Legal Review of Private-Public Partnership (PPP) Law

Table of Contents

Preamble

His Highness the Amir Sheikh Tamim bin Hamad al-Thani issued Law No. (12) of 2020 organizing the partnership between the Public and Private Sectors (the PPP Law) with the aim to develop the capabilities of Qatari private sector companies, encourage competition and enhance their role and contribution to economic development.

In addition, the law aims to give government agencies a modern vision for managing national projects and enhancing their sustainability at the lowest possible costs.

Private-Public Partnership (PPP) are long-term contracts between Public and Private sector widely used around the world by Governments aiming to develop public infrastructure and/or provide Public Services, using the expertise of the private sector, while sharing, in the contemporary, responsibilities and rewards.

Qatar has a solid economic base, and a stable political system, both important factors that could guarantee the success of PPP Projects.

The adoption of a clear legal framework provides the necessary basis and support in order to boost private interest on the PPP initiatives.

By the newly approved PPP Law No. 12/2020, Qatar aims to accelerate infrastructure projects and make another step towards the accomplishment of the Qatar National Vision 2030.

Overview

• Private-Public Partnership (PPP) are long-term contracts between Public and Private sector widely used around the world by Governments aiming to develop public infrastructure and/or provide Public Services, using the expertise of the private sector, while sharing in the contemporary, responsibilities and rewards.
• By the newly approved PPP Law No. 12/2020, Qatar aims to accelerate infrastructure projects and make another step towards the accomplishment of the Qatar National Vision 2030.
• Qatar has a solid economic base, and a stable political system, both important factors that could guarantee the success of PPP Projects. The adoption of a clear legal framework provides the necessary basis and support in order to boost private interest on the PPP initiatives.
• Public Works Authority (Ashghal) has recently announced the preparation of a list of projects, mainly related to construction and infrastructure sector, in which the private sector can participate within the requirements of the PPP law.
• This Practice Note aims to highlight the main points introduced by the new PPP Law No. 12/2020.

Key Definitions

• Minister: The Minister of Commerce and Industry of the State of Qatar.
• Government Agency: The Ministry, government apparatus, public authority, or public institution.
• Competent Department: The competent administrative unit of the Ministry.
• Contracting Authority: Any Government Agency that concludes a Partnership Contract with the Private Sector, in accordance with the provisions of the PPP Law.
• Private Sector: A private legal entity or a consortium of private legal entities.
• Partnership: An agreement between the Government Agency and the Private Sector to implement and finance works or provide services, concluded as per any of the forms outlined in art. 3 of the Law No. 12/2020.
• Partnership Contract: A contract that the Contracting Authority concludes with the Project Company for the purpose of implementing a Project.
• Project: The project to be implemented or developed in PPP.
• Project Committee: The committee formed for each Project separately, by a decision of the Minister, in coordination with the relevant Government Agencies, with representatives from the Contracting Authority, the Competent Department, and the State Audit Bureau.
• Project Company: The company established or to be established to implement the Project.

Law No. (12) of 2020 organizing the partnership

between the Public and Private Sectors (the PPP Law)

The law stipulates that Private-Public Partnership is an agreement between the government agency and the private sector to implement and finance works or provide services, under a Partnership Contract in accordance with the provisions of this law and the general policy of partnership approved by the Council of Ministers upon the proposal of the Minister.

The partnership can be governed by any of the following models:

1. Allocation of lands through a lease or usufruct licenses to be developed by the private sector.

This means that it is permissible to allocate a plot of land owned by the state to be leased to the private sector for development, or be constructed by the private sector and give it usufruct rights for facilities constructed, provided that it is managed by the private sector for the benefit of the public sector by agreement on the general policy of the partnership or management.

1. Build-Operate-Transfer (BOT) Model

In this model, the public sector gives the private sector a public facility under the partnership contract, provided that the latter builds and operates the project, and grants it usufruct rights for a certain period, and after the concession period ends, the project assets shall be transferred to the government.

(Source: Periodical on development issues in the Arab countries – Volume No. 35/ November 2004 – P. 4)

1. Build-Transfer-Operate (BTO) Model

In this model, the private sector builds for the benefit of the public sector and then transfers its ownership to the government. The private sector undertakes to operate the project for a specific renewable period, or change the operator to another operator, based on the requirements of the public interest.

1. Build-Own-Operate-Transfer (BOOT) Model

This model is one of the forms of (BOT) Model, wherein the private sector receives a concession from the public sector to build, control, own and operate the project/building for a certain concession period. After the concession period ends, the project full ownership shall be transferred to the government.

