-rent industries.Th us, for photovoltaic generation, the purpose of fi nancial sup-port is to reduce initial investment while ensuring the equipment

69

is integrated well, particularly where it is incorporated into an existing building (for green-loan and tax credit see elsewhere).For industries such as wind and hydraulics, purchase prices are adequate and should protect investors from risks due to fl uctua-tions in electricity prices and to ensure a return on investment (for purchase obligation see 7.2).However, tenders are preferred where there are particular techni-cal and environmental criteria such as for the off -shore wind or biomass industries.Other fi nancial support, as seen in 5.1, can provide incentives for renewable energies.


See 2.2. and 2.3.


7.1 Connecting to the Grid

7.1.1. Government Regulation of Connections

Law no. 2000-108 of 10 February 2000 on the modernisation and development of the public electricity service provides all produ-cers with a guaranteed right to access the distribution system.Access may only be refused on the grounds of operational cons-traints relating to public service delivery and for technical reasons related to the security and safety of systems.

7.1.2. Mandatory Connections under Public Utilities:

connection procedures and agreements

Article 71 of Second Grenelle Law no. 2010-788 of 12 July 2010 stipulates that for ten years, renewable energy sources will be con-nected to the electricity transmission system by way of priority, with the creation of regional connection systems.Moreover, it provides for the introduction of a measure to pool costs allowing new producers to bear only part of the cost of net-work works.Th e rules for sharing connection costs between producers and system operators come under articles 4, 14, 18 and 23-1 of the law of 10 February 2000 and decree no. 2007-1280 of 28 August 2007 on work to connect and extend connections to public electrical grids.Th e regulations stipulate that, within three months, the transmis-sion system operator must provide a technical and fi nancial pro-posal for connecting to the grid which includes the specifi c costs and deadlines.For connection costs, refer to the estimate drawn up by the trans-mission system operator.However, small-scale producers (up to 12 kVA per phase) are sub-ject to simplifi ed payment according to the scale approved by the energy regulation commission.

7.2. Transmitting and Selling Power: performance of energy purchase agreements with public utilities

An obligation to purchase the product of renewable energies is stipulated under article 10 of the law of 10 February 2000. EDF and local non-nationalised distribution companies are thus required to purchase electricity generated by producers using re-newable energies.

69

70www.bgi-law.com

Any production of renewable energies is therefore deemed to have been sold, transmitted and distributed, unless this undermi-nes the safety and security of the network.Th is purchase obligation allows producers to not be dependent on market fl uctuations.




a. Th ere are no specifi c legal provisions covering the civil liabi-lity of the facility operator or the owner of the land on which such a facility is located.

Th e usual law governing liability applies: ■ Liability for negligence (article 1382 of the Civil Code) ■ Liability for the actions of people or their things (article 1384 and 1385 of the Civil Code).

b. With regard to criminal liability, articles L311-14 et. seq. of the Energy Code stipulate that operating electricity genera-

tion facilities whether from renewable energy sources or not, without authorisation (see 4.1.3) is punishable by a one-year prison sentence and 150,000 euros.

In addition, obstructing the work of public servants and desig-nated agents in recording violations relating to the production of electricity is punishable under articles L142-38 of the energy code et. seq. by a 6-month prison sentence and a fi ne of 7,500 euros whether it is an operator who does not own the land or the owner itself.Th e same sanctions come under articles L135-14 et. seq. of the energy code relating to checks conducted by the energy regulation committee.Finally, article L343-5 of the energy code stipulates that building or commissioning a direct line without authorisation is punisha-ble by a one-year prison sentence and a 150,000 euros fi ne.c. Moreover, under the provisions of articles L222-1 et. seq.

of the energy code, the energy minister may order fi nancial sanctions for failures to meet obligations under the provi-sions relating to the energy-saving certifi cates (see 4.1.4).

8.1.2. Liable for Negligence as a Landlord in a Renewable Energy Project

See 8.1.1

71


8.2.1. Personal injury or property damage

Th ere are no specifi c regulations relating to renewable energies so, in the event of an accident at a renewable energy generation facili-ty, it is the usual criminal liability regime that would apply.For civil liability, see 8.1.1.aConcerning criminal liability, unintentionally causing injury through negligence, lack of care, inattention or failure to meet a safety obligation comes either under the délit or contraventionnel legal regime. (articles 222-19 to 222-21 of the Criminal Code).Mens rea is established in the event of negligence, lack of care, in-attention or failure to meet an obligation of safety or care required by law or regulations.

8.2.2. Noise

Once again, no specifi c regulations relating to renewable energies are applicable in this case.Nevertheless, it would seem that from the point of view of civil liability, the theory of abnormal disturbances in the vicinity of a power station which has undergone remarkable growth over the last few years, still falls under its scope.

Th us, it would seem to be a legal framework under which, under certain circumstances, people living near wind turbine parks, pho-tovoltaic panels or any other renewable energy facilities producing disturbances particularly of an economic (loss of operations or fall in value) or aesthetic nature would have recourse. With regards criminal liability, article R. 623-2 of the Criminal Code punishes abusive or nocturnal noises or disturbances that disturb the peace with ‘third category’ fi nes. However according to current jurisprudence these provisions are not applicable to noise made at night in practising a profession (Paris Appeal Court, 16 May 1970), unless the noise is particularly severe (Criminal Court, 15 January 1974).


See 7.1.2.

8.2.4. View obstruction

See the theory of abnormal disturbances in the vicinity developed in point 8.2.2.

71

73

AVENS LEHMAN & ASSOCIÉS BALMS GROUP INTERNATIONAL

YOUR BUSINESS IS UNIQUE

Since 1989, our lawyers have been assisting our clients on the basis of this shared viewpoint: What makes a company unique is its history, its managers, its know-how and its ambitions. Knowing the assets, the strengths and the originality of the company help our lawyers to clarify their analysis and the legal solutions they off er.

OUR COMMITMENT

Avens is a law-fi rm on a human scale, acknowledged by the clients as being concerned about off ering effi cient and high quality services, in all areas of business law. Our commitment can be stated as follows:Understanding: Structural operations, legal proceedings and consultations always take place within a context. Our lawyers endeavour to understand the company: its market, its history, its economic environment as well as the manager’s targets and expectations. Deciding: Law is a strategic tool. We always put our clients’ requests in the context of their strategy perspective, of their ambitions and of their means. With them, we defi ne the legal or judicial strategy and giving further thought to the problems, we polish up arguments and demonstrations. Advice or litigations: our lawyers’ recommendations help the managers to make enlightened decisions. Doing: Guided by the quality requirements we have set ourselves, we put our teams to work on the cases we are entrusted with as effi ciently as possible: with regard to relevancy, presentation, deadline and costs. Our partnerships in France and abroad help us to support the company in its development.

AREAS OF EXPERTISE

■ Economic Law: Distribution / marketing, competition, economic violation (national, community) public law, public procurement, criminal business law.

■ Corporate and Tax Law: Setting-up and legal follow up, operations on capital, mergers and acquisitions, transfers, executives’ status, franchise network, managers’ taxation, VAT litigation, relations with the administration.

■ Commercial Law: Agreements (drawing-up, negotiation support, audits), actions of contract, actions relating to liability, debt collection, emergency measures, ailing fi rms, insolvency proceedings.

■ Intellectual property and Communications: Trademarks, press law, publishing law, adverti¬sing law, audio-visual law, computer law, internet law, e-business law.

■ Human Resources: Individual and collective employment law. Drawing up of agreements, specifi c status, representative and control systems, employment litigations.

■ Real Estate and Construction: Property management. Selling, rental. Construction. Building sites. Civil engineering. Subcontracting.

■ Bank and Insurance: Relations between banks and fi nancial companies, insurance companies and provident societies with their environment: clients, consumer organisations, administrative regulation and competition authorities.

AVENS LEHMAN & ASSOCIÉS

67 Bd Haussmann75008 Paris

France

Tel: 00 33 1 40 67 87 67Fax: 00 33 1 40 67 97 16

[email protected]

PARTNERS

Hervé LehmanChristine Sarazin Hortense de Saint Remy Fabrice de Korodi Katona

MANAGEMENT

Yves Repussard

LAWYERS

Claudia MassaSabine Alix Matthieu Mazo

Aurélie Boulet Delphine Cuenot Alexis Sobol

Morgane Brunaud Florian Saguez

75

1. Electricity Act


Th e Electricity Act comprises a multitude of regulations, which are stated in diff erent sources of federal and state law. It can be seen as the sum of all the regulations, which deal with the supply of electricity (i. e. production, distribution, trade, sales). Th ese regulations can either belong to public or to private law. So the Electricity Act is not a homogeneous, closed fi eld of law.With regard to German federal law, the Bundesimmissionsschutz-gesetz (BlmSchG) and the Atomgesetz (AtG) should be mentioned as they deal mainly with the licensing of power plants. Th e Ener-giewirtschaft sgesetz (EnWG) contains handicaps regarding the as-sessment of plans and licences. Furthermore the regulations of the Baurecht (building law) as well as the Umweltverträglichkeitsrecht (UVPG) must be adhered to. Th e building of power plants must be approved in accordance with German regulations (land and water conservation laws and regulations).

Th ere are no special regulations for renewable energy power plants. In Germany the use of renewable energies was supported very early on by obligating electricity producers to supply their (integrated) grid system with the electricity from renewable ener-gies. Producers also received a minimum of compensation.


By using the EnWG to implement the European Union Electrici-ty Directive, the policies fostered more competition on the ener-gy market. Within the scope of the EnWG, the Federal Network Agency (Bundesnetzagentur) in Bonn was appointed as the new controlling offi ce for the German electricity and gas market in 2006. Its main function is the control and approval of charges and procedures of access to the electricity and gas markets.Th e Bundesnetzagentur is responsible for companies that supply more than 100,000 clients, the rest of them are to be controlled by the states and their authorities.

GERMANY

75

76www.bgi-law.com

2. Main Renewable Energy Legal Matters: Solar, Wind & Hydro. Conserving land

Property Requirements for Renewable Energy Projects and Property Rights in Renewable Energy Projects

Th e requirements for renewable energy projects vary greatly with relation to the type of power plant being built. Th erefore large plants like wind parks or hydro power stations not only have to go through a planning approval process but through the subject-specifi c authorisation procedure. Small parks like solar cells on the roof of a house only need, if they have to be approved at all, an installation licence according to, for example, the building law.States which fall within development planning and federal state planning (land-use planning) must draw up a major plan with the applications for the construction of plants according to the loca-tion, the type, extent and scale of development. Th ey must state in the plan the blueprints for transmission lines and energy routes. Regional and local authorities designate in which areas power plants can be built.

Types of Legal Agreements

Federal and State authorities must issue a licence permitting the operation of a power plant. A contractual regulation between the

operator of the power plant and the authority is neither necessary nor common.Th e rights and obligations of the power plant operator and the authority are laid down in the plant approval/licence.


3.1. Land Use Permits and Operating Permits for Re-newable Energy Projects

In Germany there is no standardised approval procedure for the construction and operation of renewable energy power plants. Th e scope and extent of the approval are determined by the type, location and size of the plant. As nearly all local authorities and cities in Germany have declared areas for the construction of power plants, an approval procedure is in most of the cases not necessary. Only the subject-specifi c ap-proval for the plant is necessary according to the BlmSchG or the BauGB. It is the responsibility of the federal and regional authori-ties. Small plants like the solar cells on buildings don’t need to be approved at all.But there is a special regulation for off -shore wind parks. In this case they enjoy an accelerated approval process, as stated in the Seean-lagenverordnung. Th e responsible authority is the federal offi ce for maritime shipping and hydrography (BundesamtfürSchiff fahrt).

77

3.2. Environmental Permits and Other Permits

As local authorities have designated areas in the regional planning procedure on which power plants may be built, power plants are authorised only within these areas. Th ey only have to undergo the subject-specifi c authorisation procedure according to BlmSchG or the BauGB.Th e construction and operation of power plants is determined under the Umweltverträglichkeitsprüfung (UVPG) if there are no designated areas, i.e. when local and public interests are not pro-vided for in BlmSchG, BauGB and BNatG.



Normally the structure of power plant operator or the energy supplier is a public limited company (AG) or a private limited company (GmbH), irrespectively of whether it is a privatelyor publicly-fi nanced project. In order to ensure the supply of electricity under the obligation of providing services of general interest, federal and local authorities have founded private companies or are the majority shareholder of such companies. In rural areas some plants (Biogasanlage) have the legal structure of a registered cooperative.


Normally the owners of a power plant choose the legal structure with a limitation of liability, i.e. a public or private limited com-pany. Th erefore the personal liability of the owners is limited.


For the operation of a power plant, private investors generally choose a legal structure that not only has the benefi t of a limita-tion of liability, but also benefi ts from tax regulations. As federal and regional authorities or communities operate power plants and are economically active, taxation with the aim of making a profi t is not the main focus.


Anyone that produces electricity has the possibility to sell it to the local network operator. A complex grid for the transfer of energy was set up in order to ensure that the balance of use and pro-duction of electricity remains stable. Th e distribution of electrici-ty throughout Germany and partly in Europe is ensured by large electricity suppliers. Th e highest federal authority is the Bundes-netzagentur. Th e approval for the construction and operation of a power plant is conditioned on the removal of energy and for the compensation which is to be paid.

77

78www.bgi-law.com


Th e EEG (Erneuerbare-Energien-Gesetz) not only requires large electricity producers to be connected to the grid, but also a pur-chase guarantee with a guaranteed minimum tariff according to the kind of energy production for a certain fi xed period of time (usually 20 years). As politicians can change the terms for the minimum tariff , they have the means to control, evaluate and

support the production of energy according to the type or origin of the renewable energy.

4.2. Types of Business Entities

Th ere are no regulations regarding the legal structure of a power plant. Normally the structure of the owner of a power plant is a public or a private limited company.


