CWC PUBLIC PRIVATE PARNERSHIP TRAINING ABUJA, November 17,

CWC PUBLIC PRIVATE PARNERSHIP TRAINING ABUJA, November 17,

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. 02/09/20 1 OUTLINE 1. Highlights of the Infrastructure

Concession Regulatory Commission Act 2005 (ICRC Act) 2. Other Key Legislations related to PPPs 3. A Preview of PPP Regulators 4. Legal & Contractual Issues In PPPs. 5. Conclusions 02/09/20 AYULI JEMIDE, Lead Partner, 2 Highlights of the ICRC Act Is the ICRC Act meant for only Concessions or all forms of

Public Private Partnerships? 02/09/20 AYULI JEMIDE, Lead Partner, 3 Forms of PPPS 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 PPPS? 02/09/20 AYULI JEMIDE, Lead Partner, 5 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 02/09/20 AYULI JEMIDE, Lead Partner, 6 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. 02/09/20 AYULI JEMIDE, Lead Partner, 7 Mischief cured by the Act Provides a legal basis for MDA PPP deals To regulate and guide the manner in which MDAs engage in PPPs 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?

02/09/20 AYULI JEMIDE, Lead Partner, 8 Key Actors under the ICRCA The Infrastructure Regulatory Commission Federal Ministries, Departments, Agencies Mr President The Federal Executive Council The private proponent 02/09/20

AYULI JEMIDE, Lead Partner, 9 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 02/09/20 AYULI JEMIDE, Lead Partner, 10 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) 02/09/20 AYULI JEMIDE, Lead Partner, 11 Mr President Appoint ICRC Board

Give general directives S 33 Receive yearly reports S 26 Approve regulations of the Commission S 34 02/09/20 AYULI JEMIDE, Lead Partner, 12 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 02/09/20 AYULI JEMIDE, Lead Partner, 13 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. 02/09/20 AYULI JEMIDE, Lead Partner, 14 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 02/09/20 AYULI JEMIDE, Lead Partner, 15 ICRC Guidelines ICRC has issued a few guidelines to MDAs pending the full regulation to

deal with: - Transaction thresholds - Procedure for unsolicited bids etc. 02/09/20 AYULI JEMIDE, Lead Partner, 16 ICRC as a regulator Note: ICRC regulates PPP activities but is not a contracting parties to the PPPs. Is this good for regulation? What else should a good regulator have? 02/09/20

AYULI JEMIDE, Lead Partner, 17 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? 02/09/20 AYULI JEMIDE, Lead Partner, 18

Other Key Legislations Related to PPPs 02/09/20 AYULI JEMIDE, Lead Partner, 19 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. 02/09/20 AYULI JEMIDE, Lead Partner, 20 Note the existence of Sector Legislations: NCC NERC etc 02/09/20

AYULI JEMIDE, Lead Partner, 21 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. 02/09/20 AYULI JEMIDE, Lead Partner, 22 Constitutional Power to Legislate Exclusive Federal Roads Maritime Aviation Mines & Minerals

Railways * Nuclear Energy 02/09/20 Concurrent Electric Power Industrial, Commercial & Agric Dev. Education AYULI JEMIDE, Lead Partner, Residual

Urban planning Transportation * State Roads * Water Housing Health 23 Practical issues with limits on legislative powers: States may require Federal Govt consent to establi

- a State owned airport - a state owned railway system - a state Maritime transport system States depend on the workability of the Federal po on gas supply from the Oil Companies to fuel their State owned Independent Power Projects. 24 02/09/20 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. 25 02/09/20 AYULI JEMIDE, Lead Partner, 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. 02/09/20 AYULI JEMIDE, Lead Partner, 26 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. 02/09/20 AYULI JEMIDE, Lead Partner, 27 Arguments and Counters 1st School: Procurement is about purchases & Govt buys nothing in PPPs. 2nd School: In PPPs Government trades an Asset and buys the provision of a PSO (public service obligation). 1st School:

Procurement seeks the lowest bidder and PPPs seek the highest bid. 2nd School: PPP calculates Value for Money (VFM) which is the same principle. 02/09/20 AYULI JEMIDE, Lead Partner, 28 Debate continues 1st School: The Acts scope is goods, works and services it does not cover PPP

2nd School: a) BOTS would fall under works in the Act. b) Management Concessions are services 02/09/20 AYULI JEMIDE, Lead Partner, 29 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 02/09/20 AYULI JEMIDE, Lead Partner, 30 Fiscal Responsibility Act 2007 To strengthen fiscal policy design and implementation. Citizens legal right to challenge budgetary lapses is supposed to reduce ineptitude in Govt spending. May increase Govts sophistication in

designing financial models for PPPs 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. 02/09/20 AYULI JEMIDE, Lead Partner,

32 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. 02/09/20 AYULI JEMIDE, Lead Partner, 33

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. 02/09/20 AYULI JEMIDE, Lead Partner, 34 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. 02/09/20 AYULI JEMIDE, Lead Partner, 35 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. 36 02/09/20 AYULI JEMIDE, Lead Partner, 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?

02/09/20 AYULI JEMIDE, Lead Partner, 37 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 02/09/20

AYULI JEMIDE, Lead Partner, 38 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 02/09/20 AYULI JEMIDE, Lead Partner,

39 Preview of Regulators 40 02/09/20 AYULI JEMIDE, Lead Partner, ICRC All PPPs by Federal Govt, its ministries and agencies. Securities & Exchange Bond Financing; Shares of PLCS;

Comm. PPP with Trusteeship or corporate restructuring Bureau of Public Procurement Federal Government procurement above N50 million naira Federal Executive Council 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 PPPs with Govt cash contribution or equity Nigerian Railway Corporation

All railway related Projects (state or federal) Federal Airports Authority All Airport Projects - state or Federal Basic Legal & Contracting Issues In PPPs 02/09/20 AYULI JEMIDE, Lead Partner, 43

1. Is there an Enabling Law? - Enabling Law goes beyond giving legal authority for a deal, it also sets the playing field: 02/09/20 AYULI JEMIDE, Lead Partner, 44 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.

02/09/20 AYULI JEMIDE, Lead Partner, 45 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. 02/09/20

AYULI JEMIDE, Lead Partner, 46 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. 02/09/20 AYULI JEMIDE, Lead Partner,

47 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? 02/09/20 NOTE: Restrictions onLead using foreign Insurers AYULI JEMIDE, Partner, under the 2003 Insurance Act. 48 6.

Exclusivity 1. Exclusivity vs Competition Virgin Nigeria vs MM2 was there any restraint on competition on both sides? Competition Bill not yet passed 2. Must Government provide an alternative route before granting a road concession in Nigeria? 02/09/20

AYULI JEMIDE, Lead Partner, 49 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. 02/09/20 Fast & efficient resolution of disputes AYULI JEMIDE, Lead Partner, 50 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. 02/09/20 AYULI JEMIDE, Lead Partner, 51 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 PPPs and private contracts? 02/09/20 AYULI JEMIDE, Lead Partner, 52 Force Majeure Compensation Flow Event Political Event Defined Payee A direct act Govt pays

by Govt on full affecting the Indemnity contract basis Indirect Political An act of Govt that causes an FM event. Govt splits

with private sector NonPolitical FM event from an Act of God Govt may pay little or nothing 02/09/20 AYULI JEMIDE, Lead Partner,

53 8. Permits & Licences - What permits are required? Note: State transaction requiring Federal Permits 02/09/20 AYULI JEMIDE, Lead Partner, 54 CONCLUSIONS

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. 02/09/20

AYULI JEMIDE, Lead Partner, 55 THANK YOU FOR LISTENING 02/09/20 AYULI JEMIDE, Lead Partner, 56

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