The Rise and Fall of PPPs in the Middle East - Legal resource/media/Files/Training/2015/12 December/PPP Webinar...The New Kuwait PPP Law came into full force and effect on 29 ... KAPP

© Simmons & Simmons LLP 2013. Simmons & Simmons is an international legal practice carried on by Simmons & Simmons LLP and its affiliated partnerships and other entities.

David Risbridger and Leonie Sellers

9 December 2015

The Rise and Fall of PPPs in the Middle East

2 / B_LIVE_EMEA1:3458075v1 © Simmons & Simmons LLP 2013. Simmons & Simmons is an international legal practice carried on by Simmons & Simmons LLP and its affiliated partnerships and other entities.

Introduction

The traditional role of PPPs in the Middle East

The introduction of new Dubai PPP Law

The Kuwait PPP Law

Announced Projects under the new PPP Laws

PPP in the wider Middle East


The Traditional role of PPPs in the Middle East

To date PPPs in the Middle East have focused mainly on: – government procurement

programmes in respect of Water and Power Projects

However few governments in the Middle East have actually published a PPP law: – Kuwait and Dubai have PPP law – Qatar has expressed interest in PPP

law


The New Dubai PPP Law In November 2015, the Dubai Law No. 22 of 2015 Regulating Partnerships between the Public and Private Sectors (the “New PPP Law”) came into effect.

What does the New PPP Law aim to do?

Objective to encourage the participation of the private sector, increase investment and minimise the financial risks to the government.

What does the New PPP Law say?

Offers flexibility as to what form of contract can be used.

The maximum tenure of a PPP contract is 30 years. The law stipulates that UAE law must govern any contract and disputes cannot be subject to arbitration overseas.

A detailed RFP needs to be fully developed before any new PPP is issued for tender.

Private entity may propose a project for partnership


The New Dubai PPP Law – cont’d The PPP Law Approval Criteria

The New PPP Law also outlines an approval criteria based on the total cost that will be incurred by the partnership: – If the total cost is less than AED200 million, a government authority’s

director general can grant approval. – If the total cost is between AED200 million and AED500 million, the

Department of Finance can grant approval. – If the total cost exceeds AED500 million, the Supreme Financial Policy

Committee will be responsible for approving the project. What does the New Law not contain? The New Dubai PPP Law does not specifically address project financing

Unlike Kuwait, the New Dubai PPP Law does not specify:

– any shareholding requirements for the government entity in the project company

– an IPO requirement


The New Dubai PPP Law – cont’d

Who does the New PPP Law apply/not apply to?

Applies to all government bodies funded by the state budget

Power and Water projects governed by the Electricity & Water Sector Law (No. 6 of 2011) and simple works/supply contracts governed by Procurement Law (No. 6 of 1997) will not be subject to the New PPP Law.


The PPP Law in Kuwait Kuwait PPP Law No. 116 of 2014

The New Kuwait PPP Law came into full force and effect on 29 March 2015, replacing Law No. 7 of 2008, which was restrictive for investors.

The Partnerships Technical Bureau (PTB) has been replaced with the Kuwait Authority for Partnership Projects (KAPP)

Aims to make PPPs more attractive to investors permitting security to be granted over project documents such as a share pledge within the first two years.

Permits the negotiation of contractual terms (unless otherwise specified in the RFP)

Restrictions regarding amendments have been removed and the permitted term has been increased to 50 years.

Arbitration is now expressly permitted as a form of dispute resolution in PPP contracts.


The PPP Law in Kuwait – cont’d Company and Share Restrictions

The previous PPP law raised confusion over who had responsibility for the establishment of the project company.

KAPP now has the power to establish public joint stock companies for the performance of PPP projects and specifically addresses the confusion of responsibility: – If the total cost of the PPP is less than KW$60m, the investor must

establish the project company – If the total cost of the PPP exceeds KW$60m, KAPP must establish a public

joint stock company

For those project companies that are required to be public joint stock companies, the New Kuwait PPP Law sets the share allocation: – 6% - 24% of shares to be held by the project public entity – Minimum of 26% of shares to be held by the successful investor – 50% of shares to be allocated for an IPO by Kuwaiti nationals (with KAPP

holding these shares until operational)


Announced Projects under the new PPP laws Dubai

Dubai’s RTA has confirmed that its Union Oasis Project, a mixed-use transit oriented development, will be constructed and operated using the PPP model.

The Dubai Transport Academy Project

Kuwait

Ambitious PPP scheme with $20bn worth of projects currently in the market – Az-Zour North Phase 2 – Al-Khairan Phase 1 – Al Abdaliyah ISCC – Umm Al-Hayman wastewater – Kabd waste-to-energy – Egalia services centre – Metro phase 1 – Kuwait schools development program


The Wider Middle East Qatar $125bn planned investment in support of

Vision 2030 (including the new Hamad International Airport, Hamad Port and the rail programme)

Oman Successful in the traditional power and

water IPP sector Preparing frameworks for private

investments in affordable housing and considering developing sections of the Oman Rail project using the PPP model

Bahrain The Ministry of Housing signed its first

PPP in 2012 for the provision of affordable housing


The Wider Middle East – cont’d Saudi Arabia $1.2bn Prince Mohammed bin

Abdulaziz airport in Medina is being developed through PPP, along with tendered second airport in Taif.

Egypt Following the passing of Law No. 67

in 2010, plans to develop more than 20 major infrastructure projects through its PPP Central Unit (including Cairo Wastewater Treatment Plant).

National Authority for Tunnels (NAT) is also exploring the possibility of using the PPP structure for an expansion of the Cairo metro.


Questions?


Contact Details

David Risbridger Partner, Dispute Resolution T +974 (0) 4 709 6649 E [email protected]

Leonie Sellers Associate, Dispute Resolution T +974 (0) 4 709 6625 E [email protected]



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The Rise and Fall of PPPs in the Middle East - Legal resource/media/Files/Training/2015/12 December/PPP Webinar...The New Kuwait PPP Law came into full force and effect on 29 ... KAPP