(Sources: Build-Own-Operate-Transfer (BOOT) Contract – Comparative Study – P. 56 Periodical on development issues in the Arab countries – Volume No. 35 / November 2004 – P. 6)

1. Operation and Maintenance (OM) Model

Under this model, the public sector grants the private sector the right to operate and maintain, under a partnership contract for a specified period of time that may be renewed based on the requirements of the public interest.

1. Any other model approved by the Council of Ministers

The Government Agency or the Competent Department may, on their own or based on the proposal of the private sector, select a project for implementation through a PPP and recommend it to the Minister for analysis and eventual approval.

PPP Law Objectives

The PPP Law aims to develop the capabilities of Qatari private sector companies, encourage competition and enhance their role and contribution to economic development, as well as directing government agencies to adopt a new approach and a modern vision for managing national projects in a manner that supports the efficiency and effectiveness of their completion and enhances their sustainability at the lowest possible costs.

The PPP Law explicitly allows the Private Sector to identify and present to the Government Agency or the Competent Department Project proposals for implementation through Partnership (PPP Law, art. 4).

The Partnership Contract

To establish a Partnership between Public and Private sector, a Partnership Contract should be entered under the provisions of the PPP Law. The new PPP Law describes how scope and structure of the Contract between the parties shall be defined.

The Partnership Contract draft should be submitted together with the Project Committee’s recommendation as to the successful bid, to the Prime Minister for approval of the award, before announcing the successful bid (PPP Law, art. 16).

Article 17 of the PPP Law identifies the terms that shall be included in the Partnership Contract. The responsibilities of each party should be outlined, and the risks clearly allocated.

Among others, should be specified in the contract:

1. The nature and scope of the works or services that the Project Company must perform and the conditions for their implementation.
2. The ownership of the Project's funds and assets, the obligations of the parties related to delivering and receiving works and assets, and the provisions for transfer of ownership.
3. The financial aspects of the agreement
4. The duration of the Contract, its early or partial termination, cases in which the Contracting Authority has the right to unilaterally terminate the Contract, and related parties' rights and obligations.

The details of remuneration shall, also, be included in the Contract. The PPP Law provides that remuneration can be granted through collecting fees or by availability payments payed for an agreed period by the government, when the availability and performance criteria of the asset are met (PPP Law, art. 21 and 25). In PPP projects including an operating phase run by the private, the availability payments can stimulate a more efficient management of the project, in terms of construction quality and adequate maintenance.  

The long-term nature of the PPPs is linked to the necessity of balancing the effective management responsibility and risks transferred to the private party with the provision of the possibility of an acceptable and sustainable revenue.

In this perspective, the art. 18 of the PPP Law determines, that the duration of the agreement shall not exceed thirty (30) years, explicitly providing, in the same time, that longer contracts are permitted based on the requirements of the public interest after the approval of the Prime Minister based on the proposal of the Minister of Commerce and Industry.

It is important to mention that, as PPP projects are long-term contracts and several changes can occur during the contract’s lifetime, the new PPP Law states the possibility to proceed in amendments of the Partnership Contract, in case of unforeseen circumstances arise after the conclusion of the Contract, including amendments to the legislation in force at the time of its conclusion (PPP Law, art. 22).

This provision can prevent from project’s failure determined by Contract's financial balance distress caused by unexpected changes.

Upon the expiry of the PPP contract, ownership of the project, its establishment and all its assets shall be transferred to the State of Qatar without any compensation unless otherwise agreed in the PPP contract.

PPP Project Selection, Tender and Bidding

In order to approve the Projects submitted to partnership between the public and the private sectors the PPP Law stipulates a specific procedure, as follows:

1. The Government Agency, on its own or based on the proposal of the private sector, select a project for implementation through a PPP and recommend it to the Minister for analysis and eventual approval.
2. The Contracting Authority shall prepare a report on the idea of the project that includes a summary of the project, demonstrate the advantages of implementing the project, and a definition of the roles and responsibilities of each party.
3. The report shall be provided to the Minister of Commerce and Industry for submission to the Prime Minister, together with his recommendations, for possible approval.
4. A committee for each project shall be formed in coordination with the relevant government agencies, and shall include representatives of the Contracting Authority, the competent department, and the State Audit Bureau.
5. The Project Committee shall prepare the Project Policy Document and present the same to the Minister for approval. The Project Committee is responsible for evaluating bids, negotiating the project contracts and recommending a successful/preferred bidder to the Contracting Authority.
6. The Contracting Authority in coordination with the Project Committee shall prepare the project study to be presented to the Minister of Commerce and Industry for submission to the Prime Minister for possible approval.
7. The project shall be announced by the Competent Department with its bidding process for the private sector, including the bidding documents prepared by the Contracting Authority.
8. The duration of the partnership contract shall be determined by agreement of the two parties, not exceeding thirty years. Contracts may be concluded for a period longer than that according to the requirements of the public interest, and after the approval of the Prime Minister, and upon the proposal of the Minister of Commerce and Industry.
9. The project company may collect fees, generate revenues, or earn financial returns from the project, its assets, or its users according to what is agreed upon with the contracting party.
10. Upon the expiry of the partnership contract, ownership of the project, its facility and all its requirements shall be transferred to the state without compensation or compensation unless otherwise agreed in the partnership contract.

