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Legal & Regulatory Framework For Public Private Partnership In Nigeria Under the Infrastructure Concession Regulator

Legal & Regulatory Framework For Public Private Partnership In Nigeria Under the Infrastructure Concession Regulatory Commission Act 2005 . CWC PUBLIC PRIVATE PARNERSHIP TRAINING ABUJA, November 17, 2009. Ayuli Jemide, Lead Partner. 1. 6/7/2014. OUTLINE.

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Legal & Regulatory Framework For Public Private Partnership In Nigeria Under the Infrastructure Concession Regulator

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  1. Legal & Regulatory Framework For Public Private Partnership In Nigeria Under the Infrastructure Concession Regulatory Commission Act 2005 CWC PUBLIC PRIVATE PARNERSHIP TRAINING ABUJA, November 17, 2009 Ayuli Jemide, Lead Partner. 1 6/7/2014

  2. OUTLINE 1. Highlights of the Infrastructure Concession Regulatory Commission Act 2005 (“ICRC Act”) 2. Other Key Legislations related to PPP’s A Preview of PPP Regulators Legal & Contractual Issues In PPP’s. 5. Conclusions AYULI JEMIDE, Lead Partner, 2 6/7/2014

  3. Highlights of the ICRC Act Is the ICRC Act meant for only “Concessions” or all forms of Public Private Partnerships? AYULI JEMIDE, Lead Partner, 3 6/7/2014

  4. SERVICE • Increase Private Sector Risk • Increase Private Investment • Institutional Changes • Longer Tenures • More Complicated MANAGEMENT LEASES JOINT VENTURES Forms of PPP’S CONCESSION/BOT BOO - Divest

  5. 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 PPP’S? AYULI JEMIDE, Lead Partner, 5 6/7/2014

  6. 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” AYULI JEMIDE, Lead Partner, 6 6/7/2014

  7. 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”. AYULI JEMIDE, Lead Partner, 7 6/7/2014

  8. Mischief cured by the Act Provides a legal basis for MDA PPP deals To regulate and guide the manner in which MDA’s engage in PPP’s 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? AYULI JEMIDE, Lead Partner, 8 6/7/2014

  9. Key Actors under the ICRCA The Infrastructure Regulatory Commission Federal Ministries, Departments, Agencies Mr President The Federal Executive Council The private proponent AYULI JEMIDE, Lead Partner, 9 6/7/2014

  10. 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 AYULI JEMIDE, Lead Partner, 10 6/7/2014

  11. 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) AYULI JEMIDE, Lead Partner, 11 6/7/2014

  12. Mr President Appoint ICRC Board Give general directives – S 33 Receive yearly reports – S 26 Approve regulations of the Commission – S 34 AYULI JEMIDE, Lead Partner, 12 6/7/2014

  13. 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 AYULI JEMIDE, Lead Partner, 13 6/7/2014

  14. Private Proponent Comply with bidding process – S 4 S 7 – the private proponent shall: 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. AYULI JEMIDE, Lead Partner, 14 6/7/2014

  15. National PPP Policy National PPP Policy has been passed: Establishes the: PPP Resource Centre – policy, advisory and transaction structuring Compliance Committee – to take custody of agreements and monitor compliance AYULI JEMIDE, Lead Partner, 15 6/7/2014

  16. ICRC Guidelines ICRC has issued a few guidelines to MDA’s pending the full regulation to deal with: Transaction thresholds Procedure for unsolicited bids etc. AYULI JEMIDE, Lead Partner, 16 6/7/2014

  17. ICRC as a regulator Note: ICRC regulates PPP activities but is not a contracting parties to the PPP’s. Is this good for regulation? What else should a good regulator have? AYULI JEMIDE, Lead Partner, 17 6/7/2014

  18. Highlights of the ICRC Act What about the States? Is the Federal Capital Territory Abuja a State? What about the Local Governments? AYULI JEMIDE, Lead Partner, 18 6/7/2014

  19. Other Key Legislations Related to PPP’s AYULI JEMIDE, Lead Partner, 19 6/7/2014

  20. 1. The Nigerian Constitution 2. Public Procurement Act 2007 3. Fiscal Responsibility Bill 2007 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 Federal Roads Maintenance Agency Act 10 Lagos State Roads, Bridges and Highway Infrastructure Law 2005. AYULI JEMIDE, Lead Partner, 20 6/7/2014