5.1. Tax and customs implications and possible supply limitations

Th e production of electricity is fi nanced by loans with low in-terest rates for the construction of plants or by the regulation of minimum compensation or tariff s for electricity producers. Th e consumption of electricity is regulated by the electricity tax (Stromsteuer), which was introduced on 1st April 1999 as part of the ecological reform. From the very beginning it was not only introduced to gain higher revenues from taxation but also as a guiding instrument for policies.Th e higher price for electricity due to taxation is an incentive, in private households as well as in the industrial sector, to use less electricity and to produce fewer harmful greenhouse gases (CO2), if the electricity was produced with fossil energy sources. Elec-tricity which was produced with renewable energies is not taxed.

79

5.2. Safety requirements, Operations and Maintenance

Power plant producers and operators and grid operators have to adhere to valid regulations for state-of-the-art and current tech-nical standards.


6.1. Financing large Projects

Large power plants are fi nanced by diff erent major investors or through private placement fi nancing in the form of funds. Private investors have the possibility to buy the whole power plant or to buy a share in diff erent energy projects. But there are other ways of fi nancing.Th ere are diff erent institutions off ering fi nancial aid programmes for fi nancing power plants in the form of subsidies, loans with low interest rates (for instance by the KfW banking group) or through tax privileges (tax write-off s, investment aid).Major projects are normally fi nanced by the European Investment Bank, the KfW-Bank or the regional banks (Landesbanken) of the lands of Germany.


Th e contractual obligations between the creditor and the private investor are laid down in the fi nancing contract. As the private investor collects money from private individuals, the obligations of the investor and of the private individuals are shared, i.e. in the form of shareholdings or in accordance with the fi nancing terms and conditions.


7.1. Connecting to the Grid Government Regulation of Connections and Mandatory Connections under Public Utilities: Connection Procedures and Agreements

In Germany the electrical grid is run by four large energy com-panies, which are responsible for the running of the electricity supply system and which have to ensure the distribution of elec-tricity all over the country.Th ey are obliged to off er their electricity supply system to the pro-viders against payment.German legislature has declared that the grid operator and the supplier are completely separate legal personalities and entities.

79

80www.bgi-law.com


Th e EEG determines that grid operators have to integrate new producers feeding electricity from renewable energy sources into the grid.Th ey have to pay a guaranteed minimum price, which is determi-ned for at least 10 to 20 years.




Th ere are no special regulations regarding the liability of opera-tors of renewable energy power plants. For power plant operators the common regulations regarding liability are valid. According to this regulation it depends on the responsibility, i.e. the operator only has to pay compensation if the damage occurred because the operator acted negligent or deliberate. For power plant operators,

the principles of strict liability are also valid. According to this re-gulation the person who is doing a dangerous activity or operates a dangerous machine or plant is liable for any damage suff ered.In the special laws the liability is limited or mostly excluded, if the damage occurred through force-majeure. Th e risk is also limited by a maximum sum for which the operator is liable.

8.1.2. Liability for Negligence as a Landlord in a Renewable Energy Project

Normally farmers use renewable energies in form of plants for organic substances or in form of wind parks. According to the Bundes-Immissionsschutzgesetz (BlmSchG), regarding the appro-val procedure of the plant, all relevant details of the plant which have an impact on the environment will be examined and judged. If the licence is granted and the technical standards and regula-tions are adhered to while the plant is in operation, the principles of strict liability are valid.


As aforementioned, any damages caused by emissions to a natural medium like the ground, water and air, whether they are caused to persons or property, are regulated in special laws regarding liabili-ty (UmweltHG, BImSchG, AtomG, GenTG a. s. o.).

81

In this regulation only the responsibility in civil law for damages to the environment is regulated. However, anyone that causes da-mages to the environment will be sanctioned.


Th e liability standards which are fi xed in special laws regulate the liability of the plant producer because of a product defect under the principle of product liability law (ProdHG). Th e owner and operator of a plant is liable according to the Umwelthaft ungsge-setz or the BImSchG for death, bodily harm, health risks or pro-perty damage, which occurred due to any impact said plant may have had on the environment.

8.2.2. Noise, Signal Interference, View Obstruction, Wildlife Protection

Depending on the type of power plants, diff erent environmen-tal repercussions can arise. In the case of wind plants the reper-cussions are noises, sound and shadow; in the case of bioenergy plants, the repercussions are smell and pollution of the ground and the water; and in the case of the solar cells the repercussions are radiation and refl ection of light.All laws and regulations establish maximum values for these re-percussions, so that in the case that any of them crosses the limit, the owner or operator could be liable for any damages which may occur as a result.

81

DR. PRYMUSALAATTORNEYS-AT-LAWMUNICH

Nymphenburger Straße 148,80634 MunichGermany

AU I.D. HALLERTAU

Mainburger Straße 1, 84072 Au i.d. HallertauGermany

Tel: 00 49 89 13 27 23 Fax: 00 49 89 13 27 43

[email protected]

PARTNERS

Dr. Manfred PrymusalaJoachim Leitl

MANAGEMENT

Yvonne Dörre

DR. PRYMUSALA ATTORNEYS-AT-LAWBALMS GROUP INTERNATIONAL

We became a member of Balms Group International, BGI, in August 2000. Th e terms “merger” and “globalisation” nowadays infl uence all business life in Germany, as well as the practice of German law. Th us, the keywords of the German legal world are, nowadays, manpower, specialization, know-how management, extension of cross-border activities, international offi ces and extension of fi elds of work and of legal services. A growing demand for national and international legal assistance exists because of considerable competition in the areas of industry and services. A number of businesses, including small companies, have established offi ces worldwide and cooperate with international partners in order to increase sales. Furthermore, a considerable number of Germans invest in real estate for private reasons. In Spain alone about 500,000 properties are owned by Germans, because they long for sun and the Mediterranean countryside. Th e demand is growing and an internationally active network is important in order to cater for the fi nancial and private needs of many clients. Germany is also still an industrial country which welcomes foreign investment. In this respect, we are glad to be a member of Balms Group International, which enables us to provide our German and international clients with German and international legal advice.

MUNICH (MAIN OFFICE)

Th e fi rm, Dr. Prymusala & Colleagues, was founded in Munich in 1989. Our modern offi ce is situated in the center of Munich in the district of Neuhausen-Nymphenburg, near the U 1 subway. Th us, we can off er easy access to our clients. Furthermore, all the important courts are located close to the offi ce. Our clients include members of medium-sized industry, service providers, associations and individuals.

OFFICE IN AU I.D. HALLERTAU

In July 2003 the law fi rm Dr. Prymusala & Colleagues of Munich open a new offi ce in the town of Au i.d. Hallertau to meet the request of a number of people, including local tradesmen, who wanted to be able to obtain legal advice without having to travel long distances. In Au i.d. Hallertau and the surrounding area, industry is growing fast, especially medium-sized and family-run companies. Th ere are still tracts of undeveloped land available (perhaps an opportunity for a foreign investor) only a short distance from Munich Airport.

AREAS OF EXPERTISE

Th e areas of work in which we are specialized are among other things: ■ Civil Law (national andinternational)

■ Compensation for damage ■ Contract Law ■ Employment Law ■ Inheritance Law ■ Law of Associations, including Sports Law

■ Compensation claims

In the area of taxation we have been working, for a number of years, alongside tax consultants in Munich. In cooperation with two experienced notaries in Munich, we draft and implement all types of deeds and documents that require notarization, for example: real estate transactions and matters relating to Corporate Law.

85

ITALY1. Electricity legislation


Th e legal framework governing the Italian electricity sector is dispersed and a substantial number of diff erent legal regulations apply. Th e Testo Integrato della disciplina del mercato elettrico, ap-proved by Ministerial Decree of 01-04-2011, comprises the most comprehensive body of legislation in so far as regulation of the electricity market is concerned. Work has yet to be carried out to consolidate the texts of legislation governing electricity produc-tion from renewable sources and one therefore has to refer to a number of diff erent regulations and laws. Specifi cally, paragraph 1, article 2 of Legislative Decree 387/2003 identifi es the various sources deemed in law to form part of the judicial regime governing renewable energies.Th us, nationally, Italy has the PAN or Piano d’Azione per le energie rinnovabili (action plan for renewable energies) which serves as a guide for compliance with the so-called 20-20-20 objectives.


Th e most important legislation regarding the electricity sector (relating to renewable energies).Market deregulation legislation: ■ Act 09-01-1991 No. 9: deregulation of electricity production from renewable and similar sources.

■ Directive 96/92/EC and Legislative Decree 16-03-1999 No. 79 (Decreto Bersani): deregulation of the electricity market.

Relevant national legislation, relating to renewable energies: ■ Ministerial Decree 01-04-2011, Testo Integrato della discipli-na del Mercato Elettrico.

■ Legislative Decree 03-03-2011 “Decreto Rinnovabili”, brin-ging into law Directive 2009/28/EC for promoting the use of energy from renewable sources, duly amending and revoking directives 2001/77/EC and 2003/30/EC.

■ Decree 10-09-2010, implementing Legislative Decree 29-12-2003 No. 387, guideline for authorisation of facilities.

■ Law 23-07-2009 No. 99 (articles 27 and 31), comprising provisions governing the development and globalisation of companies also relating to energy matters.

■ Legislative Decree 29-12-2003 No. 387, bringing into law Directive EC/2001/77 regarding the promotion of electricity from renewable energy sources within the domestic electri-city market. Legislation set out within this Legislative Decree comprises the minimum common denominator with regard to

a legal structure that has become fragmented both regionally and locally.

■ Legislative Decree 29-08-2003 No. 239 converted to Law 27-10-2003 No. 290 (article 1-sexies), regarding urgent measures governing safety and development of the National electricity industry and electricity recovery.

■ Legislative Decree 16 March 1999, No. 79, bringing into law Directive 96/92/EC regarding common regulations governing the domestic electricity market.


2.1. Property requirements for renewable energy projects

Th e provisions of Part IV of Ministerial Decree 10-09-10 as pro-vided under article 16, regarding suitable areas for installation, must be adhered to when introducing electrical facilities into the countryside and geographical area, together with aspects taken into account by local authorities when granting permits. Com-pliance with just one of the requirements listed under the afore-said legal principle is suffi cient to obtain a positive evaluation. Installation designs drawn up pursuant to ISO quality guarantee, among others, re-use of degraded areas and evaluated possibility of replacement of fossil fuels by renewable energies. If any of the scenarios set out under Article 17 of the same body of legislation apply, however, then the property will not be positively evaluated.

2.2. Property rights in renewable energy projects

Pursuant to the provisions of paragraph 1, article 12 of Legisla-tive Decree 387/2003, any works to carry out renewable energy facilities, as well as any works having to do with infrastructure deemed indispensable for the construction and execution of such legally authorised facilities, are deemed to be public utility works for urgent construction.Land comprises equity and is not deemed subject to degrada-tion in that it can always be used. From an accountancy point of view, any land acquired for subsequent use under the scope of a renewable energy project would be accounted for under the land category and not subject to amortisation; it is presumed that the residual value of land is equal to the acquisition cost at the end of the concession term. One can also possibly look at surface rights (article 952 of the Ita-lian Civil Code) as an alternative to acquisition of land. Th e owner of a given land can constitute a right to set up and maintain a construction on the surface of the land in favour of a third party who acquires ownership thereof and can dispose of this separa-tely to ownership of the land. Th ere are therefore two aspects to

86www.bgi-law.com

surface area: on the one hand, property rights relating to cons-truction and, on the other hand, ownership of the surface area.

2.3. Types of legal agreement

Th e operator must guarantee legitimate use of the land where the facility will be installed. In the case of privately owned land, con-tracts will have to be negotiated guaranteeing the use of the land by setting up rights and obligations. Bearing in mind the fact that renewable energy source facilities are deemed by law to be works of public interest, it should not therefore be diffi cult to reach agree-ment with private landlords. If the land concerned, on the other hand, comprises public land then one should look at the possibility of concession. If expropriation of the land is appropriate, then the provisions of Presidential Decree 327/2001 would apply.


3.1. Land use permits

See paragraph 2.1, which refers to Ministerial Decree 10-09-10 establishing suitable areas and requirements for establishment in a specifi c location.Additionally, article 12.7 of Legislative Decree 387/2003 provides that electricity facilities may be located in areas classifi ed by town planning departments as greenbelt under current town planning regulations. Provisions with regard to agricultural sustainability must be taken into account when choosing locations and particu-lar attention paid to local agricultural sector customs, to safeguar-ding biodiversity and also to cultural heritage and rural landscape.


Th e sole authorisation system established under article 12 of Le-gislative Decree 387/2003 and further implemented under Minis-terial Decree 10-09-10 combines all the permits required to cons-truct and change electrical energy production facilities supplied

from renewable sources under one single procedure. Said sole authorisation must be issued by particular Region or Province with jurisdiction once a Services Conference has been convened (see Law 241/1990). All parties responsible for granting authori-sations take part in such Conferences. Th e documents that must be attached to an application for sole authorisation are set out under article 13 of Ministerial Decree 10-09-2010. Th e steps for authorisation are as follows:Facilities with P < 20 kW: ■ Declaration of Commencement of Business Activity (DIA) to be fi led with the competent Local Authority.

■ Notifi cation, if the area concerned is protected on historic or landscape grounds, to the Sovritendenza dei Beni Culturali.

■ Application to the local grid administrator to install a bi-directional meter.

Facilities with P > 20 kW: ■ Works licence granted by the Local Authority. ■ Environmental Impact Study (VIA), as appropriate. ■ Report from National Park Authority, in the case of a protected area.

■ Approval from Army Authorities if the facility will be located in an area near an army base.

■ Svincolo idrogeologico. ■ Under specifi c authorisations according to the type of power used.

■ Connection request addressed to the Transmission Grid Ad-ministrator (GSE).

