/ PFT Online Course on
'DRAFTING AND NEGOTIATING CLAUSES OF LOAN AGREEMENTS'
Information - introduction and background
financial system is the foundation of progress and prosperity. It
is true for every entity, whether it is a developed country, a developing
country, an industrial or a commercial organization or an individual.
The efficient financial system involves two aspects efficient
management of the existing and available resources and the other is
the augmentation of the required resources. The need for augmentation
of resources is particularly more imminent when the available resources
are limited, inadequate and insufficient. In the case of a country,
the augmentation of resources can be done in several ways and from
diverse sources. Such sources may be national or international. The
domestic resources can subscribe to the generation of finances only
up to a limited extent. They are generally not sufficient for the
countrys proposed development and progress. Therefore, most
of the developing countries have to depend on foreign sources of finance
for successful implementation of their development plans and progress.
In the present world, various methods
are available for raising foreign capital. They generally include
aid, grants, bonds, private investments (equity or otherwise), etc.
So far the most popular, convenient and easy method of obtaining
foreign capital is through external borrowings. The document mostly
adopted for borrowing money in the international world is loan agreement.
The ability of a country to effectively draft and negotiate the
terms and conditions of a loan agreement depends on numerous factors.
It has vital bearing on the cost of borrowing and ability to repay.
An ignorance of appropriate methodology, unbalanced terms of the
loan agreement, and essential conditions of international borrowing
has lead to frequent defaults in the repayment of the loan amounts.
An effective team well versed with the skills and techniques of
drafting and negotiating a loan agreement can make significant contribution
towards lowering the cost of borrowing foreign money and easy repayment
of loans. A small saving in each loan agreement can ultimately have
a major impact on the debt management of the country.
The developing countries often presume,
for a variety of reasons, that they have limited or no capacity
to influence the outcome of negotiations of a loan agreement with
an international lender. They often feel that international lenders
generally do not subscribe to the viewpoint of borrowers or amend
the clauses of the loan agreements. This is a serious misconception.
Once the parties are committed to the negotiating process, the existence
of convincing reasons, may be guided by national financial and economic
considerations, for proposed amendments in the clauses of a loan
agreement are difficult to ignore and often find acceptability with
the lenders. The preparation and strategy of negotiation plays an
important role in determining the outcome.
An effective and efficient team for
negotiating a loan agreement consists of a multidisciplinary group
of professionals with combined expertise in such disciplines, such
as, finance, economics, law, accounting and negotiating skills.
The lawyers contribution to this team is knowledge of domestic
laws that govern the sovereign borrowing process, the laws and regulations
relating to the lender and his lending process, the loan agreements
generally deployed or adopted by the lender and other similarly
situated lenders, and drafting issues that may arise in the negotiation
and structuring of transactions.
Experience demonstrates that external
borrowing units of developing countries often do not pay adequate
attention to the legal issues involved in a loan agreement and their
negotiations. First, there is a danger that they will authorize
debt commitments that do not fully comply with all the requirements
of domestic law. Second, they may fail to appreciate all the implications
of the terms and conditions they accept in their loan agreements.
Third, debt managers who do not have easy and regular access to
expert legal advice are less likely to understand the legal issues
that may arise in the course of their debt operations and to make
effective use of whatever legal services may be available to them.
In this regard it is important to recognize that the financial and
legal terms of a debt transaction work together and can be coordinated
to achieve better loan transactions for the borrower. All this has
to be recognized from the drafting and pre-negotiation phase of
a loan transaction.
|| when slots are full
||November 1 to December 17,
||Minimum of 35 hours
||US $ 400/-
||UNITAR Geneva (Course Administration
and Technical Questions)
The main objective of this Course is to
create a greater awareness of importance of legal aspects in the international
borrowing process including the pitfalls and safeguards. The Course
aims at offering government officials, generally of borrowing countries,
a broader understanding of numerous clauses normally incorporated
in a loan agreement by different kinds of international lending institutions,
the terminology used in such agreements having a bearing on repayment
capacity of the loan, different methods of drafting such clauses by
various international lending institutions, with the possible or likely
interpretation thereof. In short, the aim of the present Course is
to equip the prospective Borrowers with essential professional tools,
to touch on a range of issues in a broad context, to help them in
having a loan agreement for their country with reasonable terms. It
will also set the turf for in-depth discussion and exchange of views
between the legal negotiators.
This Course will concentrate on the mechanics of drafting and negotiating
clauses of loan agreements. Therefore, it will aim at senior and middle-level
government officials, lawyers and other members of the Attorney General's
office responsible for drafting and negotiating or in any way involved
in the preparation or approval of international loan agreements; officials
of the Ministry of Justice and of such other Ministries who are in
any way concerned with or responsible for international borrowing
agreements; senior and middle level officials of the State Bank or
the Central Bank who enter into international or domestic agreements
which provide for the domestic and international borrowing; as well
as all other debt and financial management institutions and industries
undertaking external borrowing will be benefited from this Course.
The Course will also be useful to the external aid and debt strategists,
policy analysts, decision makers as sell as government lawyers involved
in drafting and negotiating external loan/aid agreements.
Representatives from the Law Faculties
of the Universities and members of the Judiciary who may be interested
in the study of various provisions of national and international
loan agreements and in knowing the purpose and intention behind
various clauses of loan agreements.
Representatives of trade and industry
who enter into international and domestic agreements;
It should be noted that this workshop is intended to invite a multidisciplinary
mix of professions - including decision makers, policy makers, negotiators,
economists, financial analysts, accountants as well as lawyers.
This course is designed as an online course in which participants
will be primarily responsible for their own learning. Each lesson
will consist of the following components:
1) Basic Reading
Materials (Compulsory Reading Materials):
these materials are intended to educate the participants about
the basic concepts and principles applicable to the subject-matter
of the lesson. It will include, where appropriate, sample materials.
These materials will constitute the required reading materials
for the lesson
2) Advanced Reading
Materials (Optional Reading Materials):
this will consist of optional reading materials for participants
who wish to learn more about the topic than what is covered in
3) External Links:
This will refer the interested participants to additional books,
articles, documents, and websites that deal with the issues raised
in the lesson.
A glossary of terms tailored
to the online course will be provided to the participants and
act as a learning support during the entire course.
At the end of each lesson there will be a set of quizzes for participants
to answer. These quizzes are designed to test the participant's
understanding of the lesson. Participants are required to pass
each quiz and obtain at least 80% or more passing grade in order
to be eligible for a certificate. All quizzes will need to be
6) Community Discussion
Board: There will be a
community discussion board available on which participants can
post questions or comments that can be seen by the instructor
and the other participants. This discussion board will be moderated
by the course director and UNITAR. Structured discussion strings
will be posted on a weekly basis.
All successful participants will be
eligible to a certificate after completion of this online course.
Lesson 1: Methods of flow of foreign
Lesson 2: Introduction
to International Lending Agencies.
Lesson 3: World Bank
Lesson 4: Loan Agreements
of Other Lenders.
Lesson 5: Conditions
Precedent under a Loan Agreement.
Lesson 6: Financial
Obligations - I.
Lesson 7: Financial
Obligations - II.
Lesson 8: Financial
Obligations - III.
Lesson 9: Covenants
(Parts I and II)
Lesson 10: Representations
Lesson 11: Events
of Default - I.
Lesson 12: Events
of Default - II.
Lesson 13: Other
Lesson 14: Resolution
Lesson 15: Guarantee