Presentation to the Public-Private Partnerships in Highways Workshop

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Presentation transcript:

The Legal Enabling Environment: Laws, Rules and Contractual Arrangements for PPP Highway Projects Presentation to the Public-Private Partnerships in Highways Workshop October 6, 2005 David Satola Senior Counsel, LEGPS

Legal & Regulatory Framework TYPES of CONTRACT Maintenance Contracts quantity based performance based Operation and Maintenance Concessions may involve a toll road may involve foreign equipment/construction Concession (ROT/BOT) Contracts high degree of complexity Legal & Regulatory Framework

Focus on Transactional Issues & Related Legal and Regulatory Aspects OUTLINE Focus on Transactional Issues & Related Legal and Regulatory Aspects Policy Imperatives Legal / Regulatory Framework Contractual Options - Examples

Principles Certainty Transparency Sustainability

POLICY PREREQUISITES FOR A SUCCESSFUL PPP Clear Policy Objectives for PPP Program Objectives better execution of projects Assignment of risk freeing public funds for other uses What is to be achieved? Maintenance/rehabilitation of existing road/ road network operation and maintenance of a toll road Privatization/ Building new roads

Development Strategy Infrastructure ICT Production Growth Poverty Alleviation Remove barriers to entry  efficiency  cost Pro-entry regulation Legal & Regulatory certainty

Reform Sequencing Legislation Regulatory Framework Market Entry Policy & Market Structure Options Legislation Regulatory Framework Market Entry Current Market New Market

Issue Identification & Resolution Reform Process Issue Identification & Resolution Stage 1 Stage 2 Stage 3 Status Quo Issues Strategies Implementation Current Market New Market Policies & Objectives LEGAL REFORM Broad Public Consultation Stakeholder Buy-in Local Ownership

Redefining the Role of the State Policy Government Legal/Regulatory Framework Regulator Regulatory Instruments Operators

Regulatory Independence Independence through structural & financial separation of Regulator, Line Ministry and Owner/Operators Ministry Determines Policy Regulator Regulates Sector Owner/Operator Operates Network

Regulatory Certainty Clarify Responsibilities among agencies National, regional, local/urban Networks / traffic Management, Safety, Evnironment Affect Commercial Opportunities Ambiguities Inefficiencies

Legal Framework v. Contract Approach - Longer Process + Greater Certainty + Greater Transparency + Applies equally + Creates Regulator + Creates Processes +Remedies through legal and administrative outlets +No industry capture of regulatory process + Expedient Requires legal framework anyway to guarantee Transparency Fairness processes Remedies only treated contractually Concentrates power in the license holder

But Enabling Framework alone is not enough to evaluate or manage risk: Maturity of Markets Tradition of “independent” authorities Outlets to redress grievances, enforce rights , settle disputes

LEGAL FRAMEWORK Recognition of the Need for New Legislation or Amendment of Existing Legislation Subordinate Legislation Precedents and Guidance Notes in the Highways PPP Toolkit

LEGAL FRAMEWORK Sector Specific Law Other Important Legislative Issues Foreign Investment ‘control’ vs. ‘promotion’ Contract Corporate /Commercial Concessions Expropriation law Safety/Health Environmental Protection Dispute Resolution /Arbitration Land Rights/Use (Eminent Domain) Labor Foreign Exchange Procurement Tax

REGULATORY FRAMEWORK Subordinate Legislation Regulatory Institutions procurement rules labor law regulations foreign exchange regulations Regulatory Institutions Ministry Agency/Regulator Environmental control agency Standards “good industry practice”

Understand Transactional Dynamics PPP Mechanisms Contract, BOT Objectives to be achieved Method to achieve Objectives Form of legal relationship Control, transfer, liability, exit rights How tendered

CONTRACTS BASIC AGREEMENTS Maintenance Contracts quantity based performance based Operation and Maintenance Concessions may involve a toll road may involve foreign equipment/construction BOT Contracts high degree of complexity RELATED AGREEMENTS (ex) Consultancy Contracts Operation Toll Other Financing Mitigate Renegotiation

MAINTENANCE CONTRACTS - PERFORMANCE BASED Source: PPIAF PPP Highways Toolkit

MAINTENANCE CONTRACTS - QUANTITY BASED Source: PPIAF PPP Highways Toolkit

Operation &Maintenance Concessions Source: PPIAF PPP Highways Toolkit

BOT CONTRACTS Source: PPIAF PPP Highways Toolkit