■ Permit to act as an electricity bureau issued by UTF. ■ Application to GRTN for classifi cation as IAFR (impianto ali-mentato da fonti rinnovabili, i.e. facility supplied by renewable sources), compulsory requirement for Green Certifi cate applications.

■ Agreements set down with the Grid Manager for the electricity concession.

■ Agreement with private individuals or acquisition of land or easements (optional).

87


Environmental legislation is set out under the Environmental Regulations (Legislative Decree 3-4-2006, No. 152). Permits and costs involved in carrying out reviews must be paid for by the in-terested party who has to submit an application to the competent authority (see Article 7 of the aforementioned regulation).Part 2 Environmental Regulation sets out the appropriate per-mits as follows: ■ VAS (valutazione ambientale strategica, i.e. strategic environ-mental evaluation) (articles 11 to 18). Comprising the analysis and evaluation of drawings and schedules and includes check-ing compliance with all regulatory requirements, drawing up an environmental review, carrying out various consultations, issuing a report stating grounds, setting out the decision and a posteriori checks.

■ VIA (valutazione impatto ambientale, i.e. environmental impact review) (articles 19 to 28). Comprising individual preventive measures with regard to the eff ects of a project on the environment, in order to establish the most appropriate solutions for achieving legal targets.

■ IPPC – AIA (autorizzazione ambientale integrata, i.e. compre-hensive environmental authorisation) (Arts. 29-dupl. Et seq.). Th e purpose of this authorisation is to prevent and reduce pol-lution from research and experimental business activities. Sets out measures for avoiding or reducing residual emissions to air, water and land, thereby achieving a high level of environ-mental protection.

3.4. Other permits

Regional or local legislation must also be taken into considera-tion. Given the continual development of Italian legislation, it is advisable to check websites for the particular Local Authorities directly for more information with regard to the procedures adop-ted by diff erent regions and provinces. Th ese have jurisdiction to issue their own legal provisions on a range of issues, including environmental permits.

4. Choosing a business structure



Liability may be limited or unlimited according to the type of bu-siness structure chosen. See paragraph 4.2. in that regard.

4.1.2. Tax assessment

Th e main tax paid by legal entities in Italy is the IRES (imposta sul reddito delle societá), a proportional tax at the rate of 27.5% applicable to income under the category of company revenue (see Article 83 of testo unico delle imposte sui redditi). Companies resi-dent in Italy for tax purposes are subject in this sense to the IRES as soon as they obtain income from Italy or abroad, whereas non-resident companies are only liable to pay tax on revenue obtained in Italy.An additional tax applies in the regions referred to as IRAP (im-posta regionale sulle attivitá produttive) and comprises a local levy applied on the value of production generated in each given tax period. Companies not resident in Italy are only liable to pay IRAP for the value of production obtained by means of company facilities located in Italy.One should point out that renewable energy works and facilities are exempt from payment of the contributo di costruzione pur-suant to Article 8.1 of Ministerial Decree 10-09-2010.It is important to bear in mind the fact that the tax regime varies according to the particular type of facility. Equally, attention must be paid to the provisions set down annually under the Finance Law (Legge Finanziaria), which can change tax rates.

88www.bgi-law.com

4.1.3. Complexity in training and operational requirements

Requirements necessary for a company to be allowed to operate an electrical power station, as provided under Article 3 of Minis-terial Decree 22-01-2008 No. 37, are as follows:a. Entry on the companies register or provincial record of

traditional companies.b. Th at the legal representative, who must exclusively hold the

one position, meets one of the requirements of Article 4 of the same cited regulation (requirements referring to acade-mic qualifi cations and professional experience).

c. Filing the DIA (business start-up declaration) specifying the intended business activity together with evidence of com-pliance with compulsory requirements in that regard.

Th e provisions set down under regional or local legislation must also be taken into account.

4.1.4. Th e impact of incentives and other restrictions

Th e most signifi cant incentives insofar as electricity production from renewable sources is concerned are generally set out under Article 24 of the Decreto Rinnovabili and comprise: ■ Certifi cati bianchi (white certifi cates). ■ Ritiro dedicato dell’energia elettrica. ■ Scambio sul posto (SSP). ■ Tariff a onnicomprensiva (TO). ■ Quarto conto energia.

“Certifi cati bianchi”: Technically referred to as Titoli di Effi cienza Energetica (TEE) (Energy effi ciency certifi cates). Th ese are de-clarations of energy savings achieved and can be sold. Th e whi-te certifi cate equates to a savings of one TeP (Equivalent Ton of Petroleum). Th e AEEG establishes the energy savings target on

a yearly basis to be achieved by each distributor. If a company fails to achieve the target it can purchase said certifi cates from third-party companies. Sales of White Certifi cates can be made through bilateral agreements or within the market created for that purpose by the GME. Th ese are provided for under Ministerial Degrees of 24 April 2001, 21 December 2007 and Legislative De-cree 115/2008, of 30 May.“Ritiro dedicato”: Th is refers to a simpler modality of electrical power transfer or with regard to other types of grid transfers (such as bilateral agreements or direct sale on the stock market) and is generally used with regard to smalland medium-sized facili-ties. Th is modality is governed by various decisions issued by the AEEG (Italian Energy and Gas Agency). “Scambio sul posto” (SSP): Refers to one of several “valorisation” modalities for electricity produced by renewable energy facilities (another modality is the sale of electricity produced). Th is service must be requested by the interested parties and is provided by the Management of Electrical Services (GSE). Th e SSP is governed by an agreement set down between the facility owner and the GSE, with a one-year duration that can be tacitly extended.“Tariff a omnicomprensiva” (TO): Refers to the alternative incen-tive system comprising green certifi cates in place since the end of 2007 (this excludes photovoltaic facilities). Th e term “omnicom-prensiva” (all-inclusive) is used due to the fact that the character value covers both the incentive component and remuneration for the sale of electricity to the electricity grid. Th e TO tariff applies for a period of 15 years and its value is established on the basis of the various diff erent renewable sources according to the provi-sions set down under Law 244/2007, subsequently amended by Law 99/2009. Aft er said period of 15 years has elapsed, the elec-tricity is paid for pursuant to the fi nancial conditions provided under Article13 of Legislative Decree 387/2003.

89

“Conto Energia”: Th is refers to the incentive mechanism for installing photovoltaic facilities authorised under the GSE. Th is incentive is applied pursuant to the feed-in premium modality and comprises a tariff that incentivises by paying a premium for electricity reduced by the facility over a 20 year period (applica-ble both to self-consumed electricity and that sold to the National Grid). Th e Conto Energía modality forms part of the European programme to incentivise photovoltaic solar energy established in 2005 and the current version is the IV Conto Energía.

4.2. Types of business entities

Italian law provides for eight types of companies under the Italian Civil Code (Articles 2247 et seq.): three of these are personalised companies (societá semplice, societá in nome collettivo and socie-tá in accomandita semplice), another three are capital companies (societá per azioni, societá in accomandita per azioni and societá a responsabilitá limitata) and the remaining types are the societá cooperativa and the mutua assicuratrice. Th e characteristics of personalised companies are: ■ Unlimited and joint liability of partners with regard to obliga-tions taken on by the company, where each partner is deemed liable to meet company obligations with all their present and future assets.

■ Partners and company directors are considered to be one and the same and a partner is therefore also deemed to be a com-pany director.

■ Th e legal capacity as partner may not be transferred without the agreement of the other partners.

Th e characteristics of capital companies are: ■ Separate legal personality, independent from the legal persona-lity of the partners.

■ Partners’ limited liability: liability is limited to the provision of each partner to the company.

■ Partners and directors have separate legal capacity, whereby a company director need not necessarily be a partner, and vice versa.

■ Th e legal position of a partner may be freely transferred.

5. Purchase of equipment and facilities

5.1. Taxes and Customs Implications

Additional costs comprise those payable by the company for use of intangible assets transferred to the specifi c location under con-ditions as required for operation (excluding fi nance costs). Th is therefore concerns the following costs: capitalisation and pre-paration of the location, transport, installation and packaging, connection to the grid, checking the business activity is operating correctly aft er having deducted cash fl ow from the sale of any par-ticular promotions, etc. Specifi cally, some of the taxes payable, as examples, are: ■ “Fabbricati”: Notary costs arising from draft ing the deed of purchase; tax for register entry of said legal act; project fees; costs incurred with regard to primary and secondary urbanisa-tion which correspond to the owner by law.

■ “Impianti e macchinaria”: Facilities and machinery costs deemed by project preparation costs, transport, duties, land installation and preparation costs, specialists fees and technical reviews, assembly and start-up costs.

5.2. Possible supply limitations

None recorded.

90www.bgi-law.com

5.3. Safety requirements

Safety measures are established in general in Ministerial Decree 22-1-2008 No. 37, which updates Presidential Decree 6-12-1991 No. 447 and comprise the legal regulation that must be adhered to for safety and maintenance of electrical facilities. By default and specifi cally when electricity is being produced, general safety re-gulations provided as set down under Article 1 Presidential Mi-nisterial Council Decree of 31-03-1989 and subsequent amend-ments apply. In the case of EPC (engineering, procurement and construction contract) the Developer is deemed responsible for health and safety liability at work. Article 93 of the Testo Unico Sicurezza esta-blishes that the developer may appoint a “works director” and de-legate all safety related issues to that individual thereby exempting the former from all liability in that regard. Legal personality is also particularly given to “the health and safety coordinator throug-hout the period of the works” and also to the “health and safety coordinator during execution of the works”; such persons must therefore have the corresponding professional qualifi cations. Th e following documents must be completed with regard to safety re-quirements, prior to opening the location where the works are to be carried out: a) the PSC (piano di sicurezza e coordinamento), b) preliminary notice and c) the fi le (fascicolo in Italian). Th e develo-per is responsible with regard to the PSC and the fi le, whereas the appointed works manager must provide the preliminary notice. A fundamental requirement with regard to all these documents is the certain date as this is necessary in order to be able to demons-trate, with regard to any a posteriori checks, that the documents concerned were duly requested prior to commencing works.

5.4. Operation and maintenance

As established under Ministerial Decree 22-01-2008 No. 37, com-panies must carry out construction and installation pursuant to current legislation in force (UNI, CEI and regulations set down by other EU homologation bodies) and are deemed liable with regard to correct execution of the works. Insofar as maintenance is specifi cally concerned, costs are classi-fi ed according to various diff erent types: i) ordinary maintenance, comprising normal maintenance and repair of assets and ii) ex-traordinary maintenance, comprising improvements involving a signifi cant increase in productivity, capacity, safety or service life of the asset.

Th ere is therefore scheduled or cyclic maintenance, which refers to maintenance of facilities requiring regular attention.

6. Financing renewable energy projects

6.1. Financing large projects

One of the most commonly used fi nancial instruments for ca-rrying out (medium and large size) investments as an alternative to traditional banking debt is the so-called project fi nance. Th is represents a structured type of fi nance and may be reimbursed from cash-fl ow generated by the fi nance project, and is granted to a vehicle company (referred to as project company or special purpose vehicle, SPV) established for the sole purpose of said project operation. Th e particular project would be evaluated by institutions with fi nancing capability and which would comprise the principle guarantee for return of the amount loaned and re-turn on risk capital. From a legal point of view, project fi nance is a technical vehicle that does not fall into typical contractual catego-ries. It essentially comprises all of the contracts involved (fi nance agreement, guarantee, concession document, works and service contract) comprising the structure of the project fi nance between them.Specifi c legislation must be taken into account however with re-gard to each energy type, given that leasing is the preferred fi -nance method for certain specifi c facilities, such as photovoltaic facilities.


See project fi nance under paragraph 6.1.

7. Connecting to the grid, transmitting and selling electricity

7.1.1. Government regulations applicable to connections

Legislation governing connection of facilities to the grid is very dispersed under Italian law and special attention must be given to regulations issued by the AEEG (Electricity and Gas authority). Th e main legislation in this regard comprises: Law No. 481/95, which defi nes technical and fi nancial conditions for access to the

91

92www.bgi-law.com

grid; Legislative Decree 387/03, setting out facilities for insta-llation of renewable energy power stations and Law No. 244/07 which, in addition to simplifying execution of installations, defi -nes substitute procedures to the AEEG for scenarios in which the grid management fails to respond and for any possible disputes that may arise between producers and grid management.

7.1.2. Mandatory connection under public utilities: connection procedures and agreements

Law 23-07-2009, No. 99 provides under Article 32 that the Italian connection agency is the company TERNA SpA and the producer company therefore has to negotiate with the former with regard to connection to an electricity transmission and distribution grid, in that this does not come under the procedure for sole authorisa-tion covered by Legislative Decree 387/2003. Obligations with re-gard to connections are established under Article 3 of Legislative Decree 16-03-1999 No. 79, pursuant to which grid management may connect any entities that so require and duly comply with requirements in that regard to the grid and the former must fur-thermore guarantee continuity of service for as long as technical-fi nancial conditions are duly met. Connection of the facility to the grid for electricity transfer is absolutely essential for success of any given project. Times and costs involved in connection must be agreed between the parties, according to criteria and rules set down in that regard by the AEEG. In practice, as soon as an con-nection application is received, the grid management, following due analysis and site visits, will provide the applicant with a pro-visional report and whenever that report is accepted by the latter, the parties will then undertake to carry out works as necessary in the time and manner set down by said Authority for connection to the grid.

7.2. Transmitting and selling electricity: the performance of energy purchase agreements with public utilities

Electricity production, import, export, purchase and sale activi-ties are free in so far as public service obligations set out under legal provisions are concerned (Article 1 of Legislative Decree 79/1999). Th e State is responsible for transfer and supply activities and these are attributed by concession to the national grid transfer management body. Electricity distribution is carried on under the legal provisions governing concession granted by the Ministry for Industry, commerce and works.


