Transcript Slide 1

CWC
PUBLIC PRIVATE PARNERSHIP TRAINING
ABUJA, November 17, 2009
Legal & Regulatory Framework For Public Private
Partnership In Nigeria Under the Infrastructure
Concession Regulatory Commission Act 2005
Ayuli Jemide, Lead Partner.
7/7/2015
1
OUTLINE
1. Highlights of the Infrastructure
Concession Regulatory Commission Act
2005 (“ICRC Act”)
2. Other Key Legislations related to PPP’s
3. A Preview of PPP Regulators
4. Legal & Contractual Issues In PPP’s.
5. Conclusions
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AYULI JEMIDE, Lead Partner,
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Highlights of the ICRC Act
Is the ICRC Act meant for only
“Concessions” or all forms of
Public Private Partnerships?
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Forms of PPP’S
1.
2.
3.
4.
5.
Increase Private Sector Risk
Increase Private Investment
Institutional Changes
Longer Tenures
More Complicated
SERVICE
MANAGEMENT
LEASES
JOINT VENTURES
CONCESSION/BOT
BOO - Divest
Scope of the ICRC Act
Section 36 defines Concessions to mean:
" means a contractual arrangement whereby the project
proponent or contractor undertakes the construction,
including financing of any infrastructure, facility and
the operation and maintenance thereof and shall
include the supply of any equipment and machinery
for any infrastructure and the provision of any
services”
• Does this definition cover all PPP’S?
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Does the short title help?
• “An Act to Provide for private sector
participation in the development
financing, construction, operation or
maintenance of federal infrastructure
or development projects (by whatever
name called) through Concessions and
contractual arrangements”
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Do these Sections align with PPP?
• Institute of Public Private Partnership
(IP3):“A partnership between government
and an appropriate qualified private sector,
entity or group of entities, for the purpose of
financing, designing, constructing and/or
operating infrastructure or services that would
normally have been provided through
traditional public channels”.
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Mischief cured by the Act
• Provides a legal basis for MDA PPP deals
• To regulate and guide the manner in which MDA’s
engage in PPP’s
• Give private investors comfort
• Ensuring that projects are based on a strong business
case and needs analysis.
• Ensure that Govt obtains Value For Money.
How does Govt define Value For Money?
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Key Actors under the ICRCA
•
•
•
•
•
The Infrastructure Regulatory Commission
Federal Ministries, Departments, Agencies
Mr President
The Federal Executive Council
The private proponent
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The Commission:
•
•
•
•
Sections 19, 20, 9, 34
Provide general policy guidelines
Manage & superintend the policies
Take custody of every concession agreement made
under the Act and monitor compliance
• Ensure efficient execution of any concession
contract
• Set up a Special Concession Account
• Make regulations pursuant to the Act
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Ministries, Depts & Agencies
•
•
•
•
•
•
Prioritize Projects – S 2 (2)
Abide by procurement process – S 2(4) to 4.
Supervise the projects – S 12
Inspect projects – S 10
Authenticate Amortization costs – S 8
Ensure that Private proponent has the relevant
expertise and financial capacity – S 2 (3)
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Mr President
•
•
•
•
Appoint ICRC Board
Give general directives – S 33
Receive yearly reports – S 26
Approve regulations of the Commission – S 34
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Federal Executive Council
• Approve MDA prioritized Projects – S 2 (2)
• Ensure there is no Arbitrary variation or
cancellation of agreements – S 11
• Pre-approve Guarantees by Federal Agencies on
PPP deals. – S 3
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Private Proponent
•
Comply with bidding process – S 4
•
S 7 – the private proponent shall:
a) Take out Insurance policy on the concession with
and Insurance company approved by National
Insurance Commission.
b) Maintain and repair facility during the
concession period.
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National PPP Policy
National PPP Policy has been passed:
Establishes the:
i)
PPP Resource Centre – policy, advisory
and transaction structuring
i)
Compliance Committee – to take custody of
agreements and monitor compliance
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ICRC Guidelines
ICRC has issued a few guidelines to MDA’s
pending the full regulation to deal with:
- Transaction thresholds
- Procedure for unsolicited bids etc.
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ICRC as a regulator
Note: ICRC regulates PPP activities but is not a
contracting parties to the PPP’s.
Is this good for regulation?
What else should a good regulator have?
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Highlights of the ICRC Act
o What about the States?
o Is the Federal Capital Territory Abuja a
State?
o What about the Local Governments?
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Other Key Legislations
Related to PPP’s
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1. The Nigerian Constitution
2. Public Procurement Act 2007
3. Fiscal Responsibility Bill 2007
4. Public Entp. (Privatization &
Commercialization) Act 1999
5. Utilities Charges Commission Act 1992
6. Land Vesting Title Act
7. National Inland Waterways Authority Act
8. Highways Act 1971
9. Federal Roads Maintenance Agency Act
10 Lagos State Roads, Bridges and Highway
Infrastructure Law 2005.
