Legal Opinions in International Transactions

1. Introduction

Lawyers involved in international financial transactions commonly play several roles. They plan, structure, draft, negotiate, facilitate, arrange for the closing and execution of the agreements, and finally provide a formal legal opinion. The issuance of this legal opinion is almost always a condition precedent to the advance of loans or bond issues, and its terms are settled with as much attention as the contractual documents themselves. Although its contents are highly standardized to establish market practice, consensus, cut costs and time, every transaction is different and terms and conditions may vary.

2. Main Transactions covered by Legal Opinions

• Depending on nationality or domicile of parties to the transaction, there could be a legal opinion from the jurisdiction of the lender, lead managers, arrangers often called principal opinion from the obligor’s or security’s jurisdiction. The most common transactions are:
• Syndicated bank credit agreements
• International debt securities
• Security agreements
• Securitizations
• Leasing
• International equity offering
• Share transactions
• Real estate sales, leases and financing.

3. Main Jurisdictions covered by Legal Opinions

The number of legal systems which impinge on an international loan transaction and which might possibly affect its terms can be multiple and include the laws the borrower’s domicile, the lender’s domicile, the place of contracting the place where the bonds are listed or distributed, the country of the forum and so on. For practical reasons, however, these can be shortlisted on loan and bond issue transactions to a legal opinion from the jurisdiction of the borrower’s domicile and a second opinion from the jurisdiction of the governing law.

The legal opinion by the lawyer in the country where the obligor is domicile is important. The borrower’s domicile usually has its place of incorporation.

4. Scope of Legal Opinions

While legal opinions are usual in financial credit transactions, there are limits on their scope. They refer only to certain narrow and basic legal matters and do not make general assurances that the transaction is satisfactory. Legal opinions concentrate on assuring i.e. that the agreement is legally binding, the validity of corporate registration and authorizations.

Legal opinions contain assumptions, exclusions, qualifications and the opinion. A legal opinion is not a guarantee. A lawyer is not an insurer.

5. Whose Lawyers should give the Opinion?

The opinion should be given by independent lawyers for the lender, independent lawyers for the borrower or the borrower’s in-house counsel, depending on the circumstances.

In every transaction involving the foreign lawyer’s opinion, there usually is one lawyer representing the lender and another representing the buyer. In some cases, the foreign lawyers issuing a foreign legal opinion have represented lender and borrower to save costs and with the dispense of any conflict of interest by the lender.

When the borrower is a foreign company, domiciled in a foreign jurisdiction, selecting an experienced foreign lawyer is vital. While there are certain duties on the principal lawyer to give precise instructions to the foreign lawyer, sometimes foreign lawyers are inexperienced and not capable of communicating effectively with their principal as well as their counterparts, thus causing delays, additional costs and even embarrassment to their principal.

6. When is the Opinion issued?

Ideally, the legal opinion from the principal lawyers should be given after all the other conditions precedent to a loan or bond issue are in place, including the foreign lawyers’ legal opinion. The opinion is normally dated the closing date.

7. Whose lawyers give their opinion?

The opinion may be given by independent lawyers for the lender, independent lawyers for the borrower or the borrower´s in-house counsel, depending on the circumstances.

8. Which is the most recommendable tax jurisdiction?

Usually, a financing transaction involves the establishment by the borrower of a foreign subsidiary in a low-tax country which allows payments of interest to be made free of withholding and other taxes. There is generally no difficulty in finding a jurisdiction where the vehicle can make payments without deducting withholding and other taxes. Cayman Islands, Panama, BVI, Bermuda, Bahamas, and other jurisdictions are commonly selected.

9. Can Pardini & Asociados assist you?

P&A is a boutique law firm with 40+ years of experience in Aviation, Banking, Shipping and Real Estate matters which comprise the areas of international transactions requiring legal opinions.

On the Lender´s (or Lessor) side, we have assisted many banks including Barclays, Coutts, Bank of America, BNY, Deutsche, BNP, NBK, Alpha Bank, UOB, Santander, FAB, HSBC and others.

On the borrower´s side, we have assisted corporations, family offices and HNWI from the Middle East, Eastern and Western Europe, Asia, and America.

We have worked with both In-House Counsel and Law Firms globally.