Who and where are the Equator Banks? - IILJ

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form, annually or more frequently if an environment related default has
occurred) an update of the EMP incorporating any required changes to the
project; and periodically to review the EMP and to inform the relevant
agent if any modification is required based on changes to the project.
The reporting obligations in the loan documentation should provide that the
borrower is obliged on receipt to provide promptly all material information
and reports provided to the borrower by the construction contractor,
environmental and social consultants, and the operator under the EMP. The
obligations should also require the borrower to inform the relevant agent of
any environmental claim against it which is current, pending or threatened
or any circumstance which could reasonably be expected to trigger
environmental liability, liability for breach of social protection laws, or to
affect the borrower’s compliance with environmental laws and the EMP in
addition to any facts or circumstances which are reasonably likely to result
in any environmental claim being commenced or threatened against it.
Again, there will be some tension between borrower and lender as to the
qualification of such undertakings.
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The loan agreement will contain a general event of default for failure to
comply with the undertakings in the document. A separate default should be
included for failure to comply with the borrower’s undertakings relating to
environmental matters which would cover the EMP, Environmental Laws
and, as defined appropriate to each project, Environmental Claims and
Environmental Liability.
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Our survey indicates that an issue for Equator Banks to consider is the
negotiation of intercreditor rights with the other lenders to ensure that
Equator Banks retain a controlling vote (or at least negative control) in
respect of environmental matters. Depending on the size of the
commitments of the Equator Banks in a syndicate and the relative size that
the commercial bank tranche bears to other tranches of the overall financing
package, Equator Banks may find themselves out-voted on intercreditor
voting if a block of non-Equator Banks or other financial institutions hold
the requisite voting entitlement when action on an environmental issue is
being decided.
We are aware from our survey that some Equator Banks have favoured the
use of special weighted voting rights on any action to amend, vary or grant
consents or enforce any provision of the loan documentation relating to
Environmental Matters (as defined), although this suggestion did not meet
with universal acceptance. The use of such rights is justified on the basis
that the Equator Banks face a greater risk to reputation if they are not seen
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