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Note the existence of Sector
Legislations:
NCC
NERC etc
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1.
The Constitution
• Establishes ownership of assets between
Federal, State & Local Governments.
- Onshore/Offshore Dichotomy
- Current dispute between Lagos State &
National Inland Waterways Authority.
• Allocates legislative power via Exclusive,
Concurrent and Residual List.
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Constitutional Power to Legislate
Exclusive
• Federal Roads
• Maritime
• Aviation
• Mines &
Minerals
Concurrent
• Electric Power
• Transportation*
• Industrial,
Commercial &
Agric Dev.
• Railways *
• Nuclear Energy • Education
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Residual
• Urban planning
AYULI JEMIDE, Lead Partner,
•
•
•
•
State Roads *
Water
Housing
Health
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Practical issues with limits on
legislative powers:
•
States may require Federal Govt consent to establish:
- a State owned airport
- a state owned railway system
- a state Maritime transport system
•
States depend on the workability of the Federal policy
on gas supply from the Oil Companies to fuel their
State owned Independent Power Projects.
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AYULI JEMIDE, Lead Partner,
Practical issues with limits on
legislative powers:
SOME CURRENT DISPUTES:
•
NIWA VS LASG re Maritime
Transport and Dredging
•
Bi-Courtney Vs LASG re Lagos
State Governments
proposed Lekki Airport.
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Public Procurement Act 2007
• “This Act establishes the National Council on
Public Procurement and the Bureau of Public
Procurement to “monitor and oversee” public
procurement and to “regulate and set
standards” for public procurement in Nigeria.
• “No objection certificate” required before Fed.
Exec. Council approval.
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• Is a Public Private Partnership a
“Procurement” within the
Procurement Act 2007?
TWO SCHOOLS:
1ST School: It is a NOT a
Procurement.
2ND School: It is a Procurement.
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Arguments and Counters
1st School:
“Procurement” is about “purchases”
& Govt buys nothing in PPP’s.
2nd School: In PPP’s Government trades an
Asset and buys the provision of a
PSO (public service obligation).
1st School:
Procurement seeks the lowest
bidder and PPP’s seek the
highest bid.
2nd School: PPP calculates Value for Money
(VFM) which is the same principle.
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Debate continues
1st School:
The Act’s scope is “goods”, “works” and
“services” it does not cover PPP
2nd School:
a)
BOT’S would fall under “works” in
the Act.
b)
Management Concessions are
“services”
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Conclusion
The reality is that if the Bureau of
Public Procurement does not issue
a “Certificate of No Objection” the
Federal Executive Council would
not approve the project.
“Compliance” is therefore the key
word
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Fiscal Responsibility Act 2007
• To strengthen fiscal policy design and
implementation. Citizen’s legal right to
challenge budgetary lapses is supposed to
reduce ineptitude in Govt spending.
• May increase Govts sophistication in
designing financial models for PPP’s and
ensuring that Govt contributions are within
budgets and available.
Public Entp. (Privatization &
Commercialization) Act 1999
• The Bureau of Public Enterprise (BPE) has
powers to privatize Fed. Govt shares in
companies listed in the Act.
• Interestingly, BPE has used PPP models instead
of privatization in several instances.
• For example: the Port Concessions by the
Nigerian Ports Authority.
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Utilities Charges Commission Act 1992
• Establishes a Utilities Charges Commission that
regulates prices on certain utilities.
• “Nepa, Nitel, NNPC, Nigerian Airways, Nigerian
Railway Corporation, Ferry Services
Organizations, Nigerian Ports Authority, Road
Transport Organizations, Nipost and such others
as Commission determines from time to time”.
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Land Vesting Title Act
1975
• All land reclaimed from Inland Waterways
is the property of the Federal Government.
• This Act clearly prohibits a State or Local
Government from purporting to grant a
Concessionaire ownership of land
reclaimed from the Lagoon in the course
of the project.
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The Act is in dispute?
Oba Yekini Adeniyi Elegushi & Ors v
Attorney General of the Federation and
others. 2000 case.
– Fed High Court. (FHC/L/CS/669/95
Challenged the validity of the Land Vesting
Title Act.
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National Inland Waterways Authority
Act 1996
• Inland Waterways are vested in the Federal
Government – National Inland Waterways
Authority. (NIWA)
• reclaiming land from any Lagoon requires
written consent of the NIWA or if Project relates
to a bridge or a motorway over an inland
waterway, the NIWA should be on your radar.
