Legal advisory for complex projects: Why knowing the law is not enough
In energy, infrastructure and industrial projects, a single decision can affect the technical solution, permitting, financing and the economics of the entire project.
In energy, infrastructure and industrial projects, legal advisory often begins long before the contract itself comes into play. Technical solutions, permitting and environmental requirements, financing, regulation and the allocation of responsibilities are closely interconnected. A decision in one area can therefore have a significant impact on how the entire project operates, its risks and its economics.
We spoke with Marek Priesol of BDO Legal about what legal advisory with a technical dimension means in practice, why knowing the law alone is not enough in complex projects and where companies most often underestimate risks. He also explains why legal advisers working on energy and infrastructure projects need to understand not only the law, but also the technical logic, economics and business behind the project.
Marek Priesol focuses primarily on projects where the law cannot be separated from the technical solution, economics and business considerations. These are typically energy, infrastructure and industrial projects, but we apply the same approach wherever technical solutions intersect with permitting and environmental matters, financing, guarantees and liability, regulation or EU rules – sometimes extending into competition or European law.
We still consider ourselves lawyers first and foremost. In complex projects, however, we inevitably also act as advisers who need to understand what the client is building or operating, how it will work and where the business value is expected to come from.
What does legal advisory with a technical dimension mean in practice?
It means that knowing what the law says is not enough.
When we work on an energy or industrial project, I need to know where the connection point is, how electricity or heat will be delivered, who will build and own the substation, where metering takes place, who controls the output and what happens in the event of an outage. In another project, the key issue may instead be emissions technology, waste management, environmental limits or the parameters that the equipment can actually guarantee.
A lawyer does not, for example, need to know how to design a high-voltage tower so that its construction minimises leakage currents and faults caused by bird droppings. Nor does a lawyer need to know how to design a 400/110 kV transformer. But they should understand why the client needs it, what practical advantage and strategic position it creates, and what its location and ownership mean for the rest of the project.
Why is looking at the contract alone not enough in major projects?
Even a good contract cannot fix a bad project.
You may have perfectly allocated responsibility for construction delays, but if the grid connection arrives two years late, that will not help you much. Likewise, you may have a good electricity price but an unfavourable network tariff. Or a cheaper technology that worsens the operating economics for the next fifteen years. You may even have an excellent technical solution that runs into problems with EIA or permitting.
Legally correct does not necessarily mean right for the project. That is why we try to look at the project as a whole – the technical solution, feasibility, economics and bankability, environmental and permitting matters, the timetable, regulation, operations and risks, but above all how individual decisions affect one another.
Which risks do companies most often underestimate in complex projects?
Interfaces – more specifically, how they are defined and who is responsible for them.
The designer deals with the technology. The EPC contractor deals with its scope. The bank deals with the conditions for drawdown. The operator deals with operations. The distribution system operator deals with the connection point. The environmental adviser deals with the EIA. Each party can do its own part correctly and the project may still fail to work as intended.
A gap can arise between permitting and construction, financing and the project schedule, or a technical guarantee and the actual operating regime. Often, a risk remains for which ultimately no one wants to accept responsibility.
What determines a sound legal structure before the contract itself is drafted?
The architecture of the project.
Who owns the assets. Who invests the CAPEX. Who holds the permit and what cooperation they need from the other parties. Who has the capacity. Who bears the risk of regulatory change. Who guarantees the technical parameters and what happens if the equipment fails to meet them. Who has guaranteed offtake. What happens if the project is delayed by a year.
How does legal advisory for an infrastructure project differ from a conventional transaction?
Time and the number of interdependencies.
An infrastructure project neither begins nor ends with the signing of a contract. Before that, you deal with land, EIA, permitting, grid capacity, financing and sometimes state aid, public procurement or competition rules. Then come construction, commissioning, trial operation, technical guarantees, SLAs, maintenance, regulatory changes and, eventually, perhaps an exit.
What does a lawyer need to understand to advise effectively on a technically complex project?
The technical logic, economics and business. We take the legal aspects as a given.
I do not need to know how to design a substation. But I do need to understand the difference between it being owned by the investor or by the network operator. I do not need to build the financial model. But I do need to know what a two-year delay in grid connection or an additional five euros per MWh will do to the IRR. And when I negotiate technology guarantees, I need to understand which technical parameters have real economic value for the client.
Otherwise, I may give the client a legally flawless answer that is bad advice in practice. A bit like a law student who comes home for the holidays and immediately starts giving legal advice to the entire family and all their friends.
Your neighbour's branches extend over your property? The law says that, under certain conditions, you may cut them back. The law student may be legally correct. But if you simply cut them off and the result is ten years of conflict with your neighbour, it was not good advice.
At which decisions can a legal adviser bring the greatest value to a project?
Decisions that are difficult, expensive or almost impossible to change later.
Where we connect. Who will own the infrastructure. Whether we build it ourselves or someone else should build it. How we allocate CAPEX. Which permitting route we choose. Who bears regulatory or environmental risk. Which parameters the supplier must guarantee. What needs to be in place before we start spending significant amounts of money.
When is a lawyer brought into a project too late?
When the client says: “Everything has been agreed. We just need to put it on paper.”
That is when you need to pay attention. It is almost always an interesting moment.
Often, ownership of the infrastructure, permitting, grid connection, price indexation, technical guarantees or a situation where one party invests before the other has fulfilled its part of the project have not yet been resolved.
You can put many things on paper. Building a power plant, a factory or another piece of technology on that basis is the harder part.
What do companies often overlook in projects combining construction, financing, regulation and operations?
You cannot contract your way around physics, economics or regulation.
If there is no grid capacity, a contract will not create it. If the technology cannot deliver the required output, a warranty may deal with the issue legally, but it will not get the factory running. If environmental limits prevent the selected technology from operating, even a good schedule will not help. And if the project does not make economic sense, another legal structure will not turn it into a good investment.