8.1. Liability for negligence

8.1.1. Liability for negligence as Owner / Operator of a Renewable Energy Project

Liability with regard to negligence is governed by Article 44 of Decreto Rinnovabili, which establishes government fi nes to be im-posed on construction and execution of unauthorised works and facilities in amounts ranging from 1000 to 150,000 euros, accor-ding to the size of the facility or works carried out. Such fi ne will be imposed on the facility owner, on the developer and on the works manager. Furthermore, sanctions will be imposed on the same aforementioned entities in the event of works being execu-ted without the simplifi ed permit procedure, or in scenarios whe-re the declared works and actual works diff er, comprising govern-ment fi nes in an amount of 500 to 30,000 euros.Separate to the obligation to have the appropriate permit and to return things to their previous condition, breach of one or more requirements as set down in the simplifi ed procedure governed by Article 6 will give rise to a government fi nes equivalent to one third of the least of the aforesaid amounts and will be imposed on the facility owner, developer and the works manager.

9393

All the aforementioned sanctions are separate to any as provided under regional or local legislation.

8.1.2. Liability for negligence as land owner of a Renewable Energy Project

See paragraph 8.1.1.


8.2.1. Personal injury or damage to property

No specifi c regulations exist governing liability for personal in-jury or damage to property as arising from a renewable energy project. General hypotheses governing compensation for dama-ges as established under Article 2043 et seq. of the Italian Civil Code would apply.

8.2.2. Noise

No specifi c regulations exist to sanction disturbances from noi-se as arising from renewable energy projects and the stipulations of the framework law governing acoustic pollution (Law 26-10-1995, No. 447) would apply. Said legislation provides sanctions for breach of its provisions, separate to any possible sanctions provi-ded for under Article 650 of the Italian Penal code.Government sanctions provided for under Article 10 of the afo-resaid regulation, according to each particular scenario, are as follows: ■ failure to observe legal procedures provided for by the go-vernment authority with jurisdiction under Article 9: from 1,032.91 to 10,329.14 euros.

■ Sanctions for exceeding values established in Articles 2.1. e) and f) for emissions in the course of carrying on fi xed or mo-bile sound emitting activities, in addition to those provided for under Presidential Council of Ministers Decree of 1-03-1001:

from 516.46 to 5,164.57 euros. ■ Breach of provisions set down under regulations implemen-ting said law or regional, provincial and local entity provisions governing noise issues: from 1,032.91 to 12,911.42 euros.

Possible closure of a facility due to excessive noise is not covered under any specifi c law that may be imposed by adopting the “ordi-nanze di necessitá”, provided for under Article 9 of the Act.


Signal interference has to do with the quality of electricity dis-tribution and several diff erent regulations exist. Th ese defi ne methods and techniques for measuring parameters with regard to the quality of electricity supplied to the grid. Th e CEI (Comitato Elettrotecnico italiano) legislation EN 50160 must be considered in this regard, together with regulations governing the EMC (Nor-me sulla compatibilitá elettromagnetica) and AEEG decisions.


Visual contamination is a new concept referred to nationally within Cultural Patrimony Code No. 42/2004 and this does not establish any precise liability arising from audiovisual contami-nation. Regional and local legislation must be reviewed in this regard i.e. these matters are more specifi cally dealt with under regional and local law.

8.2.5. Protection of wildlife

Protection of wildlife was updated under European legislation set down in Legislative Decree of 16-08-2006, No. 251, setting out urgent provisions to ensure the Italian judicial system adheres to wildlife Directive 79/409/EEC. Th at regulation has not however been brought into Italian law. At the present time there are there-fore no national regulations in this regard and local and regional wildlife regulations apply.

94

95

CERUTTI & PARTNERSBALMS GROUP INTERNATIONAL

Cerutti & Partners, with headquarters in Milan and offi ces in Madrid, is a law fi rm specialized in advising and consulting companies, at judicial and non judicial fi elds.Th e fi rm, founded by Mr. Massimo Cerutti, features, among its staff , highly skilled professionals who exploit their experience in order to achieve a major competence within Commercial, Company, International, Bankruptcy and Labour Laws. Such professionals, who are carefully selected and addressed towards specifi c professional profi le, operate so that client companies fi nd in the fi rm an adequate consultancy and a constant and valid reference point concerning the transactions underway.Cerutti & Partners, collaborating regularly with native speaking professionals, is able to carry out the dossiers in Italian, English and Spanish.

AREAS OF EXPERTISE

■ Commercial Law ■ Company Law ■ Bankruptcy Law ■ EU Law-Antitrust ■ Employment and Labour Law

CERUTTI & PARTNERS

Via Durini 220122 – MilanItaly

Tel: 00 39 02 76009493Fax: 00 39 02 76008374

[email protected]

PROFESSIONALS

Avv. Massimo Giorgio CeruttiAvv. Gloria BulantiAvv. Federica CinnanteAvv. Cinzia ParodiDr.ssa Eleonora RuggieriAb. Carmen García Pérez

97

1. Electricity act



Since the adhesion to the European Union, as a member state, Ro-mania has been compelled to enact the European directives and to establish a legal framework with regards to the electricity market.Th us, the electricity market is mainly regulated by the ensuing laws which are complemented by other regulations such as the company law, the construction law and other specifi c ones:(1) Electricity Act no. 13/2007 published in part 1 of Offi cial Ga-zette no. 51/23.01.2007.(2) Law no. 220/2008 on the promotion of renewable energy pro-duction, republished in part 1 of Offi cial Gazette no. 577 of 13 August 2010.(3) Government Decision no. 1892/2004 on establishing a me-chanism for promoting the production of electricity from E-RES, published in part 1 of Offi cial Gazette no. 1056 of 15 November 2004.


2.1. Property Requirements for Green Energy Projects

2.2. Property Rights in Green Energy Projects


To construct on land in Romania, one must acquire a right to use the real property which, according to Construction Law no. 50/1991, republished in part 1 of Offi cial Gazette no. 1066 din 17/11/2004, as further amended and supplemented, can be (i) a property right or a dismemberment of such right (superfi cies, usufruct, easement rights) procured typically through a notarised agreement or (ii) a concession right procured through a conces-sion agreement.


3.1. Land Use Permits

3.2. Operating Permits for Green Energy Projects

3.3. Environmental Permits

Stages to be fulfi lled to start-up an E-RES generation facility:

Th e Urban Planning Certifi cate is issued at the request of any in-terested person by the Local Public Authorities and it is an infor-mative document, aiming to provide a complete list of prerequisi-te approvals, consents, permits and authorisations for a building permit. Th e following step is to obtain a Site Permit, a Feasibility Study and a Grid Connection Permit; all these documents are issued by Network Operators. Th e Site Permit is required for the development of any construc-tion and any electrical installation, if it is a requisite under the Ur-ban Planning Certifi cate and if the installation will be located in the security zone of an energy facility. Th ereaft er, for the purpose of establishing the most advantageous connection, from econo-mical and technical perspectives, the network operator prepares the Feasibility Study which is however paid by the developer of the E-RES generation facility. Once the connection method has been decided on, the following step is for the developer to make a general estimation of the costs of the connection which will serve as a basis for the computation of the connection tariff and to sub-mit the documentation for the issuance of the Grid Connection Permit. Th e latter represents the network operator’s reply to the developer’s application and includes data regarding the grid con-nection method, the approved capacity, the works to be carried out for the installation of the E-RES generation facility, the do-cumentation to be submitted for the performance of the connec-tion agreement, the value of the connection tariff and a number of technical specifi cations regarding the E-RES generation facility. Th e local distribution network operator will issue the Grid Con-nection Permit for those projects with an installed capacity of less than 50 MW, while the Romanian electricity transmission opera-tor will issue it for capacities greater than 50 MW.Furthermore, it is necessary to obtain the Technical Specifi cations issued by Local Public Authorities and containing the related drawings. Th e economic and technical solutions for the fulfi lment of the investment should be prepared by an authorised architect and an authorised engineer. Th e technical specifi cations will con-tain the relevant documents and drawings required for the Buil-ding Permit.Th e next step is the Environmental Agreement that includes the application for and the granting of the Environmental Agree-ment is mandatory for public and private projects where such projects signifi cantly aff ect the environment by their nature, size or location. However, should a project not adversely impact the

97

ROMANIA

98www.bgi-law.com

environment, the relevant environmental authority will endor-se the implementation of the project without the prerequisite of Environmental Agreement and, on a case-by-case basis, provide certain terms and parameters that must be observed within the project construction and development.Another very important document is the Building Permit, which may only be requested by the holder of a valid title upon the land. Usually the documents requested by the Urban Planning Certi-fi cate in order to apply for the building permit are: Title deed, PAC documentation, Electrical energy connection, Telephone connection, Environmental protection, Population healthiness, Romanian Civil Aeronautic Authority, National Administration for Land Improvements, Withdrawal from agricultural circuit, PUZ (endorsed and approved), Authorisation taxes. Subsequent to the granting of the grid connection permit and the building permit, the developer will enter into, together with the network operator, the connection agreement which will entail the payment of the connection tariff and the implementation of con-nection works within the terms of the agreement.Developing of new generation facilities is subject to Establishment Authorisation from the National Energy Regulatory Authority (hereinaft er “ANRE”) whereby ANRE determines the duration of the permit in accordance with the necessary period for the rele-vant works and commissioning thereof and in association with the terms specifi ed in the documents submitted by the applicant.To generate electricity and to commercially operate the genera-tion facility, the developer should obtain from ANRE the Electri-city Generation Licence following a strictly regulated procedure.

3.4. Other Permits

Furthermore there are other licences and permits that are requi-red in the projects that involve other types of renewable energy sources. For example in the event that the project uses water as a source of renewable energy, it is necessary to obtain several appro-vals and permits from the Ministry of Waters and Environmental Protection.





4.1.3. Complexity of Training and Operational Requirements



In order to start up an E-RES generation facility, the investor has to set up a Romanian legal entity as a special project vehicle. Th ere are fi ve company forms regulated by Romanian Companies Law no. 31/1990, republished in part 1 of Offi cial Gazette no. 1066 of 17/11/2004, as further amended and supplemented, yet two of them (i.e. the joint stock company and the limited liability com-pany) are customarily used by the majority of investors due to standard corporate governance rules.

99

Moreover, the most used company structure for developing such an E-RES generation facility is the limited liability company, and according to the legislation in force regulating the incorporation and development of said company states that the shareholders shall be liable towards third parties only up to the amount sub-mitted as the share capital of the legal entity. Th eir liability is res-tricted to those contributions in money or in kind. Besides, the formation and registration of a limited liability company with the competent authorities, such as the Trade Registry where the com-pany has located its headquarters, is not as complex and thus a limited liability company can dully function within 4 days.Th e taxes to be assessed for developing an E-RES generation faci-lity as a limited liability company are twofold: those on the inco-me of the company following the development of the E-RES pro-ject and those on the dividends distributed to the shareholders, if appropriate.


5.1. Tax and Customs Implications

5.2. Possible Supply Limitations

5.3. Safety Requirements

5.4. Operations and Maintenance

With regard to the purchase of the technical equipment required for developing an E-RES generation facility, the place of purchase must be taken into account; meaning whether or not it is acquired within the EU. Hence, if the technical equipment is acquired from

within the EU there are no taxes; otherwise there will be tax and customs implications as per the regulations in force.In regard to possible supply limitations, the Electricity Law per-mits the distribution operator to limit the energy supply in the event that it puts at risk the life or health of humans, or the inte-grity of materials; to prevent or limit damage to power equipment in the electricity network areas or national electricity system; or to execute operations and works that cannot be performed without interruption.Concerning the safety requirements, Electricity Law no. 13/2007 states that in order to protect the transmission lines, individuals and legal entities are forbidden to build in the safety area of the facilities without having obtained a site permit issued by the net-work operator and system operator. Nor are they permitted to carry out excavations of any kind or to establish plantations in the area of transmission lines; to store materials on passageways and in the protection and safety areas without the approval of the network operator and the system operator; to damage or permit the deterioration of buildings, fences and identifi cation and war-ning inscriptions related to the transmission lines; to limit or to obstruct by means of fences, buildings or by any other mode of access to the equipment of the network operator and the system operator.

6. Financing Green Energy Projects



99

100www.bgi-law.com

When it comes to fi nancing an E-RES generation facility, there is no one-size-fi ts-all solution. Tailoring the right funding structure for such developments depends on where the E-RES generation facility is planned to be built, what scale of project is contempla-ted, and whether it’s a purely private or community endeavour. However, the majority of Romanian fi nancial institutions grant in most cases the needed funds for the investment in and develop-ment of E-RES generation facilities.Th e Romanian legislation in force, as per Law no. 220/2008 on promotion of renewable energy production, also provides incen-tives for E-RES generation facilities. Energy, regardless of the sou-rce, is sold at the market price and the price is established based on market off er and demand, and agreed by the generators and suppliers/traders through Energy Purchase Agreements.In addition to this market price, each E-RES generation facility source which qualifi es for the aid receives a number of green cer-tifi cates from Transelectrica. Th is is variable depending on the sources of energy for each MWh of green energy delivered into the national grid.Th e green certifi cates received by the E-RES generation facili-ties can be traded independently of the quantity of energy they represent (i.e. 1 MWh) on the green certifi cates market, which is separate from the energy market (or on the centralised green certifi cates market). Th e minimum and maximum price levels for green certifi cates are established by law. Th us, up until 2014, the minimum price per certifi cate is €27, and the maximum €55.State aid to encourage renewable energies is also available un-der various other schemes, one targeted specifi cally at renewable

energies, others supporting investments in general. But these schemes are only available for: ■ Projects which have not been fi nanced with any other public funds, and where the funding was sought and approved before work had begun (preliminary studies do not count);

■ Initial investments such as the acquisition of land, machines and know-how to set up a new unit or expand an existing one, or to make fundamental changes in the global production process;

■ Investment in entirely tangible assets, including land (up to 10% of eligible costs), buildings, equipment or facilities;

■ Investment in entirely intangible assets for SMEs (or up to 50% of eligible costs for large companies), such as patents, licences and know-how;

■ A mixture of tangible and intangible assets but not VAT, interest and other commissions, second-hand equipment or operational costs.

