3.2.1.2 Bankability -
The starting point for the Private Partner and its Lenders will be that change in law is a form of political risk that it cannot control or manage and should therefore be expressly allocated to the Contracting Authority under the PPP Contract. Even if the Contracting Authority is not directly responsible for the change in law, the Private Partner will argue (with some justification) that as an arm of government it is fair and more appropriate for the Contracting Authority to bear the risk31.
| EMERGING AND DEVELOPED MARKET DIFFERENCES The allocation of change in law risk is a key bankability point and will be particularly relevant in jurisdictions where changes in law are less predictable or more likely due to underdeveloped or less stable legal or regulatory frameworks. |
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31 See the Global Infrastructure Hub Report: Allocating Risks in Public/Private Partnership Contracts, 2016 edition - e.g. the Regulatory/Change in Law entries in Risk Matrix 2: Airport (DBFO) and Risk Matrix 3: Light Rail (DBFOM). See link in Appendix, Additional PPP Resources.