• Title/Summary/Keyword: Lender liability

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A Legal Study on the Environmental Liability of Financial Institutions and its Responses (금융기관의 환경책임과 대응방안에 대한 법적 고찰)

  • Lee, Jae-Hyup
    • Journal of Environmental Policy
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    • v.3 no.1
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    • pp.1-29
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    • 2004
  • The role of the financial institution to promote corporate sustainability may be reviewed in two angles, as a commercial lender and an investor. As a commercial lender, financial institutions should minimize the legal risks and the political risks. Financial institutions began to recognize environmental risks as legal risks that directly affect their lending practices since the legislation of the Comprehensive Environmental Response, Compensation, and Liability Act("Superfund") of the U.S.A. The so-called lender liability rule has a detailed guideline where the financial institutions may be exempted from the Superfund Liability. Similar attempts are noticed in the recent EU White Paper on Environmental Liability. In Korea, comprehensive environmental liability laws are yet to be developed. The Soil Environment Preservation Act now includes a far-reaching environmental liability provisions, where the owners and operators as well as receivers of the facility bear responsibility. However, whether the financial institutions may be captured as a potential responsible party is not very clear. Until the relevant legislation is developed and court decisions accumulate, Korean financial institutions are well advised to raise awareness on this issue, to develop environmental policies and to train personnels.

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A concerned party of purification liability for soil pollution (토양오염에 대한 정화책임의 주체)

  • 조은래
    • Proceedings of the Korean Society of Soil and Groundwater Environment Conference
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    • 1999.10a
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    • pp.53-56
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    • 1999
  • The concerned party of purification liability in a soil pollution is an owner or occupant of a contaminated site. But when we don't appoint the polluter or he can't do a cleanup, municipal put in effect the purification. In such a case, another parties who are related to the contamination ought to the liability. The province of responsible parties, therefore, is required to extend to an owner or operator of a facility, a carrier and lender

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The Liability on the Damage of Soil Pollution (토양오염의 피해에 대한 책임)

  • Cho, Eun-Rae
    • Journal of Soil and Groundwater Environment
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    • v.10 no.6
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    • pp.1-9
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    • 2005
  • Soil is polluted by an agricultural chemicals, the effluence of a crystal and sewage sludge, illegal discharging of waste water or waste matter and so on. Soil pollution that accompanies a groundwater and the crops contamination has a large effect on people's living. By polluters pay principle, when a soil was polluted, polluters take the responsibility of clean-up and compensation for damages. The character of the responsibility is a strict liability. When joint polluters exist in a soil pollution, they bear collective responsibility. But they are exempted from obligation in case of a natural calamity and war. The polluters who are poor contribution of pollution take a partition responsibility but it is not easy to prove that. The concerned parties of purification liability in a soil pollution are polluter, an owner or occupant of a contaminated site, and a grantee. But when we do not appoint the polluter or he cannot do a cleanup, municipal must put in effect the purification. In such a case, another parties who are related to the contamination should take upon themselves a liability. The province of responsible parties, therefore, is required to extend to an owner or operator of a facility, a carrier and lender.

How to Reflect Sustainable Development, exemplified by the Equator Principles, in Overseas Investment (해외투자(海外投資)와 지속가능발전 원칙 - 프로젝트 파이낸스의 적도원칙(赤道原則)을 중심으로 -)

  • Park, Whon-Il
    • THE INTERNATIONAL COMMERCE & LAW REVIEW
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    • v.31
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    • pp.27-56
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    • 2006
  • Today's financial institutions usually take environmental issues seriously into consideration as they could not evade lender liability in an increasing number of cases. On the international scene, a brand-new concept of the "Equator Principles" in the New Millenium has driven more and more international banks to adopt these Principles in project financing. Sustainable development has been a key word in understanding new trends of the governments, financial institutions, corporations and civic groups in the 21st century. The Equator Principles are a set of voluntary environmental and social guidelines for sustainable finance. These Principles commit bank officers to avoid financial support to projects that fail to meet these guidelines. The Principles were conceived in 2002 on an initiative of the International Finance Corporation(IFC), and launched in June 2003. Since then, dozens of major banks, accounting for up to 80 percent of project loan market, have adopted the Principles. Accordingly, the Principles have become the de facto standard for all banks and investors on how to deal with potential social and environmental issues of projects to be financed. Compliance with the Equator Principles facilitates for endorsing banks to participate in the syndicated loan and help them to manage the risks associated with large-scale projects. The Equator Principles call for financial institutions to provide loans to projects under the following circumstances: - The risk of the project is categorized in accordance with internal guidelines based upon the environmental and social screening criteria of the IFC. - For Category A and B projects, borrowers or sponsors are required to conduct a Social and Environmental Assessment, the preparation of which must meet certain requirements and satisfactorily address key social and environmental issues. - The Social and Environmental Assessment report should address baseline social and environmental conditions, requirements under host country laws and regulations, sustainable development, and, as appropriate, IFC's Environmental, Health and Safety Guidelines, etc. - Based on the Social and Environmental Assessment, Equator banks then make agreements with borrowers on how they mitigate, monitor and manage the risks through a Social and Environmental Management System. Compliance with the plan is included in the covenant clause of loan agreements. If the borrower doesn't comply with the agreed terms, the bank will take corrective actions. The Equator Principles are not a mere declaration of cautious banks but a full commitment of lenders. A violation of the Principles in the process of project financing, which led to an unexpected damage to the affected community, would not give rise to any specific legal remedies other than ordinary lawsuits. So it is more effective for banks to ensure consistent implementation of the Principles and to have them take responsible measures to solve social and environmental issues. Public interests have recently mounted up with respect to environmental issues on the occasion of the Supreme Court's decision (2006Du330) on the fiercely debated reclamation project at Saemangeum. The majority Justices said that the expected environmental damages like probable pollution of water and soil were not believed so serious and that the Administration should continue to implement the project seeking ways to make it more environment friendly. In this case, though the Category A Saemangeum Project was carried out by a government agency, the Supreme Court behaved itself as a signal giver to approve or stop the environment-related project like an Equator bank in project financing. At present, there is no Equator bank in Korea in contrast to three big banks in Japan. Also Korean contractors, which are aggressively bidding for Category A-type projects in South East Asia and Mideast, might find themselves in a disadvantageous position because they are generally ignorant of the environmental assessment associated with project financing. In this regard, Korean banks and overseas project contractors should care for the revised Equator Principles and the latest developments in project financing more seriously. It's because its scope has expanded to the capital cost of US$10 million or more across all industry sectors regardless of developing countries or not. It should be noted that, for a Korean bank, being an Equator bank is more or less burdensome in a short-term period, but it must be conducive to minimizing risks and building up good reputation in the long run.

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