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Federal Highways Act 1971
• Section 2 of the Federal Highways Act
empowers the Minister for Transportation to
build Toll gates, operate and collect Tolls on
Federal Highways .
Can the Minister delegate this power to a private
company?
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Lagos State Roads, Bridges and
Highway Infrastructure Law 2005.
• Enacted by the Lagos State as the legal framework for
Concession on Roads in Lagos State.
• It was specifically enacted for the Lekki Concession
Company PPP re the Lekki road. and is limited to Roads.
• Some other states have or are about to pass separate
PPP laws
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Federal Roads Maintenance
Agency Act 2002
• Established FERMA
• Section 8(a) and (b) that:
“FERMA shall enter into road concession
contracts for the purpose of executing relevant
projects as well as set guidelines for the
working of concession contracts”
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Preview of Regulators
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ICRC
All PPP’s by Federal Govt,
its ministries and agencies.
Securities & Exchange •Bond Financing;
• Shares of PLC’S;
Comm.
Bureau of Public
Procurement
Federal Executive
Council
• PPP with Trusteeship or
corporate restructuring
Federal Government
procurement above N50
million naira
All Federal Government
contracts above 50 Million
Naira need FEC approval.
Bureau of Public Entp. All entities listed in the
BPE Act
Debt Management
Office
• State or FGN debt
• State or FGN
Sovereign Guarantees,
• Bond Financing
• PPP’s with Govt cash
contribution or equity
Nigerian Railway
Corporation
Federal Airports
Authority
• All railway related
Projects (state or federal)
All Airport Projects - state
or Federal
Basic Legal & Contracting Issues In PPP’s
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1. Is there an Enabling Law?
- Enabling Law goes beyond
giving legal authority for a deal,
it also sets the playing field:
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2. Who Is The Contracting Party?
- Preferred Bidder/SPV or both
- Government/Agency or both
- Lenders via substitution
Agreements
Note: Section 54 of Companies Act.
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3. Who owns the Asset?
a) Asset owner may not be the dealing authority
– Example of BPE
b) One transaction may have different asset
owners
– NIWA, NRC, Federal Ministry of Works own
different assets on the Lagos Light Rail Project.
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4. Contractual Allocation of Risks
Key principle in Risk Allocation: Risks are allocated
to the party that is best suited to handle the risk.
For example: Political Risk are usually covered by
Government
For example: In the Motherland Badagry Resort
transaction the risk of settlement of community
landowners was allocated to Lagos State
Government.
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5.
Insurance
Private sector usually insures subject to review
on the following:
•
•
•
•
•
Who has the Insurable interest?
Same transaction may have different asset owners
Is it expedient to have one or several policies?
What are the rules on reinstatement?
What happens to Insurance monies where asset
cannot be salvaged?
• NOTE: Restrictions on using foreign Insurers under
the 2003 Insurance Act.
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6.
1.
Exclusivity
Exclusivity vs Competition
• Virgin Nigeria vs MM2 – was there any restraint on
competition on both sides?
• Competition Bill not yet passed
2.
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Must Government provide an alternative route
before granting a road concession in Nigeria?
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6. Dispute Resolution
KEY ISSUES:
1.
Investor Comfort vs Government Sovereignty
2.
Clause in Agreement to ensure the Continuity
of Public Service Obligations during a dispute
situation.
3.
Fast & efficient resolution of disputes
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Dispute Resolution
What are the options?
1. DRC (Dispute Resolution Committee)
2. Experts determination
3. Arbitration
4. Courts (domestic or foreign)
5. Note other options like UN Centre for
Settlement of Investment disputes.
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7. Force Majeure
As a general rule force majeure operates on the
“NO FAULT PRINCIPLE”
PPP agreements have redefined force majeure
and allocated compensation based on the role
that Government had to play in the event.
Why is this? What is the difference between PPP’s
and private contracts?
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Force Majeure Compensation Flow
Event
Defined
Payee
Political
Event
A direct act
by Govt
affecting the
contract
Indirect
Political
An act of
Govt that
causes an
FM event.
FM event
from an Act
of God
Govt pays
on full
Indemnity
basis
Govt splits
with private
sector
NonPolitical
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Govt may
pay little or
nothing
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8. Permits & Licences
- What permits are required?
Note:
State transaction requiring Federal
Permits
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CONCLUSIONS
•
•
•
•
•
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Things will continue to evolves
The Pending Bills particularly the National
Transport Commission Bill will change the
landscape
The ICRC Regulations will bring a sense of
organization, certainty and fluidity to PPP
deals on the Federal level
States will begin to come up with their
frameworks
The PPP market will grow exponentially in
the next 5-10 years.
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THANK YOU FOR LISTENING
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