Figure 1. Workflow from Project Proposal to Bid Submissions according to the Qatar Law n. 12/2020.

Project Company Obligations

According to Article No. 1 of PPP Law, the Project Company is the existing company or the company that is established to implement the project.

The Contracting Authority and the Private successful bidder may establish together the Project Company.

In the event that the Contracting Authority does not wish to participate in the Project Company, the successful bidder must establish the Project Company, provided that its sole purpose is to implement the Project, subject-matter of the Partnership Contract.

Project Company is committed to the following:

1. No to dissolve, change its legal form, or reduce its capital without the approval of the Minister of Commerce and Industry. The articles of association of the Project Company must include a ban on its shares being traded before the date of completion of building, preparation or development works, as well as a ban on trading the shares owned by the majority that owns its capital after this date without the approval of the Ministerof Commerce and Industry.

In all cases, the shares of the Project Company cannot be mortgaged except for the purpose of financing or refinancing the PPP project, and every procedure or action that is made in violation of the provisions of this clause shall be null and void.

1. Preserving and maintaining the project’s assets and holdings, taking care of them and using them for their purposes only.
2. The Project Company may not sell the facilities, assets, and movable and immovable funds of the project that it may own in accordance with the terms of the PPP contract, unless it is for purpose of implementing the replacement and renewal program in accordance with the conditions set forth in the PPP contract and after the approval of the Competent Department.
3. Submit all the documents, information and data requested by the Competent Department or the Contracting Authority and cooperate with its employees and allow them to enter their sites for inspection at any time.
4. Provide environmental, health and safety requirements for project workers and beneficiaries.
5. The Project Company may not contract with subcontractors without the approval of the Contracting Authority, provided that this does not prejudice the obligations of the Project Company established under this Law, the decisions issued to enforce it, and the PPP contract.
6. The Project Company shall continue to provide contracted services, maintain their quality, and ensure equality among all the beneficiaries.
7. As a relevant note to foreign investors, the Project Company may be exempted from all or some restrictions imposed under the legislation in force on companies owned by non-Qataris, including the ownership, use, or lease of land.
8. The PPP Law, given the importance of the Public interests involved, subjects the Partnership contract to the Qatari Law, establishing the jurisdiction of Qatari Courts over related disputes (PPP Law, art. 28).

However, the same article grants the possibility of having another dispute resolution mechanism included in the Contract.

Advantages of the Private-Public Partnership

The PPP Law undoubtedly has many advantages and benefits, including diversification, distribution and mitigation of risks for private sector companies and raising the creditworthiness of the project by enhancing the flexibility of the financing structure and achieving tax revenues as well as enhancing the ability to obtain the necessary financing for the project so that companies can provide the necessary expertise and competencies for project management, governance and rationalization of expenditures directed to the state budget, support the added value and benefit from the influence of partners to enhance negotiation mechanisms and reach better work standards.

Amongst the most important advantages and benefits of this law is the promotion of the principles of disclosure and accountability in managing resources for companies, as well as managing projects on economic grounds that bring both social and economic gains in order to achieve success and expansion in business through stimulation. Besides, the ability to develop successful solutions to address economic and social challenges, which encourage the Qatari private sector to participate in economic development projects to provide a dynamic business environment that enhances the performance of the government sector and supports the future direction of evaluating services according to economic rules to consolidate partnerships and cooperation between large, small and medium-sized companies with the government sector to encourage competition and innovation and protect consumers from monopolistic practices.

In addition to legalizing the granting process of benefits and incentives granted to the winning bidder or to the Project Company or its shareholders or main contractors or subcontractors, including financial and tax incentives, and legalizing the granting process of exceptions from some laws, such as the Tenders and Bids Law and the State Financial System Law.

Conclusion

We applaud the efforts of the Qatari legislator in issuing this law in line with the best international practices.

After comprehensive legal scrutiny of this law, it is clear the importance that the PPP Law will have in order to enhance the partnership between the public and private sectors and attract foreign investment to the State of Qatar.

If implemented successfully by maintaining progress in projects at the same pace in the long term, the State of Qatar will be a role model concerning the benefits arising out of public and private sectors combined efforts.