Tuesday, 24 September 2019 07:15

Cherry-picking

While local firms can offer great insights on local legislation, international firms are often the better option when it comes to matters of international finance, says Renzo J. Salazar Vallejo.

Renzo Salazar Vallejo World Energy CouncilIs it better to use local law firms or international firms?

Renzo J. Salazar Vallejo, director and legal adviser of the Peruvian Committee of the World Energy Council (WEC) is convinced of the merits of both. He has experience of working both in-house and in private practice and believes that a clients choice of law firm is heavily dependent on the nature of the matter at hand.

However, Salazar Vallejo – a former lawyer in the energy and infrastructure practice of Peruvian law firm Rubio Leguia Normand, and in-house counsel at Grupo Cobra, a global energy and infrastructure services company headquartered in Madrid – argues that there are some key characteristics that all law firms must have when advising both public and private sector clients. One of these, he says, is a knowledge of a wide range of different industries as multiple parties are often involved in contracts, particularly in the infrastructure sector.

CONFLICT OF INTEREST

“The WEC relies heavily on the participation of external lawyers for the revision of contracts for services and consultations, particularly when there are multiple players involved and there can be a conflict of interests,” Salazar Vallejo said. He added that the WEC chooses external law firms depending on the requirements of each case, and that costs are also an important consideration when making such a decision.

“As well as its expertise and experience, the law firm in question also needs access to local data, and expertise in the local legislation, and we value the diversity of a team, as matters such as energy contracts are often linked to other areas, such as infrastructure, and there are many technical considerations to take into account in these kinds of contracts,” Salazar Vallejo explains.

RAMPING UP OIL PRODUCTION

It is anticipated that Peru will experience an increase in investment in its energy sector as a result of the recently drawn up hydrocarbons law, which is designed to facilitate the ramping up of the country’s oil and gas production and increase its renewable energy generation as it seeks to meet the rising demand for electricity. The country’s oil and gas regulatory body PetroPeru has forecast there will be up to $6.5 billion in new investments over the medium term as the country aims to more than double its oil production by 2023, up to 100,000 barrels a day from the current 41,000 barrels.

Meanwhile, Peru is also planning to build a major pipeline, the Gasoducto del Sur, to import gas from Bolivia to meet domestic demand. Such plans are expected to increase the workload of law firms, both within and outside Peru, specifically in relation to the drawing up of contracts and the procurement of financing for such projects, Salazar Vallejo says.

CORRUPTION CASES

There has also been an increase in legal work related to corruption cases, according to Salazar Vallejo. In one high profile case, the contract the government had signed with Brazilian infrastructure conglomerate Odebrecht was cancelled in 2017 after the company admitted to having paid bribes to companies and governments across Latin America to secure lucrative infrastructure contracts.

While the WEC uses both local and international law firms, the advantage of a local law firm is that it can provide insight and guidance to investors and stakeholders regarding new legislation drafted in Peru that is designed to attract more investment into the energy and infrastructure sectors.

In addition, using local firms can be advantageous when navigating the new regulatory framework governing those sectors. While the WEC uses Peruvian law firms when it needs to rely on lawyers with extensive knowledge of local laws and data, Salazar Vallejo says that, in contrast, during his work as an in-house counsel at Grupo Cobra, there was a preference for using international law firms. This was due to the need for knowledge of international laws regarding financing, as well as the company’s use of global capital to finance projects. Salazar Vallejo says:

“Global law firms offer an advantage when dealing with financing from international banks, as they have experience in dealing with such institutions, and in negotiating such transactions, they also have experience of long-term projects that can involve more than one player and jurisdiction.”

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