Th e schemes are open to companies of all sizes and sectors apart from several exemptions. Costs which are eligible under one sche-me cannot be counted under another. Any costs which are wholly or partly eligible under more than one scheme will be allocated to the scheme with the higher upper limit.Furthermore, in respect of the funds available to support the in-vestments in the construction and modernisation of power units, Government Decision no. 750/2008 has approved a scheme of re-gional state aid regarding operation of E-RES generation facilities. Th e scheme was elaborated in accordance with the Sector Ope-rational Programme “Increase of Economic Competitiveness”

101

Priority Axis 4 “Increasing energy effi ciency and security of supply, in the context of combating climate change”. Th e funds are available until the end of December 2013 and the estimated bud-get is €200 million (in lei), out of which 88% represents non-reim-bursable funds from the EU and 12% from the domestic budget. Eligible applicants are small, medium and large enterprises, to the extent that the value of the project does not exceed €50 million. Th e level of fi nancing is 40% for the enterprises located in Bucha-rest-Ilfov region and 50% for the other regions of development.


7.1.1. Government Regulation of Connections

7.1.2. Mandatory Connection under Public Utilities: Connec-tion Procedures and Agreements


Electricity Law no. 13/2007 and Government Regula on ap-proved under Decision no. 90/2008 provide technical condi ons for accessing the electrical grid.

To access the grid, electricity producers must apply for a tech-nical permit issued by the grid operator. Th e price of the permit depends on technical variables of the electrical power facility. Th e Grid Connection Permit includes data regarding the grid

connection method, the approved capacity, the works to be ca-rried out for the installation of the E-RES generation facility, the documentation to be submitted for the performance of the con-nection agreement, the value of the connection tariff and a num-ber of technical specifi cations regarding the E-RES generation fa-cility. Th e local distribution network operator will issue the Grid Connection Permit for those projects with an installed capacity of less than 50 MW, while the Romanian electricity transmission operator will issue it for capacities greater than 50 MW.For the purpose of establishing the most advantageous connec-tion from economical and technical perspectives, the network operator prepares the feasibility study which is however paid by the developer of the E-RES generation facility. Subsequent to the granting of the grid connection permit, the investor will enter into, together with the network operator, the connection agreement which will entail the payment of the con-nection tariff and the carrying out of connection works within the terms of the agreement. However, the performance of the connec-tion agreement is not mandatory if there is no need for new works or modifi cations of the exiting connection installations. Access to the public grid by investors is a right recognised under expressly stated conditions of the law and has to be observed by the network operator, as well as by the power supplier. Nevertheless, access to the grid could be restricted to the extent that the security of the National Power System is not aff ected.Th e E-RES producer may sell the E-RES on the energy market, similar to any other electricity producer, obtaining the market price. For covering the entire generation costs and for obtaining a

101

102www.bgi-law.com

reasonable profi t, the producer receives a green certifi cate for each MWh of electricity supplied in the electricity network. Th is green certifi cate may be traded within the legally set-up price limits.Th e wholesale of the E-RES on the energy market includes regula-ted contracts and mutually negotiated contracts between produ-cers and suppliers, regulated contracts for covering the network losses, producer-producer and supplier-supplier bilateral nego-tiated contracts, as well as contracts concluded on centralised markets – Centralised Market of Bilateral Contracts (CMBC), Centralised Market of Partially Standardised Bilateral Contracts, with continuous negotiation (CMBC-CN) and on the fl oor of the RCE (Romanian Commodities Exchange) regarding energy, tran-sactions on Day-Ahead Market (DAM) and on Balancing Market (BM).




8.1.2. Liability for Negligence as a Landlord of a Renewable Energy Project

8.2. Liability forNuisance


8.2.2. Noise

8.2.3. Signal Interference

8.2.4. View obstruction

Th e Electricity Law no. 13/2007 states the liability of any person in regards to the noncompliance with this law.In addition to that, licence and permit holders are liable for any damage and prejudices that they cause the land owners next to the E-RES generation facility in the circumstances of interference for the refurbishment, repair, maintenance or failure thereof.In the event that the landlords in the vicinity of the licence and permit holders that have the easement and use rights for these lands are aff ected by their activity, the landlords have the right to receive compensation for the produced prejudices. Th e amount of these compensations is determined by the agreement of the parties or by the law. In the calculation of the amount of com-pensation, the following will be taken into account: the surface area aff ected by the performance of the works concerning the E-RES generation facility, the type of crops, plantations and facilities aff ected by the works; as well the activities restricted by the per-formance of the works.In regards to noise and signal interference, the E-RES generation facilities owner/operator is obligated to pay for any noise pollu-tion following “the polluter pays” principle. Noise and signal in-terference are considered noise pollution due to the fact that they

103

aff ect the environment and the human activity in the vicinity of the E-RES generation facility as well. As a consequence of applying this principle there are three situations as follows: the fi rst refers to preventative actions taken by the E-RES gene-ration facility owner/operator, the second refers to the reme-dies taken by the E-RES generation facility owner/operator as a result of the damage produced and the third states that if the operator does not have enough fi nancial resources, then the countries that apply the same “the polluter pays” principle would fi nd a solution for that case. Moreover, depending on the nature, size or location of the E-RES generation facility to be built, the Environmental Impact Assessment procedure must be undertaken as per Romanian and EU law in force. Th is procedure is required in order to obtain the Environmental Authorisation and its main purpose is to identify any potential environmental problems associa-ted with the E-RES generation facility, assessing its scale and impact and identifying, if necessary, the measures to avoid or reduce these eff ects.Specifi c tests and subtests will be run within the Environmen-tal Impact Assessment procedure as required for the Environ-mental Authorisation with regard to the impact of the E-RES generation facility on the following: protected areas and local wildlife; noise; visual obstruction; aesthetics; cultural her-itance; the quality of soil, water and air; electromagnetic radia-tions; the fl icker eff ect; as well as of the impact of the E-RES generation facility’s decommissioning over the land (which depends of the type of the E-RES generation facility).

103

104

107

RUSSIA1. Law of Electricity

Legislative and normative base for renewable energy development in Russia is still in the initial development stage. Generally, the re-newable energy industry in Russia remains largely undeveloped, hindered by low tariff s for conventionally sourced electricity and lack of clear rules for operating in the sector.Th e electricity sector is governed by general and special legisla-tion. General legislation is presented by the Constitution of the Russian Federation, nearly by all Codes – the Civil Code, the Land Code, the Tax Code, the Budget Code, the Customs Code of the Russian Federation, etc. Special legislation includes: Federal Law No. 35-FZ “On the Electric Power Sector”, Federal law N 28-FZ “On Energy Saving”, “On state regulation of prices and tariff s for electricity and thermal energy”, etc. Th ere is also a technical regulation and, fi nally, the regulation of international law in the form of international treaties. It is worth noting the Energy Strategy of Russia for the period until 2030 and the Federal Law on Energy Saving which encourage the develop-ment of alternative energy sources. A new national energy strategy for the period untl 2030, approved by the Russian government in November 2009, aims to reduce Russia’s dependence on fossil fuels by increasing the share of re-newable sources in its energy mix.Over the last decade, signifi cant steps have been taken to reform the Russian energy sector, including privatisation, de-monopoli-sation and diversifi cation of the energy mix.Th e Energy Strategy of Russia for the period until 2030 can be defi ned as the basic document containing a system of scientifi c statements about the long-term priorities of state policy and its implementation mechanisms. It identifi es priorities; orientation and structural funds; regional scientifi c/technical, environmental and climate policy in the energy supply of the country. It also de-fi nes the means and mechanisms for implementing the provisions set forth, among which the leading role is given to the adoption of regulations that implement the main provisions of the Strategy.Legal regulation of the electricity industry is exercised at the fe-deral level. Th e subjects of the Russian federation and local go-vernment bodies have the right to take regional and municipal programmes in the fi eld of energy conservation and energy effi -ciency, the contents of which can not contradict federal laws.


Th e plot of land on which it is planned to arrange a system of renewable energy sources (e.g. solar power station), should be either privately owned by the entrepreneur, or can be used on the terms of land lease.In this area, the following laws shall apply: the Land Code, the Civil Code, the Forest Code, the Water Code. Th ere are no spe-cial rules governing the provision of ownership and lease rights to plots of land for the construction and installation of renewable energy sources in the Russian Federation.If the land is not owned by citizens, legal persons or municipali-ties, it is public property, in accordance with paragraph 2 of Art. 214 of the Civil Code of the Russian Federation (hereinaft er the CC), Section 1, Art. 16 of the Land Code of the Russian Federa-tion (hereinaft er the LC RF).Th e ownership right in plots of land arises on the bases provi-ded by civil and federal laws and is subject to state registration in accordance with the Federal Law “On state registration of immovable property and transactions involving such property”. Th us, pursuant to the provisions of the CC and the LC of the RF, such grounds include the following: acts of state bodies and local authorities, which are provided as a basis for land rights, contracts and other transactions provided for by law, the purchase of a plot of land on the grounds prescribed by law (for example, in the case of transfer of land rights, buildings and structures are built on the plot during the transition of ownership); judicial decisions.Th e land is rarely owned. By contrast, it is more commonly used on lease agreement terms. Land lease agreements are fi xed-term contracts and are subject to state registration, if their term exceeds 1 (one) year. Upon expiration of the land lease agreement, the les-see has the priority right to enter into a new land lease contract, except for certain cases.Th e lease contract of state or municipal plots of land is based on the results of the public authorities or local self-government auc-tion.Th e intended purpose of a plot of land should be taken into ac-count. For example, construction is prohibited on agricultural lands. Th e LC of the RF delineates the provision of land for cons-truction and for purposes not related to construction. Par. 4 of Art. 28 of the LC of the RF specifi es that the provision of stateor municipally-owned plots of land for construction purposes can be denied only in certain cases: withdrawal from the market area, prohibition of privatisation by federal law; reservation of plots of land for the state or public needs.

107

108www.bgi-law.com


In accordance with the principles of land law, enshrined in the Land Code of the Russian Federation, all lands are divided into categories by purpose, according to which legal regime is deter-mined by the land and its use in accordance with the zoning of the territories and the laws.Th e LC RF, which establishes the list of land categories, provides said category, like energy production. Land is used in accordance with its established intended purpose.Th e type of permitted use of the available types of zoning areas are chosen independently, without additional authorisation and approval procedures.Lands of power industry: lands that are used or intended to sup-port the activities of organisation and operation of power plants.In accordance with the Federal Law “On the sanitary and epide-miological welfare of the population”, the provision of land for construction is allowed with the sanitary-epidemiological ends when the intended use of land is in compliance with the sanitary regulations.In fact, licensing and legislative regulations of the operation of power plants are under development.Th ere is a draft law “On renewable energy sources”, which pro-vides for the licensing, supervision and control in the use of re-newable energy sources.

Th e Government Executive Order of 08.01.2009 “On main di-rections of state policy in the fi eld of energy effi ciency of electric power using renewable energy sources in 2020,” analyses the state of renewable energy in Russia. It also provides a plan for the im-plementation of measures to improve the legal regime of natural resources for construction and operation of power generating fa-cilities using renewable energy sources.Power plants must operate on the basis of renewable energy in order to qualify.Information about the power plant must be provided in the Regis-ter regarding the issuance and redemption of certifi cates proving the amount of qualifying electric power generated on the basis of renewable energy.Th e Federal Law “On Environmental Protection” sets out specifi c limits of permissible impact on the environment.For exceeding the established limits of permissible impact on the environment and other subjects of economic activity, transgres-sors will be held responsible depending on the harm caused to the environment, in accordance with the law.


Th ere are no legislation restrictions about choice of business struc-tures, it can be state-owned enterprises, which are fi nanced by go-vernment budget, or business companies and non-profi t-making

109

organisations, which are fi nanced by foreign and other investments. For example, mini hydro power plants and wind power plants are usually organised as stock companies (scientifi c production com-panies). Th e direction of Government policy in this area of energy production is focused on the introduction of resources and powers of SMEs to construct new power plants and develop new equip-ment to become more independent of Europe and the USA. Th ere are no restrictions in the Tax Code on creating and selling renewable energy, but there is Government Executive Order da-ted 08.01.2009 which involves the system of additional charges, which is paid over the equilibrium price of the energy wholesale market; entitlement payments from national budget, which are indemnifying the value of technical connections to the power grid for oscillating objects with a total capacity of at least or equal to 25 MW; and liabilities of transmitting and distributing companies in priority renewable-energy purchases for compensation of their own expenses in power transmitting processes. Unfortunately, as this order forms part of the administration’s Governmental Acts, for the time being this question has not been resolved by legisla-tive authority. Th ere are some administrative restrictions in market authorisa-tion of renewable-energy companies. For example, there are res-trictions on generating capacity: 1) companies which have a gene-rating capacity of less than 5 MW are only authorised on the retail market; 2) companies which have a generating capacity of more than 25 MW must sell energy only on the wholesale market; 3)

companies which have a generating capacity of more than 5 MW but less than 25 MW have a choice of markets.Russian scientists call this area of energy “non-traditional” and “uncommon” and they are right, because the renewable-energy area in Russia is in the initial development stage. Th at is why there is not a lot of legislative acts and more administrative regulations on important matters, such as tax, duties and fees.2. As mentioned above, there are no restrictions on choosing a bu-siness structure. Essentially, there are stock companies and non-profi t companies in this area. Stock companies can be created as scientifi c production associations, inter-sector scientifi c/technical companies, factories, etc.It is important to distinguish between companies that produce and sell energy and companies that perform maintenance services on equipment. Maintenance companies are usually organised in business companies (stock companies and LLC), which is create in development design technical offi ces.


