All PPP Contracts will contain provisions addressing circumstances for which the Contracting Authority is responsible, but these provisions vary depending on the specific PPP Contract and jurisdiction.
| EMERGING AND DEVELOPED MARKET DIFFERENCES In some established, stable, markets, there is typically no need for a specific MAGA provision as Private Partners accept that the type of MAGA risks likely to arise are limited and can be dealt with through the Force Majeure shared risk provisions, together with separate provisions dealing with specific events for which risk is allocated to the Contracting Authority (such as Contracting Authority breach of contract and Change in Law)23. In Australia, however, the Contracting Authority accepts certain risks in relation to environmental/indigenous rights through a MAGA-style regime. Contracting Authorities in other, typically less established, PPP jurisdictions may find it expedient if the PPP Contract includes MAGA provisions as well as Force Majeure provisions to ensure the PPP Project is viable for the Private Partner (this has been the case in recent PPP Projects in the Philippines). The inclusion of specific MAGA provisions in such jurisdictions may be because of an actual or perceived increased likelihood of certain MAGA events, or be due to a lack of track record in administering successful PPP Contracts over very long periods of time and across political cycles free from political interference. |
Even where included, MAGA provisions may be structured differently as political risks will vary between jurisdictions. Some Contracting Authorities will also choose to address events such as Change in Law and Contracting Authority default in separate provisions, while others will include them in the MAGA provisions. The South Africa PPP Guidelines, for example, have a MAGA-type provision entitled "Unforeseeable Conduct" which addresses a material effect on the Private Partner's finances of any unforeseeable discriminatory Contracting Authority action, including Change in Law. (Contracting Authority default is more usually dealt with in a separate provision and this Guidance treats Change in Law separately).
As a result, while not all PPP Contracts will include MAGA provisions in the precise form set out in Section 2.3, Sample Drafting 2, the key is to ensure that the concepts are included, the risks allocated and the consequences made clear in the PPP Contract to ensure clarity and bankability. See also Section 1.1.3, Force Majeure and Section 3.1.3, Change in Law.
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27 This is part of the approach described in the footnote to Section 1.1.3, Force Majeure.