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1 October 2004

1 October 2004. International Association of Development Funds Second Conference on FINANCING MUNICIPALITIES & SUB-NATIONAL GOVERNMENTS The Role of Specialized Local Funds and Financial Intermediaries. Working Lunch: Making Projects Bankable - The Legal View. The legal environment (1)

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1 October 2004

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  1. 1 October 2004 International Association of Development FundsSecond Conference onFINANCING MUNICIPALITIES & SUB-NATIONAL GOVERNMENTS The Role of Specialized Local Funds and Financial Intermediaries

  2. WorkingLunch: Making Projects Bankable - The Legal View The legal environment (1) • Concession Law / PPP Law / Public Procurement Law / No Law ? • Where do innovative projects fit within the existing law ? • The "traditional" approach and risk transfer • Is a PPP Law the answer ? The EC still debating the issue, France has said yes • Competitive dialogue • Should Management Contracts be treated as simple Public Procurements ? • Is a law necessary ?

  3. WorkingLunch: Making Projects Bankable - The Legal View The legal environment (2) • Division of power between municipalities and central governments • Water as a municipal activity • Water as a national jurisdiction (extraction from multi-jurisdictional sources, environmental legislation, price controls) • Can municipalities be trusted by central governments to award PPP Contracts for water ? • Can municipalities influence required legislative change to promote water projects ?

  4. WorkingLunch: Making Projects Bankable - The Legal View The existing municipal water company • Does it remain or is it wound up ? • Retrenchment of municipal employees • Existing debt • Municipal participation in Special Purpose Project Company

  5. WorkingLunch: Making Projects Bankable - The Legal View The contractual structure (1) • Are the traditional typologies of water contracts (concession, BOT, lease, management contract, service agreement) useful ? • Towards the sui generis contract

  6. WorkingLunch: Making Projects Bankable - The Legal View The contractual structure (2) • Performance-based Contracts • Simplicity versus complexity • The importance of baselines • The ability to measure performance • Should operators write their own performance criteria and penalty / incentive regime ? • Penalties must not be excessive / Incentives can never be enough

  7. WorkingLunch: Making Projects Bankable - The Legal View The contractual structure (3) • Can a contract "evolve" from one structure to another over time, or must it stop and be re-procured at each milestone ? • Is this simply a procurement / transparency issue ?

  8. WorkingLunch: Making Projects Bankable - The Legal View The regulatory regime • Is an independent regulator only a dream ?

  9. WorkingLunch: Making Projects Bankable - The Legal View Conclusion • If water is a priority, the legal / contractual / regulatory regime is not the problem but only the solution • The true problem is financing

  10. Algiers Beijing Belgrade Brussels Bucharest Budapest Casablanca Hanoi Istanbul London Moscow New York Paris Prague Riyadh Shanghai Tunis Warsaw Contact(s) John D. Crothers, Partner crothers@gide.com Association d'avocats 26, cours Albert 1er 75008 Paris - France Tél. +33 (0)1 40 75 60 00 Fax+33 (0)1 43 59 37 79 E-mail : info@gide.com www.gide.com

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