Primarily, this question depends on oscillating equipment, becau-se without the installation of generators certain companies have no business purpose. Th e capacity and technical requirements of oscillating equipment should be certifi ed, accident-free and fool-proof. Th e Government of Russia determines certifi cation of osci-llating equipment by its Acts.

109

110www.bgi-law.com

Th ere is diff erent specifi c equipment, such as solar batteries and collectors, photo-elements and modules for solar energy produc-tion, thermo compressors, hydro-electric sets, wind turbines for water pumping, etc.Th ere are a lot of equipment makers in Russia in the hydro and wind power sectors, etc. For example, the primary Russian equi-pment maker is INSET, a joint stock company, from Saint Peters-burg, which develops a lot of new devices and machines for small hydro power plants. All equipment for geothermic stations was created by Russian specialists.However, these advances have not helped Russia gain indepen-dence from Europe and America. Th at is why its governmental strategy consists of the intentions of raising the level of equip-ment quality, developing innovative technologies, raising the pro-fessionalism of specialists in this sphere and creating profi table work conditions.Unfortunately, as we mentioned, the Russian Tax Code does not contain specifi c fees for the renewable-energy industry.


One of the trends in improving governance (management) in the fi eld of energy effi ciency by using renewable energy sources is to provide development and implementation of measures in-tended to attract non-budgetary investments for construction and

reconstruction of existing generating facilities, which operate on the basis of renewable energy. Th is includes active development of international cooperation in this sphere. Foreign investors able to share their experience in this fi eld are being attracted. Moreover the mechanism of public-private partnerships (the PPP) can be used (this opportunity is expressly provided for in the energy development strategy of the Russian Federation until 2030). Th e process of implementing public-private partnership is governed by the laws on PPP and concession agreements. Specifi c regulations governing PPPs in renewable energy area does not exist. Currently, energy sector funding, including renewable energy sources funding, is carried out mainly through state (budget) fun-ding, as well as extra-budgetary funds. Th e energy development strategy of the Russian Federation until 2030 contemplates an increase in: the role of government participation in the develop-ment of the Russian energy sector, including, inter alia, provision of necessary resources for construction and modernisation of energy infrastructures; in the provision of government guaran-tees to entities for the realisation of priority long-term investment projects; in the support of the fi nancial-economic sustainability of energy companies.In addition, the Government of the Russian Federation by vir-tue of par. 34, sub-article 1 of Art.21 of the Electricity Law must support the use of renewable energy sources and promote the use of energy effi cient technologies in accordance with the budgetary legislation.

111

Single decrees and directives of the executive authority may pro-vide for the allocation of funds from the federal budget aimed at the development of renewable energy sources.In our opinion, in Russia, it is easier to develop “renewable” energy on the basis of existing power plants than starting from scratch (it is so because of administrative barriers). Electric power stations, hydroelectric power stations and other facilities that ge-nerate energy, are usually governmentally owned and are natural monopolies with dominant positions. Th is hinders access of in-vestors, particularly foreign investors, to the plants. Th e purpose of the energy strategy is to increase the number of public utilities and increase investments in public assets of energy companies.Th e provision of credit funds and the process of negotiating and entering into agreements with lenders and investors in the energy sector do not diff er from the provision of credit to businesses in other spheres. Th ere is no specifi c way of negotiating and provi-ding credit to renewable energy entities under law.However, subject to par. 5, sub-article 1 of Art. 67 of the Tax Code of the Russian Federation N 146-FZ, dated 31 July 1998, it is possible to provide an investment tax credit to an organisation investing in renewable energy projects. An investment tax credit provides the organisation with an opportunity to reduce their tax payments for a specifi ed period and within certain limits. Inves-tment tax credit may be granted for organisations’ income tax as well as for regional and local taxes. An investment tax credit may be granted for a period from one to fi ve years.


Th e meaning of “electrical grid” referred to in Russian Federal Law “On the electric power industry” and other Acts of Govern-ment. Electrical Grid is a complicated term, it consists of produ-cing and selling renewable energy companies, maintenance and technical companies, transmitting companies, etc. Th e major electrical grid is the Unifi ed Power System (UPS) of Russia, which consists of six transmission system operators, a lot of energy companies, power plants at diff erent levels, etc. Th ere are small hydro and wind power plants too. Diff erent renewable energy companies can unite in one energy concern or holding; electrical grids are not restricted. Th e crea-tion of an electrical grid or the conclusion of an Agreement of adhesion is the same as for connecting companies or non-profi t organisations; they are regulated by the general provisions of Civil and Contract Law in Russia.Th ere are two specifi c types of contracts between renewable ener-gy facilities, which are regulated by the provisions of Energy and Civil Law: contracts of sale and power capacity on delivery and bi-lateral contracts of transmitting power capacity. Th e fi rst type was created as a guarantee by investors, ensuring that their power ca-pacity is solvent and that the Russian energy market will be able to pay for it. As mentioned above, power capacity should be defi ned by specifi cations drawn up by the government. Bilateral contracts

111

112www.bgi-law.com

are entered into by generating and consuming entities on arm’s length terms agreed between the two parties of this contract.


Unfortunately due to a lack of legislative regulation of the ge-neration of renewable energy, a specifi c liability in this sphere is not consolidated at all. A common basis of liability is conso-lidated in the various codes and can be used in cases of viola-tions in the renewable energy sphere.Diff erent types of liability are determined by legislation.Administrative responsibility: executive authorities may in-tervene in the event of perpetrators. Th e main legal act is the Code of Administrative Violations.Civil liability: arising from the breach of property and personal rights of citizens and organisations. Th e main legal act is the Civil Code of the Russian Federation.Criminal liability: is used in court to face the perpetrator of a crime. Th e only piece of legislation which establishes criminal responsibility is the Criminal Code of the Russian Federation.For the violation of legislation on renewable energy sources, perpetrators will be held liable in accordance with legislation.Among the most important means of ensuring the ratio-nal use of natural resources and environmental protection, perpetrators will be held legally responsible for violations of

environmental laws. Like any legal liability, it is a form of state coercion to comply with the law, which is expressed in the duties of the person undergoing the adverse eff ects of his misconduct related to the application of sanctions.In this case we are talking about being forced to comply with en-vironmental law, violation of which implies adverse eff ects in the form of sanctions as provided by law.

113113

114

115

ELENA KAZANKOVA YURBUREAU LLC

Offi ce # 67, 21/6Tsvetnoy BulvarMoscow, 127051Russia

Tel: 00 7 495 625 95 24Móvil: 00 7 926 219 7308

[email protected]

AREAS OF EXPERTISE

■ Real estate and construction ■ Holding Structures and Antitrust Law

■ Mergers & acquisitions ■ Arbitration court litigation ■ Environment and climate change ■ Securities ■ Employment ■ International sales ■ Maritime and Admiralty Law

PARTNERS

Elena KazankovaRoman Makarov

Yurbureau LLC was founded in 2006 as an independent legal entity and combined lawyers with experience in diff erent fi elds of law.Th e law fi rm has the prerequisite experience and resources to provide legal support in M&A and real estate transactions, holding structure schemes, representation of client’s interests in arbitration and court proceedings at all levels of jurisdiction, as well as legal support for companies’ business activities.Yurbureau LLC’s expertise includes legal support for projects related to the reduction of greenhouse gases, within the framework of the Kyoto Protocol.Th e fi rm’s professionalism and experience in the corporate law fi eld, including investments, enables it to provide legal services of the fi nest quality.

ELENA KAZANKOVA YURBUREAU LLCBALMS GROUP INTERNATIONAL

117

1. Electricity act


General basic legislation: ■ Law 54/1997, dated 27 November, governing the Electricity Sector.

■ Royal Decree 2019/1997, dated 26 December, which organises and regulates the electricity production market.

■ Royal Decree 1955/2000, dated 1 December, which regulates the transmission, distribution, marketing, supply and procedu-res for authorisation of electricity facilities.

■ Electricity Grid Operation Procedures.Specifi cally for the special regime: ■ Royal Decree 661/2007 of 25 May, which regulates electricity production under the special regime.

■ Royal Decree 1578/2008, of 26 September, governing remu-neration of electricity production using photovoltaic solar technology for facilities aft er the fi nal date for maintaining remuneration as laid down in Royal Decree 661/2007, of 25 May, for the aforementioned technology.

■ Royal Decree 1565/2010 of 19 November, which regulates and modifi es certain aspects concerning electricity production under the special regime.

■ Royal Decree 1614/2010 of 7 November, which regulates and modifi es certain aspects concerning electricity production using solar thermoelectric and wind technologies.

■ Order ITC/2452/2011, of 13 September, which reviews certain tariff s and premiums of special regime facilities.

■ Royal Decree 661/2007 of 25 May, which regulates electricity production under the special regime, and lays down a legal and economic regime for that activity. Th is royal decree includes facilities that are entitled to the special regime, and lays down the classifi cation of these in accordance with: primary energy use, technology, energy performance and installed power.


Th e basic regulation of all electricity supply activities (produc-tion, transmission, distribution and marketing, is covered in Law 54/1997, of 27 November, governing the Electricity Sector. Th is law has a three-pronged approach: to ensure the supply, quality and cost of electricity.Production of electricity is conducted under a system of free com-petition based on supply (from producers) and demand (from distributors, marketers and eligible consumers). In contrast,

transmission and distribution are activities that are regulated by the State.Important players: ■ Th e Market Operator: the company in charge of economic management of the grid.

■ Th e System Operator: the company in charge of technical ma-nagement of the grid (this is Red Eléctrica de España, which is also the sole transmission agent).

■ Th e National Energy Commission: an advisory body to the Ad-ministration with regard to electricity issues (it is a regulator).

Economic and technical management of the system are also regu-lated activities. Th e terms of reference are shared between the Ge-neral Administration of the State and the Autonomous Regions, within the sphere of their respective statutes. Th ere are coopera-tion agreements for more effi cient management of administrati-ve actions concerning electricity facilities. Electricity planning is conducted by the State together with the autonomous communi-ties and is submitted to the Spanish House of Commons (Congre-so de los Diputados). Th e planning is of an indicative nature except with regard to the transmission grid.

2. Th e land/property

2.1. Property requirements for renewable energy facilities

Traditionally, typical divisions for the diff erent kinds of ‘land’ or properties that will be aff ected by renewable energy facilities are:1. For own consumption; or for production and sale (more

checks, permits, authorisations, etc. are required in the event of production and sale).

2. Depending on the type of renewable energy: for statistical purposes, geothermal is irrelevant in Spain. Th e other three dominant types may have peculiarities: photovoltaic, wind and solar thermal.

3. Concerning the site: when photovoltaic panels are assem-bled on the roofs of industrial premises, there is no envi-ronmental impact on the cities or the outskirts. When a set of wind turbines are assembled on the crest of a mountain range, the environmental risk does have to be analysed (and checks need to be passed and permits obtained).

With regard to the diff erent criteria, we will pursue the energy type:PHOTOVOLTAIC: Th e standard fi rst analysis in Spain refers to the site. In percentage terms, the south of Spain is far more deve-loped. We should point out:

SPAIN

117

118www.bgi-law.com

1. On industrial premises (rarely on large roofs of buildings): in the event of own consumption, a standard works licence is required (covering the municipal area), as well as registration (communication) with the Ministry of Industry, reporting the site of this facility, its power, etc. In the event of production and sale (even if part of this is targeted at own consumption), permits and licences (depending on the watts authorised) are required in addition to the works licence.

2. For ground-based facilities, normally rural, it is also ne-cessary to obtain a specifi c permit or licence because of the environmental impact (this depends on each autonomous region). We should also point out the diff erence between own consumption and production and sale.

In Spain, WIND and SOLAR THERMAL energy is only availa-ble on the ground, in a rural or unpopulated area. Th e diff erence between own consumption and production and sale is statistically irrelevant because the vast majority is for production and sale.

2.2. Owner’s right with regard to the project

No content.

2.3. Types of legal agreements

With regard to legal agreements, almost all of the possibilities laid down in our private law are acceptable: from a single owner of a large tract of land that is fi nancially solvent, purchases the com-ponents and installs them, carries out the maintenance himself and is therefore the only party that would contract with the distri-butor; through to the existence of a cooperative of landowners or several combined companies (one provides the fi nance, another is owner of the most valuable components, another carries out the assembly, another performs maintenance, etc.); through to multi-ple business combinations. Th e most common forms are: an ex-clusive owner or an owner that assigns the land (either by renting it, or by assigning the surface right, or by assigning the operating rights, for example for the fi rst 15 years, whereby the last 10 years generate wealth for the owner); or an owner that holds a stake in a company, in very diff erent ways, in which the companies that pro-vide the fi nance, that purchase, that assemble, that manage, that perform the maintenance, etc. also take part). One example of a

119

contract between an owner and a distributor, bearing in mind the power levels to be requested, is shown in the Offi cial State Gazette (BOE) 19242, of 8 December 2011.


3.1. Permits for land use

In accordance with article 52.1 of the Electricity Sector Act, elec-tricity facilities for production, transmission and distribution of electricity -for the purpose of expropriation of goods and rights required to set these up and the imposition and exercise of the easementare declared of public use. In order for certain facilities to be recognised as being of public use, it will be necessary for the interested company to apply for this, including a specifi c and in-dividualised list of the assets and rights that the applicant believes need to be expropriated.Decisions concerning applications for public use will be taken by the Regional State Offi ces of the Industry and Energy Agency in whose provinces the facilities are either located or pass through. Th e declaration of public use brings with it the implicit need to occupy the assets or acquire the rights aff ected and will imply ur-gent occupation. Similarly, it implicitly requires authorisation for the establishment or passage of the electricity system over public domain, use or service lands. Th e party applying for declaration of public use may at any time reach an agreement with the owners of the required goods and rights to purchase them through mutual agreement.


