Public-Private Partnerships (PPPs) are now being used in many countries to develop infrastructure projects. While PPP transactions in this context typically are based on a network of complex legal agreements, there is normally a PPP Contract at the center of each such transaction, in the form of a concession agreement or similar document, between a public authority (the "Contracting Authority") and a private company (the "Private Partner").
The complexity and sophistication of PPP transactions, and the fact that they are often heavily negotiated to reflect the characteristics of a given infrastructure project, frequently means that considerable time and expense is involved in preparing and finalizing PPP Contracts. This has led many commentators to ask if it is possible to reduce costs, and shorten the time involved in such processes, by standardizing the provisions found in concession agreements or other PPP Contracts between the Contracting Authority and the Private Partner. In a number of countries efforts have been made to develop complete standardized PPP Contracts for different types of infrastructure projects, such as roads, railways, ports or power generation. To date, however, there is no universally accepted language for such agreements on an international basis.
Given the variety of PPP transactions carried out globally; the different legal systems existing in various countries; and the need to have 'tailor-made' provisions to deal with the individual characteristics of specific projects, the development of complete PPP Contracts on an international basis is likely an unrealistic goal. Nevertheless, there may be merit in focusing on certain contractual provisions dealing with particular legal issues encountered in virtually every PPP Contract/structure, such as, for example, the issues of force majeure, termination rights or dispute resolution.
Against this background, the World Bank Group developed the Report on Recommended PPP Contractual Provisions, 2015 Edition (the "2015 Report") which presented the first attempt by a Multilateral Development Bank to prepare a compilation of "recommended" language in respect of a selection of these typically encountered provisions. Following internal and external consultations on the contents of the 2015 Report, it is in response to the industry feedback received during those discussions that this new edition has been developed. In this respect, its objective is to assist its target audience, namely Contracting Authorities - and particularly those in emerging PPP markets -, with obtaining a better and more comprehensive understanding of the contractual provisions as outlined in the 2015 Report. Accordingly, this current edition includes, inter alia, detailed commentaries in regard to key considerations relevant for Contracting Authorities due to different levels of PPP transactional experience in a given country or due to the characteristics of different legal systems in order to help them to carefully assess the issues specific to their own PPP project and jurisdiction in developing contractual provisions. With the support of the Global Infrastructure Facility (GIF), this edition also comprises two additional chapters that address contractual considerations related specifically to bond financed and corporately financed PPP transactions.
In regard to the sample drafting contained in this document, the authors would like to emphasize that it is neither intended to be exhaustive nor prescriptive - specifically, it is not meant to be mandatory for use in all PPP transactions which the World Bank Group financially supports. Instead, the objective of the Guidance is to set out and analyse contractual language that has formed the basis of many successfully procured PPP transactions, and to describe the rationale for these provisions. In doing so, the authors of the Guidance hope to foster discussion and consensus-building around these provisions and of appropriate contractual language in PPP transactions generally, with a view to helping to reduce the aforementioned time and expense associated with PPP Contract development.
As in any document of this type, some cautionary notes should be emphasized. As indicated, PPP transactions are usually very complex, and extensive due diligence - with the assistance of qualified legal, financial and technical specialists - needs to be undertaken by both Contracting Authorities and private parties before concluding a PPP Contract and related agreements. In this regard, the contents of this Guidance should simply be regarded as a suggested starting point and one of many inputs for the contracting parties to consider.
Also, many of the provisions set out in the Guidance will affect the allocation of risks in a PPP transaction - and the fairness of the overall risk allocation in a transaction can only be assessed by consideration of the entirety of the PPP Contract and related agreements. Where appropriate, suggested contractual language has been linked to the sample matrices showing the allocation of risks between public and private sectors in typical PPP transactions as contained in the Report on Allocating Risks in Public- Private Partnership Contracts, 2016 edition, developed by the Global Infrastructure Hub. It should likewise be noted that this Guidance primarily focuses on PPP transactions on a project finance basis, as reflected by the attention given to the protection of lenders' rights and the sharing of the benefits of refinancing.
This being the second edition, the authors would finally like to stress that this publication is seen as an evolving process. The intention is to develop further iterations of the Guidance once further industry feedback has been collected and as and when new consensus develops around the provisions considered in the document or in connection with an analysis of other contractual language typical of successful PPP transactions.
Christina Paul
Washington, DC
June 2017