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Presentation to the Public-Private Partnerships in Highways Workshop

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Presentation on theme: "Presentation to the Public-Private Partnerships in Highways Workshop"— Presentation transcript:

1 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

2 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

3 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

4 Principles Certainty Transparency Sustainability

5 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

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

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

8 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

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

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

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

12 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

13 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

14 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

15 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

16 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”

17 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

18 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

19 MAINTENANCE CONTRACTS - PERFORMANCE BASED
Source: PPIAF PPP Highways Toolkit

20 MAINTENANCE CONTRACTS - QUANTITY BASED
Source: PPIAF PPP Highways Toolkit

21 Operation &Maintenance Concessions
Source: PPIAF PPP Highways Toolkit

22 BOT CONTRACTS Source: PPIAF PPP Highways Toolkit

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