The World's Best Public-Private Partnership Law

MMM Infra Blog No. 8 18 September 2024

Recently, a client with a development agency asked me “What is the best Public-Private Partnership Law in the world?”

My joking response was “Whichever PPP Law I am currently working on with a client country!” On a more serious note however, the question did cause me to reflect on the elements that make a PPP Law particularly effective.

Of course, in discussing this subject, it is appropriate to begin by setting out some important preliminary stipulations.

First of all, not every country needs a PPP Act. Many jurisdictions with very successful PPP programs, such as the various Australian states and a number of Canadian provinces, have developed their programs without any PPP-specific legislation. However, these (typically Common Law) jurisdictions are advanced economies, with well-established and highly developed legal frameworks, particularly in terms of the enforcement of contractual rights and the protection of investors. In addition, these countries have government departments and agencies with considerable capacity and expertise. Be that as it may, for emerging market countries that wish to develop a PPP program but which lack these advantages, there is real benefit (whether they are Common Law or Civil Law countries) in enacting a new law to encourage Public-Private Partnerships. With a new PPP Act, the country can set out the institutional arrangements for the PPP program; define the scope and key features of the program and, importantly, send a message to prospective investors – both foreign and domestic – that the country is serious about doing Public-Private Partnerships, as evidenced by the fact that the legislature has gone to the time and trouble to enact primary legislation to further the initiative.

Another key preliminary point is that drafting PPP legislation is not a ‘one-size-fits-all’ proposition. It is critically important to have the law reflect the realities of the country in which it is being written. The PPP Law for a small island unitary state with an economy primarily reliant on tourism and small-scale agriculture can and should have a PPP Law that is different than the one drafted for a large, federal and highly-industrialised country.

For these reasons, the available PPP model laws, such as the 2019 UNCITRAL Model PPP Law (https://uncitral.un.org/en/mlpppp) on the 2022 UNECE Model PPP Law (https://unece.org/eci/documents/2022/10/working-documents/standard-public-private-partnershipsconcession-model-law) must be used with care. Quite simply, there is no universally-applicable model.

These UN model laws do, however, offer some helpful guidance in terms of setting out the ‘chapter topics’ that should be addressed in any PPP law, and in terms of identifying the key elements within each ‘chapter topic’.

So, what are the key ‘chapter topics’? In my view, every PPP law should address the following topics, ideally in separate chapters, in something like this order:

●        An Introduction chapter, setting out the objectives and scope of the Act, including a listing of the sectors to which the Act does and does not apply. This chapter can also introduce keep concepts, such as risk allocation, value for money, sustainability, and affordability.

●        A chapter on Institutional Coordination and Responsibilities, establishing new entities (such as a new central PPP unit and a new PPP inter-ministerial committee), and outlining the relationship between these new entities and organisations such as (i) the line ministries which will act as the public partners – the Government Contracting Authority (GCA) – for PPP projects; and (ii) the private sector companies that will act as the private partners in a PPP transaction. (Surprisingly, these important institutional issues are not addressed in the UNCITRAL Model PPP Law).

●        There should also be a series of chapters dealing with the different phases of the PPP Project Cycle. Personally, I like the simplicity of the approach taken by the European PPP Expertise Centre (EPEC), a division of the European Investment Bank, in the 2021 EPEC PPP Guide (https://www.eib.org/en/publications/epec-guide-to-public-private-partnerships), which divides the PPP Project Cycle into four phases, as follows:

o   Phase 1: Project Identification and Selection

o   Phase 2: Project Preparation

o   Phase 3: Project Procurement

o   Phase 4: Project Implementation.

One possible approach would be to have a short chapter describing the PPP Project Cycle, followed by individual chapters concerning each of the four phases.

●        In the chapter on PPP Project Identification and Selection, there should be provisions on project initiation by line ministries and other government agencies, as well as provisions dealing with unsolicited proposals – indicating whether the latter are allowed and, if so, on what basis.

●        In the chapter on PPP Project Preparation, there can be a discussion of feasibility studies and of the PPP Contract (since a draft of the PPP Contract should be developed during this phase). This chapter can also introduce concepts such as market soundings and bankability, as well as provide additional information in regard to risk allocation, value for money and affordability.

●        In the chapter on PPP Project Procurement, the arrangements for a competitive bidding process should be set out, as well as the restrictions (which should be severe) on direct negotiations.

●        In the chapter on PPP Project Implementation, there can be a discussion of contract monitoring and reporting, as well as a discussion of dispute resolution and renegotiations, plus handback issues.

●        Countries may also wish to have a separate chapter on Government Support for PPPs, setting out the permissible range of government support mechanisms for private sector PPP partners, such as tax breaks or Viability Gap Funding mechanisms. This chapter could also deal with support for lenders to PPP projects, in the form of Direct Agreements between a GCA and lenders, and the ability to grant  ‘step-in rights’ to lenders.

●        If a country wishes to establish a PPP Project Development Fund, to help with project preparation, there could also be a separate chapter on this topic.

●        Lastly, there should be a chapter on Transitional and Final Provisions, dealing with conflicts with antecedent laws; the disposition of prior ‘PPP-like’ projects that are currently being implemented or procured; and the ability  of the government to issue regulations under the Act. This last point is especially important, since much of the detail of the PPP programme will be set out in secondary legislation.

Of course, different countries may wish to organise their PPP Law in different ways, but every such enactment should deal, as coherently as possible, with the various topics listed above.

So, to return to the question I was asked – What is the world's best PPP law – is there a perfect example? The answer has to be “Not yet!” Indeed, given that the world of Public-Private Partnerships continues to evolve, there will always be room for improvement.

This blog is in a series that appears on this website. It has been written by Mark Moseley, the Principal of Moseley Infrastructure Advisory Services (Mark.Moseley@MMMInfra.com). Unless otherwise noted, the copyright in this blog is owned by Moseley Infrastructure Advisory Services. The blog is made available for use under a Creative Commons Attribution 3.0 Licence, whereby users are free to copy and redistribute the contents of the blog, if they give credit to the author, and clearly indicate any changes that have been made.