Projects/project finance

Projects/project finance

Adam Smith

Sullivan & Cromwell LLP

University: University of Sheffield
Degree: Law

Whenever a large project is conceived, built and operated, legal advice is key. A project might relate to the construction of a new hospital or a wind farm in the UK, or perhaps a new transnational gas pipeline. UK lawyers frequently work on the construction and financing of energy and transport infrastructure projects in other parts of the world, leveraging their expertise in English law (which is often the law of choice for a project's commercial and finance agreements). Large projects involve lawyers specialising in finance, construction and corporate law, all of whom must work over long periods of time and to finely tuned schedules. Some firms target the project companies and their shareholders (sometimes referred to as "sponsors") that actually build things; some the governments and organisations that commission projects; some focus on representing banks and other funding entities; and some advise all of these from time to time.


It was academic interest that first led Adam Smith to the law. "I wanted to study law at university because I was keen to do something I hadn’t studied previously," he recalls. "At the same time, I wanted a challenge, something that would give me the right skills and broad base that would open doors to a variety of career options. I thought the law fitted those criteria."
 
As soon as his studies commenced, Adam discovered a natural propensity for the subject and with academic prizes and vacations schemes in hand, it wasn’t a surprise that he should accept a training contract at a City firm. Adam enjoyed his training contract immensely, although is not shy to admit that he had to get used to working in a professional environment, having spent the prior years as a student.
 
"It was a little bit of a shock to the system," he explains. "Understanding how to operate in the workplace and with other people, rather than just working for yourself at university and law school, requires some adjustment. But with a challenging and rewarding workstream, I was more than equipped for life as a qualified solicitor by the end of my training contract."
 
As a qualified lawyer at Sullivan & Cromwell, Adam now finds himself working on what he describes as "the highest quality work" with "the highest calibre of people" in the project finance team. One of his first cases for the US giant was advising on the financing of the world’s largest aluminium smelter plant in the United Arab Emirates, which he really enjoyed. "It was a great opportunity by which to ‘cut my teeth’ as a qualified lawyer. The transaction, which has now reached financial close, is a landmark deal, globally and especially for the Middle East region. The amount of responsibility I was given as a junior lawyer was tremendously rewarding." The general nature of the firm’s practice means that Adam has since been involved in other similar transactions and has built up somewhat of "a critical mass" in terms of knowledge and understanding of how project finance deals work: a vital weapon in the armoury of any lawyer in his or her field.
 
Adam points out that although his main role as a project finance solicitor is to help negotiate and draft all of the documentation regarding the funding of large projects (eg, in Adam’s practice, loans from banks or bonds issued to international investors to fund transnational gas pipelines, mineral mines and and oil and gas fields), the sheer number of projects that legal specialists in this field see often means that they able to provide their opinion to clients on the commercial, as well as the legal, aspects of the matter.
 
"As you might imagine, if a club of banks are lending $4 billion to a project, they will want to have a sufficient amount of control over how the project is constructed and operated - the principle being that the banks want to make sure that the project doesn’t overreach itself and so can pay back the monies it has borrowed," explains Adam. "So the documentation is heavily negotiated over a relatively lengthy period of time to ensure that the lenders have the control they require (eg, restrictions on how borrowed monies are spent), but balanced with the need of the project to be able to operate on a day-to-day basis without being overly constrained. Because we become highly experienced in these sorts of projects and the various issues that may arise, we build up an appreciation of how our clients might reach the optimal commercial outcome and are able to advise accordingly. We have to be very commercially orientated lawyers."
 
That commercial understanding will need to develop early, as trainees and newly qualified lawyers will often be tasked with sitting in on client meetings, taking notes on ongoing negotiations and helping to draft the legal documents. That early level of responsibility is one of the aspects of project finance that Adam enjoys the most. "A lot of the drafting is quite technical, so the only way to appreciate that and do it properly is by attending the meetings. It’s critical to be there and I’m normally expected to actively participate - either advising the client or negotiating with the lawyers on the other side. It’s great experience and you learn quickly; I’m only two years qualified and often find myself on the phone or in meetings advising very senior persons of extremely reputable clients."
 
One of the other high points for Adam is the international aspect of the work. There are sometimes international financial institutions involved, such as the World Bank and the European Bank for Reconstruction and Development, that will provide, guarantee or insure loans so that, for example, lenders in developed markets are incentivised to lend to projects in developing markets at favourable interest rates. Similarly, export credit agencies, which are agencies tied to a particular country’s government, will provide, guarantee or insure loans to projects on the condition that the project purchases goods and services originating from the country to which the export credit agency is tied. 
 
All of this means that there can be quite a lot of international travel involved and Adam often finds himself jetting off around the world with a suitcase full of documents to be signed or to offer his expertise sorting out the finer points of a negotiation on site. "You feel that you are involved with something on an international scale and seeing the project in person, and the number of people involved on the ground, brings home the significance of what you are doing," he claims.
 
Young lawyers thinking about a career in project finance should be aware that it can throw up all manner of legal issues, so a broad understanding of the law is vital - as is the ability to know how all the smaller matters you’ll have to deal with fit into the broader picture. "On the whole you are looking after the finance documents, but they can interact with all sorts of other legal documents," says Adam. "For example, if you are acting for the project company you may need to advise the client on the implication under the legal documentation of the daily issues that arise in the construction and operation of a project - for example, suppliers failing to deliver or a power outage - without losing focus on the project’s transaction goals as a whole. The client will have a lot of people, doing a lot of different things and they may be coming to you about pretty much all of them."
 
He also suggests that those who are really interested can look at journals and other resources on project finance online, or perhaps even try and land some work experience at companies that are involved in major projects - mining organisations, for example. 
 
However, Adam doesn’t believe that such a predetermined idea about one’s future in law is a prerequisite to a successful future in the area. His view is that often it is better to leave your options open, as training contracts introduce junior lawyers to different areas of law and may result in evolving intentions. "I didn’t set out at the beginning of my training contract to be a project finance lawyer. I tried my hand at it, worked hard and developed a passion," he explains. "A training contract is your opportunity to explore different practices; I wouldn’t advise putting all your eggs in one basket". 
 
So, if this article has triggered your interest, Adam suggests "looking online at project finance resources to find out more and perhaps seek out a firm that offers project finance experience during its training contract, but don’t feel too much pressure to do everything possible".

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