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PPP LAWS FOR THE DEVELOPMENT OF PPP PRACTICE IN THE CIS MEMBER STATES International PPP experts views on the CIS PPP Model Law perspectives on PPP legal.

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Presentation on theme: "PPP LAWS FOR THE DEVELOPMENT OF PPP PRACTICE IN THE CIS MEMBER STATES International PPP experts views on the CIS PPP Model Law perspectives on PPP legal."— Presentation transcript:

1 PPP LAWS FOR THE DEVELOPMENT OF PPP PRACTICE IN THE CIS MEMBER STATES International PPP experts views on the CIS PPP Model Law perspectives on PPP legal and regulatory frameworks in CIS Member States : Marc Frilet Managing Partner « Frilet – Société d’ Avocats » Vice-President of the French Institute of International Legal Experts (IFEJI) Team Leader : UNECE Zero Tolerance Corruption PPP Co-promoter of UNECE PPP International Centre of Excellence Board member ETIC-PPP 26/11/2014© Frilet Société d'Avocats1 Program of International conferences : Perspectives of Development of PPP Legal and Regulatory Frameworks in CIS Member States 26 th November 2014, Saint-Peterburg, Russian Federation.

2 International PPP Experts Group 07/03/2014© Frilet Société d'Avocats2 As practitioner of concession and PPP in France and developing countries for over 30 years I have learned many lessons on the problems and condition of success of all type of Concessions and PPP's. Today I have also the benefit to share with you the lessons learned ; - by a leading PPP expert group including planning experts, economist,scholar, lawyers, financiers and former senior officers of developpement agencies (ETIC-PPP) having participating to more than 100 concessions and PPP across the globe in the last 40 years. - through my own participation as an expert to the recent UNCITRAL exchanges on a possible UNCITRAL model law - in my capacity of co-promoter of the UNECE international Center of Excellence PPP's Polices Laws and Institutions

3 3 Lessons Learnt : never underestimate disctinctive features of PPP's Most PPP's involves a contractual relationship governing situations virtually unknown in most contracts. - Very large upfront investment. - Sunk investment : cannot be resold in the market. - Very long term recovery (often decades) - Public interest : a top priority triggering special sovereign rights. - Private interest : need of special protection when special rights are triggered -Long term nature call for an answer to a well know dilemma in the law of contract: - Pacta Sunt Servanda - Rebus Sic Stantibus

4 4 The two decades of international learning curve for identification of PPP benefits and conditions of success Since the new wave of active promotion of PPP starting in the 1990 ’ s, it took nearly two decades to reach a reasonable level of consensus on PPP definition and the conditions to be fulfilled to develop pipelines of resilient PPP's. During a first decade, PPP have been developed in a climate of deregulation and privatization. Privatization of Public services has been aggressively promoted. Some real successes but many projects in distress with the exception of few countries. Globally, less and less appetite for private investment in PPP for Public Services. International Community started to consider the needs of ad hoc regulation for facilitating the development of pipelines of concessions and PPP Change of approach of the World Bank through the infrastructure action Plan

5 5 The two decades of international learning curve for identification of PPP benefit and conditions of success (2) During a second decade up to 2010 Several public and private working groups and initiatives reached common conclusions on the conditions of success of concessions and other PPP. Due to the innovative nature of long term relationships, PPP are complex and learning by doing project after project is not an option. In the area where PPP is the most needed, (ie: PPP for infrastructure of public services in the core sector), many conditions of success are similar irrespective of sectors or local situation. On this basis, the pre requisites of successful pipelines of PPP is good framework law and related institutions, appropriate procedures, templates, contracts and sound investment climate A major attempt made by UNCITRAL in 2003 through legislative guide for privately financed infrastructure project and model legal provisions : Excellent work, but not well disseminated. Later, many attempts to identify and promote best practices and many PPP laws have flourished around the world : - Template contracts have been promoted (ie : UK ) - PPP units have been created.

6 6 The two decades of international learning curve for identification of PPP benefit and conditions of success (3) Lessons leant since 2010 : many positive developments included in the CIS Model Law Growing consensus on the limits and on the future development of PPP : PPP is not a financial instrument when Public Budget can not finance a Public Infrastructure. When PPP triggers liability, contingent or not on future tax budgets it may only be considered within very strict Public accounting and fiscal deficit limits. PPP have a real future for delivery of public services where the recovery derives entirely or mostly from users fees. The challenge for the content of the appropriate institutional, legal and contractual framework remains very high. Currently, these challenges (identify and promote best practices, standards and model provisions) is taken seriously by : - UNCITRAL - G20 - UNECE International Center of Excellence - Other institutions (ex : World Bank, PPIAF)

7 7 CIS PPPModel Law : A good synthesis of the international consensus for promotion of pipelines of PPP. Two G20 quotes to summarize the benefits of the content of CIS Model Law : “Private sector will not invest in the dark in PPP projects” “Development of PPP pipelines will depend on proper identification and implementation of Gold Standard” The content of CIS Model Law : overview of key conditions of success currently lacking in many situations for PPP in the core public service sector - Principle of mutual beneficial cooperation for a specified period of time. - Principle of transparency and accessibility of rules and procedures - Principle of good faith implementation - Principle of planning and economic and financial feasibility studies leading to robust economic and financial scenarios before considering any tender.

8 8 CIS PPPModel Law : A good synthesis of the international consensus for promotion of pipelines of PPP (2) - Principle of competitive biding, with very few exceptions : competitive biding taking into account the particular nature of PPP where functional specifications are more important than technical specifications and as a result : - pre-qualification - two-stage tender - competitive dialogue - Contractual or legal framework securing general interest. - adaptation of the service rendered in the public interest. - ensuring continuity for rendering public service. - insuring non discriminatory access to the service. - guarantying a same level of services for all users in the same category.

9 9 CIS PPP Model Law : A good synthesis of the international consensus for promotion of pipelines of PPP (3) -Guaranty of the respect of rights and legitimate interests of the private partner : - Right to be compensated for any losses deriving from illegal action or failure to act from the State and /or Public Bodies. - Right to reinstatement of the economic equilibrium of the contract in case of hardship grossly detrimental to the private party. - Right to stability of the legal framework at the date of entering into the contract. - Right of fair indemnification in case of unilateral termination for general interest reasons. - Right to efficient and fair dispute resolution mechanisms.

10 10 Conclusion (1) : Merits of CIS Model Law The CIS Model Law has many merits - It is the first attempt to have a global approach addressing most of the key issues which together are a condition of success of concession and other PPP from planning to dispute resolution. - Its content is clearly in line with the growing international consensus on lessons learnt in the last two decades. - However, lessons learnt also indicate that the success of pipelines of projects heavily depends on the proper and actual implementation of the principles contained in framework regulations.

11 11 Conclusion (2) : CIS Model Law although essential is not sufficient In our experience, in order to develop pipelines of projects, it is necessary in addition : -To have the concepts and core principles of the law not only included but also developed in State laws and in a series of implementing regulations. -To have an institutional framework and related human resources able to implement the regulation and to monitor efficiently the project -To have a series of standard bidding documents, templates and guidelines published and easy to understand by all stakeholders. In our experience, all those additional conditions are essential to attract private investors for which legal and contractual certainty is paramount when dealing with public sector and making heavy upfront investments with very remote recovery horizon. In a nutshell : -Bravo ! and -Encore!


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