Contracting for Forest Carbon : Elements of a Model ... - Forest Trends

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in the agreement (see Box 11 - Default and Box12 - Remedies).A partial list of general representations (made byeach party) appear in Box 8.Box 6. Sample General RepresentationsArticle 5.Representations.5.1 General Representations. Each partyrepresents that:(a) It is duly organized and validly existingunder the laws of the jurisdiction of itsorganization or incorporation, and, if relevantunder those laws, in good standing.(b) It has the power:(1) to execute this agreement and any otherdocumentation to which it is a party relating tothis agreement;(2) to deliver this agreement and anydocumentation relating to this agreement that itis required by this agreement to deliver; and(3) to perform its obligations under thisagreement,(c) All required authorizations have beenobtained and are in full force and effect.(d) Execution, delivery, and performance underthis agreement does not cause it to violate anyapplicable law, statute, contractual obligation, orcourt or government order.(e) Its obligations under this agreement arelegal, valid, and binding, and enforceable inaccordance with their respective terms, subjectto applicable creditors’ rights laws and toequitable principles of general application.(f) No Event of Default, as that term is definedin Article 9, or event that with notice or lapse oftime or both would constitute an Event ofDefault, has occurred with respect to it, and nosuch event would occur as a result of its enteringinto or performing its obligations under thisagreement.(g) No litigation, arbitration, or administrativeproceeding before any governmental entity ispending or, so far as it is aware, threatenedagainst it that would, if adversely determined,result in a material adverse change in itsfinancial condition or its ability to perform itsobligations under this agreement, or that islikely to affect the legality, validity, orenforceability against it of this agreement.(h) It has entered into this agreement after a fullopportunity to review its terms and conditions,it has a full understanding of these terms andconditions and their risks, and it is capable ofassuming those risks.(i) It is not relying upon any representations ofthe other party other than those expressly set outin this agreement, and the other party is notacting as a fiduciary or advisor for it.(j) All information that is identified as beingsubject to or connected with this agreement andthat it provides, or that is provided on its behalf,in writing to the other party is, as of the date itis provided, true, accurate, and complete inevery material respect.Forest carbon sellers may need to makeadditional representations to the effect thatsellers are legally entitled to sell VERs from theproject area under applicable local and nationallaw. Furthermore, if a sellers’ representative isused, it should represent that it was legallyappointed, after full and fair disclosure, by allparticipating landholders.Box 7. Sample Representations Made by theSellers’ Representative5.2 Seller Representative Representations. TheSeller Representative represents that:(a) Participating Landholders hold use rights inthe Project Area, as shown in the land use grantthat is attached at annex 4, that entitle them toperform, and receive revenue from, ProjectActivities.Contracting for Forest Carbon | 10
(b) As shown in the agreement between theSeller Representative and ParticipatingLandholders that is attached at annex 5, theSeller Representative is authorized by theunanimous, free, prior, and informed consent ofParticipating Landholders to act on behalf ofParticipating Landholders and to oversee projectgovernance and distribution of revenues asdescribed in the Project Plan.To show the buyer that sellers are legallyentitled to sell VER from their land, sellersmust, at a minimum, demonstrate that:• Sellers have a use right (statutory orcustomary) in the project area that permitsthem to perform project activities andexclude incompatible uses, for the fullduration required by the purchaseagreement and the certification standardsused.• Claiming and transferring credit foremission reductions within the project areais not contrary to applicable national orlocal law.If the land or natural resources belong to thegovernment, governmental approval may berequired for project activities to proceed.It may be good practice to specify thatparticipating landholders have held use rightsfor a minimum period of time before the projectbegan, indicating that they did not recentlyacquire rights in the project area by squatting orappropriation.The function of clause 5.2(a) in Box 9 is toassure buyers that the sellers’ representative hasthe free, prior, and informed consent of allparticipating landholders to (1) representparticipating landholders, (2) oversee projectgovernance, and (3) manage revenuedistribution. The sellers’ representative will needto attach proof of consent, which can be anagreement signed by all participatinglandholders and the sellers’ representative, to thepurchase agreement.Validation and VerificationUsing the Voluntary Carbon Standard oranother accepted standard or program forassessing the carbon benefits of a forest carbontransaction provides minimum requirementsand procedures for project validation andverification. Most standards, including theVoluntary Carbon Standard, additionallyprovide specific methodologies or protocols thatdescribe how the project and its net effects oncarbon emissions are to be assessed in specificcircumstances. For the sake of simplicity, thisdocument will use “standards” to refer tocarbon standards or programs and“methodologies” to refer to methodologies orprotocols under those standards.Generally, validation is an evaluation of theproject plan and associated documents todetermine whether the project is likely togenerate emission reductions that can satisfy therequirements of the chosen standard andmethodology. Monitoring refers to periodicassessments of whether the project isaccomplishing its goals. Verification refers to anex-post evaluation of whether emissionreductions were generated as planned.Even in the voluntary market, rigorous thirdparty validation and verification is likely to beextremely important to buyers. Where thirdparty validation and verification is used, thepurchase agreement must specify whichstandard, and which of the chosen standard’smethodologies, will be used. Alternatively, theagreement can describe the process by which astandard and methodology will be selected.In general, validation and verification must bedone by separate individuals or entities, each ofwhich must be approved to performaccreditation under the chosen standard. Due toboth the rigor required and the lack of peopleContracting for Forest Carbon | 11
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Page 6: AcknowledgmentsA joint project betw
Page 10 and 11: Legal costs make up a significant,
Page 12 and 13: individual or entity - a sellers’
Page 14 and 15: prior, and informed consent by all
Page 16 and 17: 3.5 Payment Mechanics. On or before
Page 20 and 21: qualified to perform validation and
Page 22 and 23: wrong from a regulatory perspective
Page 24 and 25: (d) A failure to deliver payment wh
Page 26 and 27: a court of law, but is binding on t
Page 28 and 29: (6) to time is to Eastern Standard
Page 30 and 31: Wrapping Up: Signaturesand AnnexesS
Page 33 and 34: Works CitedCERSPA Initiative. Certi

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