In accordance with Royal Decree 661/2007, the administrative authorisation for the construction, operation, substantial modi-fi cation, transmission and closure of electricity facilities covered under the special regime and recognition of the status as a power plant covered by this regime falls to the competent bodies of the Autonomous Regions or to the State Administration, through the Directorate General of Energy Policy and Mines attached to the Ministry of Industry, Tourism and Trade. Th e Administration will notify the National Energy Commission, the System Operator and the Market Operator.Th e procedure for granting the administrative authorisations in the aforementioned cases, when this falls to the State Administra-tion, will be governed by the general rules governing electricity production facilities. Th e procedures to be followed to obtain the diff erent administrative decisions for setting up new facilities are regulated in Title VII of Royal Decree 1955/2000, of 1 December, in Royal Decree 661/2007, of 25 May, and in applicable environ-mental regulations.In all circumstances, the applications to be presented to the Re-gional State Offi ce of the Industry and Energy Agency of the aff ec-ted provinces are:1. Administrative Authorisation (accompanied by the draft

project and the environmental impact study).2. Approval of the fi nal project design (accompanied by the

project design and the diff erent parts of the project that aff ect other Administrations).

119

120www.bgi-law.com

3. Certifi cate of commissioning (once the project has been carried out, accompanied by the fi nal works certifi cate).

In turn, as part of the administrative authorisation procedure, both the grid access concession as well as the grid connection concession are required from the system operator and grid trans-mission agent or, if appropriate, from the distribution network manager.Access to the transmission grid is governed, and will be subject to the technical, economic and administrative conditions set by the competent Administration. Specifi cally for production faci-lities covered by the special regime, the applicant must submit a guarantee for 2% of the set-up budget, prior to applying for access. Th is guarantee will be cancelled once the applicant obtains admi-nistrative authorisation for the facility.Lastly, in order to supply electricity to the market operator and to sign physical bilateral contracts, the production facilities must be registered with the Administrative Record of Electricity Produc-tion Facilities (a record that divides those covered by the ordinary regime from those covered by the special regime). All electricity production facilities that are authorised to sell electricity in Spain must be entered in this register. Th e registration requirements and procedures for this Register are laid down in Royal Decree 1955/2000, of 1 December.


Public and private projects that involve works, facilities or any other activity specifi ed in the following law must be subject to an environmental impact assessment as provided for in Royal Le-gislative Decree 1/2008, of 11 January, which approves the con-solidated text of the Law governing the Environmental Impact Assessment of projects.Th e aim of this law is to ensure that environmental aspects are integrated into the project by including these in the authorisation procedure of the environmental impact assessment: direct and indirect eff ects of the project on human beings, fauna, fl ora, soil, water, air, the climate, the countryside, tangible assets and cultural heritage.Th e developer must therefore apply to the competent body of the public administration so that his project can be subject to an en-vironmental impact assessment. Next, the environmental body determines the scope and level of detail of the environmental im-pact study, and the project developer prepares the corresponding environmental impact study. Once the public reporting procedu-res have been carried out and checks made with the public admi-nistrations aff ected and interested persons, the competent body issues the environmental impact declaration, which will be made public and will conclude the assessment.

121

Th e Ministry of the Environment and Rural and Marine Aff airs will be the environmental body responsible for this issue.

4. Business structures

4.1. Choosing the business form: panoramic view of the relevant points in choosing the type of company. See point 2.3.


See point 8.

4.1.2. Taxes

Most of the incentives for the investor or producer of renewable energies in Spain referring to direct taxes (Corporate tax and In-come Tax) for investments targeted at facilities that use energy from the sun to transfer this energy into heat or power have been repealed.Companies or natural persons whose business activity is the production of solar energy connected to the grid for sale to an electricity distributor no longer have the right to the following allowances in their tax as occurred in 2007/2010 in which the tax allowance for corporate tax fell from 0.8 to 0.2.

Currently, only section 3 of article 39 on environmental allowan-ces states that 10% of the investments made in new tangible assets targeted at using renewable energy sources and which comprise facilities and equipment targeted at any of the uses mentioned be-low may be deducted from the tax payable:a. Transforming energy from the sun into heat or electricity.b. Using urban solid or biomass waste from farm or forestry

industry waste; from farm and forestry and energetic plant cultivation waste as a fuel for transformation into heat or electricity.

c. Treating biodegradable waste from farms, wastewater treatment plants, industrial effl uent or solid urban waste for transformation into biogas.

d. Treatment of farm, forestry and used oil products for trans-formation into biofuels (bioethanol and biodiesel).

Th e part of the investment funded with capital grants will not be entitled to an allowance.Logically these allowances will have to be re-established and we understand that the legislator will re-establish the allowances once the public expenditure possibilities have been looked into.

4.1.3. Operating requirements and their complexity

No content. See point 3.

121

122www.bgi-law.com

123

4.1.4. Incentives, restrictions, etc.

See 4.1.2

4.2. Types of businesses

See 2.III.

5. Purchase of components / equipment and facilities

5.1. Taxes and customs

See 4.1.2. Generally speaking, there are NO signifi cant specialities in the fi scal or customs regime for components/equipment and facilities.

5.2. Restrictions and limitations on importation/supply

Th ere are none, except for those specifi ed in section 3 (permits and licences).

5.3. Safety/quality requirements

Th ese are also dealt with in section 3. Th e public administrations involved always have supervisory powers.

5.4. Operations and maintenance

See section 3. Th e same as 5.3.

6. Funding renewable energy projects

6.1. Funding large-scale projects

ICO-IDAE-ESE line of credit. Sustainable investment 2011

On 8 June 2011, the ICO (Offi cial Credit Institute) and the IDAE (Institute for Energy Diversifi cation and Saving) signed a speci-fi c line of credit as part of the “ICO-INVERSIÓN SOSTENIBLE 2011” line of credit, with the fi nancial allocation of 600 million euros, to fund energy effi ciency and renewable energy projects carried out by energy services companies (ESCOs). Th e IDAE has set up a fund of 30 million euros for this facility, to hedge against the fi nancial risk.ICO-IDEA schemes.BIOMCASA scheme, funding for facilities that produce heat using biomass in buildings. GEOTCASA scheme, funding geothermal facilities in buildings.SOLCASA, funding solar heating facilities in buildings.GIT scheme, for Large Th ermal Facilities.Th e Renewable Energies Plan (PER) considers six lines of credit, the purpose of which is to encourage compliance with the targets laid down:A: Funding programme for technological research and develo-pment of new prototypes and innovation.

Emerging technologies at development or pre-commercial stage, the future development of which is subject to technological evo-lution and overcoming barriers (market, social aspects, adminis-trative aspects). B: Targeted at innovative technological development demo projectsProjects at a very incipient (pre-commercial) commercial or tech-nological demo stage.C: Specifi c for projects at commercial stage, but with a certain barrier that prevents developmentFor mature technologies which, due to a series of barriers, have not yet been able to develop their potential.D: Programmes off ered by private fi nancial institutes to fund ESCOs that use thermal renewable energies, with the support of the IDAETh e development of Energy Services Companies (ESCOs) of Th er-mal Renewable Energies is an immature market that is currently being driven by pilot IDEA funding schemes. It is envisaged that the scheme will succeed the pilot funding schemes (Facility F).E: Credit facilities for electricity facilities with power of less than 10 kW for own consumptionFor installations subject to the net balance system.F: Pilot schemes to fund projects and promote ESCOs that pro-vide thermal renewable energiesTh e current pilot schemes of the IDAE are shown below.

123

124www.bgi-law.com

Th e IDAE is launching the GIT scheme as an impetus to carry out large hot water and heating projects in buildings using re-newable energies. Th e GIT scheme has a budget of €17,000,000 to fund projects submitted by ESCOs. Th e aim of this Scheme, together with the other schemes promoted by the IDAE for the same purpose (BIOMCASA, SOLCASA, GEOCASA), is to act as an impetus in shaping a supply of quality and one which is adap-ted to the needs of potential users, using renewable energies as the energy source.Th e IDAE (Institute for Energy Diversifi cation and Saving) is setting up the GIT scheme to cover the funding needs for large thermal installations in buildings, using renewable energies (both biomass as well as solar heating and geothermal energy), as pu-blished in the resolution dated 26 April 2011 of the Offi cial State Gazette (BOE).Th is new offi cial call is targeted at those products which, because of their size and complexity, were outside the limits established in the BIOMCASA, SOLCASA and GEOTCASA schemes. It lays down a system of funding large facilities in these areas, which continues the drive for an energy services model that guarantees a quality supply that satisfi es the needs of those that use hot water and heating in buildings, all in accordance with the framework of the 2005-2010 Renewable Energies Plan in Spain.

Th e GIT scheme has a budget of €17,000,000 to fund projects sub-mitted by the ESCOs (Energy Services Companies), authorised to carry out large projects that comply with the requirements of the Scheme. Th e capped funding limit per project will be 80% of the investment value, with an absolute funding limit per individual project of €3,000,000. In turn, the minimum funding limit per in-dividual project is established as follows:€350,000 for BIOMCASA GIT projects€250,000 for SOLCASA GIT projects€350,000 for GEOTCASA GIT projectsTh e renewable energy services sector itself pushed for a scheme of these characteristics with which the IDAE will undoubtedly manage to drive the renewable energy services model applied to large projects in buildings, such as district heating, hot water and heating of tourist complexes and shopping centres, etc.


See:http://www.lamoncloa.gob.es/ConsejodeMinistros/Referencias/_2011/refc20111111.htm#PlanEnergia

125125

7. Connecting to the grid, transmitting and selling energy

7.1.1. Governmental regulation on connections

(BASIS OF EVERYTHING = Electricity Sector Act)Th e general procedures for access and connection to the trans-mission grid of production, consumption or distribution facilities are given in Royal Decree 1955/2000, while specifi c procedures for production under the special regime are given in Royal Degree 611/2007. Th e technical aspects and details, including the com-missioning stage, are developed in the Electricity Group opera-ting procedures P.O. 12.1 and P.O. 12.2.As system operator, transmission grid manager and sole transmis-sion agent, Red Eléctrica is responsible for managing the access and connection procedures for those agents who wish to connect a new facility to the transmission grid (or to the distribution grid with impact on the transmission grid or the security or quality of supply), or that may be looking to modify the conditions of an existing facility.

7.1.2. Mandatory connections under public utilities: connec-tion procedures and agreements

In order to process access and connection to the distribution grid, the applicant must engage in dialogue with the distribution net-work manager, who will ask Red Eléctrica to make the necessary assessment of acceptability of those facilities that have a signifi -cant impact on the transmission grid.Once the access and connection procedures have been carried out and the corresponding authorisations obtained, within a deadline of one month from issue of the IVCTC (Verifi cation Report of the Technical Conditions of the Connection), a Technical Contract for Access (CTA) to the grid will be signed between the agent and the transmission manager, and Red Eléctrica will be notifi ed of this.Regarding special regime production facilities, the CTA will be signed between the agent, the IUN (Sole Interlocutor of the Node) and the owner of the connection point to the transmission grid, with the possibility of grouping into a single contract the diff erent production facilities with connection to a given node and belon-ging to the same producer. Likewise, pursuant to that set out in Royal Decree 661/2007, regarding the signing of that CTA, the producer must provide proof of obtaining the Administrative Authorisations of the production facilities and of the connection from these to the transmission entry point. Regarding special re-gime production facilities, in order to be considered for defi niti-ve commissioning of service or commercial operation stage it is mandatory to have received the System Operator Report or Final IVCTC (which in turn is also a requirement for registration at the RAIPEE).

7.2. Transmitting and selling energy: performance of energy purchase agreements with public utilities

In order to sell their electricity production, owners of facilities subject to application of RD 661/2007 must choose between: a) assigning the electricity to the system in exchange for a regulated tariff , or b) selling it on the market, in which case the sales price

of electricity will be the price on the organised market or the price freely negotiated by the owner or representative of the installa-tion, plus a premium if appropriate. In any case, the option chosen will apply for a period of no less than one year.Th e facilities that have chosen option a) will sell their energy through the system of off ers managed by the market operator, and they will make off ers to sell energy at zero price on the daily mar-ket and, if appropriate, off ers on the intraday market, pursuant to the current Market Rules. Th e facilities that have chosen option b) may sell their energy either directly or indirectly through repre-sentation both on the off ers market as well as by signing bilateral contracts or futures trading.

8. Liability in the production, transmission and distribution of renewable energy

8.1. Liability for negligence

In accordance with general regulations and the principles of con-tractual and extra-contractual liability. Th ere is no objective lia-bility (like in air accidents). Public liability insurance is required to operate on the market as in any other risk generating branch.

8.1.1. Liability for negligence as Owner/Operator of a Renewable Energy Project

Th ere is liability (ex. art. 1902 et seq of the Civil Code) for the owner of the land and/or the facilities where energy is produced.

8.1.2. Liability for negligence as landowner in a Renewable Energy Project

See 8.1.1


See 8.1.

8.2.1. Personal injury or property damages

See 8.1. Normally assessed in accordance with uniform tables with legal force, the amounts of which are updated every year.

8.2.2. Noise

See 8.1.


See 8.1.


See 8.1.

8.2.5. Fauna protection

See 8.1. See 3.3.

www.bgi-law.com

127

BALMS ABOGADOS ESPAÑABALMS GROUP INTERNATIONAL

Established in 1989, Balms Abogados is a multi-disciplinary law fi rm specialized in Public and Private Law. Balms Abogados has offi ces in Marbella, Madrid, Vigo and Barcelona. Also, Balms Abogados through its international network, Balms Group International (BGI), has offi ces in over 20 countries providing worldwide leal services to meet each client specifi c needs.Our philosophy is to promote professional training and teamwork with one goal: to achieve the highest level of excellence. We create a professional connection with the client, based on mutual trust and quality service Our nature, thoroughness and dedication marks the diff erence. Balms Abogados was created to ensure a comprehensive service to our customers and it is formed by a number of departments specialized in Private and Public Law, tax consultancy, accounting, human resources and document management for businesses and individuals. All these departments are certifi ed with the System of Quality and Environmental ISO Management 9001 and ISO 1400.In addition to our eff ort, we are also devoted to charity actions through our foundation “Fundación Balms para la Infancia”, a non profi t organization dedicated to provide fi nancial aid, assistance and protection to children in Peru and Colombia.

