Sberbank's ERPA approval methods and its "binding recommendations" provoke discussion

Since completion of the first tender selection of Joint Implementation Projects ("JI Projects"), the right of Sberbank of Russia OJSC ("Sberbank") to sign off on contracts ("ERPAs") governing the transfer of Emission Reduction Units (ERUs) under JI Projects has become a major focus of discussion. As can be inferred from the "recommendations" it has been giving to JI Project participants with regard to various aspects of such contracts, Sberbank appears to contemplate linking its approval of such ERPAs (i) to the sale price of ERUs, (ii) to the terms and conditions of payments for delivered ERUs as provided in such ERPAs, and (iii) to some other criteria mentioned in Sberbank's recommendations.

Whether such recommendations given by Sberbank are binding or not is a cause for much discussion. Also, the effect of these recommendations on the respective ERPAs is not clear. What is clear is that this effect will heavily depend on the provisions of the respective ERPAs on the rights and obligations of the parties in case of changes in the legislation. Negotiations between participants of JI Projects on amendments to their ERPA can reduce risks stemming from the ERPA's non-compliance with Sberbank's recommendations. Should negotiations prove difficult and not easily lead to an agreement, each participant in a JI Project should develop its own strategy for interaction with its counterparty in order to minimize the legal and commercial risks connected with Sberbank's possible refusal to sign off on the respective ERPA.

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