  21. Note the existence of Sector Legislations:NCCNERC etc AYULI JEMIDE, Lead Partner, 21 6/7/2014

  22. 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. AYULI JEMIDE, Lead Partner, 22 6/7/2014

  23. Constitutional Power to Legislate AYULI JEMIDE, Lead Partner, 23 6/7/2014

  24. Practical issues with limits on legislative powers: • States may require Federal Govt consent to establish: • - a State owned airport • - a state owned railway system • - a state Maritime transport system • States depend on the workability of the Federal policy • on gas supply from the Oil Companies to fuel their • State owned Independent Power Projects. 24 6/7/2014 AYULI JEMIDE, Lead Partner,

  25. 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 6/7/2014 AYULI JEMIDE, Lead Partner,

  26. 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. AYULI JEMIDE, Lead Partner, 26 6/7/2014

  27. 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. AYULI JEMIDE, Lead Partner, 27 6/7/2014

  28. Arguments and Counters 1st School: “Procurement” is about “purchases” & Govt buys nothing in PPP’s. 2nd School: In PPP’s Government trades an Asset and buys the provision of a PSO (public service obligation). 1st School: Procurement seeks the lowest bidder and PPP’s seek the highest bid. 2nd School: PPP calculates Value for Money (VFM) which is the same principle. AYULI JEMIDE, Lead Partner, 28 6/7/2014

  29. Debate continues 1st School: The Act’s scope is “goods”, “works” and “services” it does not cover PPP 2nd School: a) BOT’S would fall under “works” in the Act. b) Management Concessions are “services” AYULI JEMIDE, Lead Partner, 29 6/7/2014

  30. 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 AYULI JEMIDE, Lead Partner, 30 6/7/2014

  31. Fiscal Responsibility Act 2007 • To strengthen fiscal policy design and implementation. Citizen’s legal right to challenge budgetary lapses is supposed to reduce ineptitude in Govt spending. • May increase Govts sophistication in designing financial models for PPP’s and ensuring that Govt contributions are within budgets and available.

  32. 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. AYULI JEMIDE, Lead Partner, 32 6/7/2014

  33. 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”. AYULI JEMIDE, Lead Partner, 33 6/7/2014

  34. Land Vesting Title Act1975 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. AYULI JEMIDE, Lead Partner, 34 6/7/2014

  35. 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. AYULI JEMIDE, Lead Partner, 35 6/7/2014

  36. 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 6/7/2014 AYULI JEMIDE, Lead Partner,

  37. FederalHighways 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? AYULI JEMIDE, Lead Partner, 37 6/7/2014

  38. 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 AYULI JEMIDE, Lead Partner, 38 6/7/2014

  39. Federal Roads MaintenanceAgency 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” AYULI JEMIDE, Lead Partner, 39 6/7/2014

  40. Preview of Regulators 40 6/7/2014 AYULI JEMIDE, Lead Partner,

  41. Basic Legal & Contracting Issues In PPP’s AYULI JEMIDE, Lead Partner, 43 6/7/2014

  42. Is there an Enabling Law?- Enabling Law goes beyond giving legal authority for a deal, it also sets the playing field: AYULI JEMIDE, Lead Partner, 44 6/7/2014

  43. Who Is The Contracting Party?- Preferred Bidder/SPV or both- Government/Agency or both- Lenders via substitution AgreementsNote: Section 54 of Companies Act. AYULI JEMIDE, Lead Partner, 45 6/7/2014

  44. Who owns the Asset? a)Asset owner may not be the dealing authority – Example of BPEb) One transaction may have different asset owners – NIWA, NRC, Federal Ministry of Works own different assets on the Lagos Light Rail Project. AYULI JEMIDE, Lead Partner, 46 6/7/2014

  45. 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. AYULI JEMIDE, Lead Partner, 47 6/7/2014

  46. 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? • NOTE: Restrictions on using foreign Insurers under the 2003 Insurance Act. AYULI JEMIDE, Lead Partner, 48 6/7/2014

  47. 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? AYULI JEMIDE, Lead Partner, 49 6/7/2014

  48. 6. Dispute Resolution • KEY ISSUES: • Investor Comfort vs Government Sovereignty • Clause in Agreement to ensure the Continuity of Public Service Obligations during a dispute situation. • 3. Fast & efficient resolution of disputes AYULI JEMIDE, Lead Partner, 50 6/7/2014

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