AREAS OF EXPERTISE

■ Civil Law ■ Family Law ■ Criminal Law ■ Labour Law ■ Bankrupcy and Commercial Litigation

■ Administrative Law ■ Zoning, City Planing and Real Estate Law

■ International Private Law ■ Insurance and personal injuries ■ Debt collection ■ Copyright Law ■ Corporate Law ■ Industrial and Intellectual Property Law

■ Private placement ■ Landlord and tenant ■ Transfer and Acquisition of Businesses and Assets

■ Building contracts and construction litigation and arbitration

■ Contractual claims ■ Protection data ■ Projects development and fi nance ■ Shareholders/Company disputes ■ Agency and Distribution Agreements

■ Shipping and Maritime Law ■ Tax Law ■ New Technologies Law ■ EC & Competition Law ■ Contract Law ■ Corporate fi nancing, disposals, parthership formation

■ Environmental Law ■ Telecommunications & Media Law ■ Banking Law ■ Litigation and arbitration

BALMS ABOGADOS MARBELLA

C/ Generalife 9 – Aloha Pueblo 29660, Nueva Andalucía Marbella, SpainTel: 00 34 952 81 21 00 Fax: 00 34 952 81 27 [email protected]@balms.com

BALMS ABOGADOS MADRID

Pº General Martinez Campos 49, 6º28010 Madrid, SpainTel: 00 34 91 702 01 56 Fax: 00 34 91 702 01 [email protected]@balms.com

BALMS ABOGADOS GALICIA

C/ Reconquista 9, entresuelo36201 Vigo, Pontevedra, SpainTel: 00 34 986 44 31 43 Fax: 00 34 986 44 60 [email protected]@balmsgalicia.com

BALMS ABOGADOS CATALUNYA

Paseo de Gracia 116 Bis, 4ª Planta08008 Barcelona, SpainTel: 00 34 93 311 3999Fax: 00 34 93 311 [email protected]

PARTNERS

Juan Luis Balmaseda de Ahumada y DíezJulio Aguado Arrabé Katja BlackmerÓscar Gómez MonasterioJorge Martín LosaAntonio Heredero González-Posada

Javier Pascual GarófanoJuan Camacho Vázquez Javier Massana GaspàCesar Ramos Onis

129129


In Uruguay, the legal framework of the Electricity Industry is regulated by the National Electricity Law (Decree Law 14694), the Law on a Regulatory Framework for the Power Sector (Law 16832) and numerous additional laws and regulatory decrees. Th is framework is aimed at the development of the renewable energy sector, at providing incentives for private participation in power generation and at increasing investment in the sector. Among the main new developments in the law the following stand out: freedom in the generation of power, enabling the entry of private parties to the same; the creation of a wholesale electri-city market; the ability to associate with public companies, sepa-rating the functions of the State regulator and the entrepreneur, creating organisms with specifi c tasks, and a system of promotion and protection of domestic and foreign investment with signifi -cant benefi ts and tax exemptions. All of which means that today’s electricity sector is of great interest to local and foreign investors alike. Uruguay is aiming to diversify the renewable energy matrix to meet all its national energy needs, at costs that are appropriate for all sectors of society, contributing to the country’s competiti-veness in a context of regional integration, with sustainable po-licies both in economic and environmental terms. Subsequently, energy policy is used as a tool to develop productive capacities and promote social inclusion.


Th e requirements for the property to be used for a renewable energy project, that is, the land on which it is installed, shall emer-ge from the environmental conditions to be imposed for each par-ticular project based on the source of power to be developed and the demands of Municipalities in their Land Management Plans. Th e development or implementation of a renewable energy ven-ture can be carried out on property that is acquired or leased. In some cases, such as when the input for electricity production is wind, there is a special scheme involving the imposition by the Executive Branch of onerous easements (a term of use for a fee). If the venture is installed on government-owned land, permission must be sought. Th e legal agreements may relate to land purchase, lease or the price to be paid for the easements. Th e terms of these agreements are governed by rules of private law which enshrine freedom of contract as a principle.


In order to install power generation plants (from any primary source), one of the fi rst steps is to obtain authorisation from the Executive Branch aft er meeting the requirements of Articles 53 and 54 of the Regulations of the Wholesale Electricity Market. If there is no resolution once the time limits have expired, authori-sation shall be deemed to have been granted. Prior to this process, environmental clearance must be obtained from the Ministry of Housing, Planning and Environment on matters such as fl ora, fau-na, visual, acoustic and soil erosion, among others. Also, if water courses in the public domain are used (being the most abundant), concession for their use must have been previously obtained from the Ministry of Transport and Public Works. In short, the per-mits and licences which are typical of the energy sector, based on environmental regulations regarding the use of renewable energy or resources, to which are added the safety controls exercised by special state agencies that supervise and advise on this fi eld.


Th e Law on Commercial Companies of Uruguay provides for the existence of partnerships and holding companies. Among the la-tter are Limited Liability Companies (S.R.L. in Spanish initials) and Corporations (S.A. in Spanish initials). Both types of legal entities limit the liability of the owners (partners, shareholders) to the capital contributions made by them. However, in an S.R.L., its owners have the obligation to respond jointly with the com-pany to work-related fi nancial claims and are not subject to state supervision and control. Meanwhile an S.A. is subject, a circum-stance which is usually taken into account by fi nancial institu-tions when arranging funding. Additionally, its partners can be natural persons or legal entities, which oft en allows for discretion and confi dentiality of the shareholders. In general they are liable for taxes on business activity (IRAE), value added tax (IVA in its Spanish initials) and the estate tax, but due to diff erent legal rules a regulatory framework has been confi gured which is highly fa-vourable for domestic and foreign investment in the sector. Law 16906 of 1998 declared the promotion and protection of domes-tic and foreign investment to be an issue of national interest. For investment projects in any sector of the activity being presented and promoted by the Executive Branch (as is the case with electric power generation), it is possible to calculate up to a maximum of 100% of the amount invested as partial payment of Income Tax (IRAE). Th e plant and equipment of the fi xed asset and civil works are also exempt from wealth tax and the value added tax (VAT) is recovered from the material purchases and services used

URUGUAY

130www.bgi-law.com

on them. Th e same Law also exempts the company from paying import taxes and charges on movable fi xed assets which are decla-red as being non-competitive with the domestic industry. Decree 354/009 has been in force since 2009, complementing the course set down by the aforementioned law. Also in force is the Law on the Promotion of Solar Th ermal Energy (18585) which declares research, development and training in the use of solar thermal energy to be of national interest, promoting the inclusion of this technology in various sectors in Uruguay. Similarly, there is De-cree 173/010, which authorises the subscribers connected to the low-voltage distribution network to install generation facilities from renewable wind, solar, biomass and mini hydro sources, fra-ming the decree within the National Energy Policy of Uruguay 2005-2030, being the pioneer country in South America in freeing up the connection of power generation from renewable sources in the public distribution network. Lastly, we should mention Law 18786, which establishes the legal regime for Public Private Parti-cipation contracts for Energy Infrastructure works, strengthening private participation and the possibility of partnerships with pu-blic companies in this area.


Th e Law on the Promotion and Protection of Domestic and Fo-reign Investment (16906) of 1998 allows the calculation as part of

Income Tax (IRAE) up to a ceiling equivalent to the total inves-tment, including equipment and facilities. Also, while these are transformed into movable goods within the fi xed asset, they are exempt from wealth tax. With respect to the machinery to be used for the installation of power plants there is also a system called “Temporary Admission”, under which it can be used during the time entailed by its construction without having to pay the taxes levied for its importation. Possible limitations in production and consumption are linked to the rule of supply and demand and there are no supply constraints. In Uruguay there is a sustained industrialisation of the country and a government policy aimed at replacing electricity production that is based on oil and water resources. Th ere is a detailed set of regulations that establishes requirements for the installation and operation of power plants in terms of their safety and environmental aspects, which are in line with international standards, where a major role is played by specialist state agencies with powers in this fi eld.


Th e Uruguayan fi nancial market off ers a variety of funding me-chanisms; not only the more traditional forms of loans, but also other useful instruments, such as the issuance of debt securities that allow direct access to savings generators, off ering recourse to the institutions that manage pensions and national savings funds.

131131

Also, there are already government agencies and private entities of great importance in the country that allow and encourage access to project fi nancing. Additionally, the regional and international fi nancial circuit, including multilateral lending agencies, non-resident banking and fi nance institutions specifi cally supporting foreign trade, is made up of key agents for the development of renewable energy projects and is a key driver that includes those already operating in the country (such as the Inter-American De-velopment Bank, the Global Environment Facility, the United Na-tions Development Units, among many others). Th us renewable energy projects are emerging as a prominent option, because to this favourable institutional fi nancial environment, which ensures easy and convenient access to loans, we can also add a promotio-nal tax framework for investment in electricity generation from renewable sources and long-term contracts with the state-owned fi rm that provides the transmission and distribution of electrical energy.


Uruguayan legislation provides for electric power generation by private individuals, when so authorised by the State. It also autho-rises the sale of that energy they produce to distributors and lar-ge consumers in a system which means that they do so through the “National Load Dispatch” and according to the rules of the “Wholesale Electricity Market”. Th is enshrines the freedom of ac-cess to the transmission networks of the National Grid and the distribution networks to end users, subject to the availability of capacity and following the payment of a toll fee. Transmission and distribution are activities which are considered to entail a public service and therefore may be granted to individuals. In Uruguay this activity is performed by a state agency called the “National Administration of Power Plants and Transmission” (UTE in its Spanish initials). Legally this Entity is authorised for the produc-tion, processing, transmission, electricity distribution so it can: a) be bound by contract with public or private, domestic or foreign entities; b) participate, with the consent of the Executive Branch, in public or private sectors joint ventures, whose main objective is to install new plants or make new transmission lines to expand

the transmission system in order to interconnect with other coun-tries in the region.


In Uruguayan law, the obligation is enshrined in general to repair the damages caused to people or their property. Th is is why today the majority doctrine terms it the right to cause damage, precisely because the damage is the reason or source of the obligation to pay compensation. In Uruguayan law, the obligation is enshrined in general to repair the damages caused to people or their proper-ty by acting negligently in activities relating to power generation. Its regime is no diff erent from the general regime, including the fact of whether or not one is the owner of the land on which the activity occurs. Th e diff erence between owning or being a tenant of the building in which the activity occurs only means that in the latter case another person is added to the list of potential injured parties (the owner of the property being leased) or to the list of potential responsible parties. In matters of environmental liabili-ty, the fact that in order to produce electricity prior authorisation is required from the Executive Branch and that the project com-plies with the standards in the fi eld in question, does not exempt it from liability for its transgressions. Environmental protection is regulated by law but has Constitutional protection, enshrining it as being in the public interest. Protection is given to the quality of air, water, soil, landscape, conservation of biological diversity and the confi guration and structure of the coast; conservation of fl ora and fauna; the reduction and proper management of toxic subs-tances; the prevention, elimination, mitigation and compensation of negative environmental impacts; regional and international en-vironmental cooperation and the implementation of national en-vironmental policies on sustainable development. Apart from the general regime of liability, there are penalties for the violation of the rules of environmental protection, which range from simple warnings to suspensions of registrations, clearances, authorisa-tions or permits to carry out the business activity, subject to fi nes for violation of other general and specifi c rules established in the rules of the regulatory framework.

132

133

MM&A CORPORATE LAW AGUADA PARK

Paraguay 2141Of. 1005MontevideoUruguay

Tel: 00 598 2927 2727

CENTRO

Plaza Cagancha 1356 P.7MontevideoUruguay

[email protected]

PARTNERS

Diego Martínez BernieAgustin López CarriquiryHoracio González Mullin

LAWYERS

Agustin López CarriquiryHoracio González MullinFelipe VásquezIgnacio Jiménez de Aréchaga

Carlos Peña RachettiClaudia AmoedoMaría Gabriela Bove Britos

AREAS OF EXPERTISE

■ Labour Law ■ Commercial Law ■ Tax Law and Tax Planning ■ Intellectual property ■ Civil Law ■ Administrative Law ■ Environmental Law ■ Notary services ■ Private aff airs ■ Image rights ■ Criminal Law ■ Family Law ■ Company Law ■ Corporate Law ■ Sports Law

Constant development of markets and technology, regional integration and global economy changes, pose a major challenge for the business world today. Legal frameworks that go with these changes are essential to seize new opportunities and avoid potential obstacles. MM&A Corporate Law is a fi rm that focuses its practice on meeting the most demanding requirements of the modern world. MM&A Corporate Law emerged naturally from the main company, MM&A Consultants, founded nearly two decades ago.MM&A Corportate Law business philosophy has the same basis as Balms Group International, helping BGI to expand to new frontiers in Latin America. MM&A Corporate Law specializes in Private and Public Law and its development is based on the diversity and excellence of services, based on the talent and experience of their lawyers, whose eff orts are focused on providing an appropriate service to the situation and the needs of each client.Th e fi rm’s main offi ce is in Montevideo (Uruguay), and the international offi ce is located in Aguada Park, a free trade zone in Uruguay. Also, MM&A Corporate Law have local support offi ces in several South American countries like Brazil, Argentina, Chile or Paraguay.

MM&A CORPORATE LAWBALMS GROUP INTERNATIONAL

www.bgi-law.com

193

194

195

142www.bgi-law.com

Documents

BGI Law Magazine 2012