Structuring & Managing PPP Legal Agreements

This course forms module 2 of the PPP Contract Negotiation, Strategy & Legal Agreements Training Week. Attend both modules to save 15% on the combined price. This course is about structuring and managing PPP agreements. Since these types of contracts are long term contracts, it is important that their development is based on an adequate risk allocation between the public and private sector. This course parts from setting out the basic issues of upstream policy and how these will affect how risks are apportioned within a sector and how competition can be enhanced. The course then delves into the specificity of how risks are dealt with in PPP agreements. It looks in detail at some of the standard clauses most likely to appear in PPP agreement regardless of a county’s legal tradition. Further it distinguishes between countries with a Common and Civil Law tradition. It goes on to explore in detail how different contracts have used certain specific clauses such as lender step-in rights, termination payments and tariff adjustments. Further it explores the different techniques available to practitioners to manage change including tariff resets, transition periods, extension of contract terms etc. It further assesses ways in which the public sector can backstop its obligations within the contract as a means of enhancing the project’s overall bankability. Finally this leads to a discussion on how to manage disputes that may arise and some recent trends in infrastructure contracts (and others) which are using innovative techniques such as expedited dispute resolution and expert panels to resolve disputes. Course objectives Provide a basic primer of commercial terms and their implications in different legal environments where PPPs take place Link risk assessment to contract clauses by understanding the critical business aspects that are to be enshrined in a contract Given the fact that PPPs have the added challenge of being a long term arrangements, afford practical insights and techniques to effectively introduce clauses that allow modifications and changes to the original terms of the contract without jeopardizing the overall business relationship Who should attend? Government officials, ministries and public sector agencies Investment planning commissions Project developers, sponsors and consultants Senior investment and credit analysts Commercial, Business Development, Bid and Acquisitions Managers Lawyers and legal counsel Project financiers Credit, Risk and Investment officers Chief Financial Officers and Controllers Infrastructure and structured finance specialists Methodology The design of the course combines theory with relevant case studies as well as interactive participatory discussions. The course is comprehensive in its legal assessment of different techniques available to practitioners to deal with critical issue of PPP design and risk allocation. Importantly, through interactive discussions and case studies, it will illustrate the way in which change is managed in different PPPs. It will also provide course attendants with specific and practical techniques for drafting form scratch PPP agreement, based on proven pragmatic and practical techniques based on best international practice.
Day 1 Introduction Opening remarks This is to brief the participants on the overall objectives of the second part of the programme for the structuring and management of PPP agreements, and how this links to the first two days. Upstream policy implications and their effect on PPP contractual agreements Objective: In this session we specifically link the legal arrangements that are developed under PPP agreements and how they relate to upstream and sector policy. This involves three broad topics , including: How do we define an appropriate Market structure How do we identify the level of Government to be responsible for infrastructure services and what are the responsibilities of other levels of Government, and how these relate to PPP contractual agreements? Competition and regulation – how can we establish competition and how does it get reflected in a PPP agreement e.g. how to deal with monopoly arrangements etc. Implications of different legal jurisprudence environments Objective: This session is intended to assess implications of different legal jurisprudence environments. Specifically: Why does the system matter and how do I link contractual obligations with legal regime? Contracts and local courts – the implications of legal precedence and how it can affect contract design In order to illustrate these fundamental differences for contract drafting and its implication different examples will be providing, comparing and contrasting civil and Anglo-Saxon jurisprudence. Furthermore, examples will be provided as to how these ‘shape’ certain contractual arrangements. Case study and discussion session Each one of these issues outlined in session 10 and 11 will be explained by making reference to specific case studies in projects for toll roads (Senegal Diamando), Ports (Ghana), Metro (Sao Paolo Brazil and Dar es Salaam Rapid Bus Transport), Power generation (Azito Power, Kenya wind) and Health (Mozambique hospital). So for example, when dealing with early termination issues, the case study of Tanzania water lease contract will be used, etc. Upstream policy implications and their effect on PPP contractual agreements Objective: In this session we look at: Where does VfM fit in the project evaluation cycle? What is an adequate definition of VfM? The linkage of VfM and the Public Sector Comparator How to determine VfM? Overview of case studies using the UK, Brazilian, Indian and Australia (Victoria) VfM methodology. Summary and learning issues Objective: Every day will conclude with a wrap up of core principles of each one of the sessions, drawing out each of the learning outcome for each session. Day 2 Key Contractual Clauses Objective: This session is divided into two given the quantity of contractual clauses that will be covered. The two sessions will look at some of the more critical contractual clauses encountered in PPP agreements. The starting point will be a discussion of the differences between Common and Civil Law legal traditions. In addition discussion will be had on: Appropriate techniques for contract drafting Estimating probability of risk Developing a risk matrix (and setting out its minimum contents) Use of ‘heads of terms’ as an instrument for risk allocation prior to contract drafting Objective: This session will continue from the previous session but will specifically focus on: Why standardisation is important and examples of where this approach has been successful Role of credit committees and implications to key contract clauses Institutional investors Clauses and risk allocation Sample clauses and risk allocation Objective: This session will continue from the previous session but will specifically focus on: Clauses and risk allocation Sample clauses Standard clauses Dealing with change within a PPP agreement (including tariff variation procedures – an often controversial set of provisions subject in some instances to regulatory approval) How to manage change within a PPP including tariff resets, transition periods, extension of contract terms etc. Objective: Building on the concepts of previous sessions, this session will be a structured discussion on: Mechanisms to deal effectively with conflicts within a PPP Back stopping of public sector obligations within the contract as a means of enhancing the project’s overall bankability Other contractual clauses will be evaluated and their implication discussed by using relevant cases studies. The session will interact with participants by doing a quick survey of the different experiences amongst the students, by asking each to outline their experience to date in preparing contractual documents and any issues/problems they currently face. The course leader will then present an overview of the process and share best-practice. This will be followed by an interactive Q&A session. Day 3 Dispute Resolution and Managing Change within PPP Agreements Objective: PPPs are long term contracts which by their nature will change. This session will look at mechanisms by which change can be managed within a contract, allowing flexibility to deal with change but at the same time ensuring contractual integrity. Particular focus will be on: How to build clauses that allow for change e.g. tariff review processes, review procedures, milestone attainment etc. Techniques to address change within a contract Dealing with unforeseen circumstances Case study example of Chile toll road programme of variable length contracts The session is intended to be an introduction of the specifics of dispute resolution procedure in the session below. Objective: building form the second session on Key Contract Clauses, this session will continue the discussion on how to manage change within a PPP agreement with a particular focus on: The dispute resolution procedure Expedited dispute resolution including expert panels Arbitral awards Managing the process of renegotiations Venues for dispute resolution UNCITRAL, ICSID etc. IFI Risk mitigation instruments and other forms of guarantees (political risk insurance etc.) Case study: Review of conflicts e.g. Aguas Argentinas, Panama Canal expansion etc. Group work A specific worked session will be presented where the group will be split into grantor and sponsor. Each party will negotiate a mock PPP agreement. An interactive and moderated discussion will be done simulating: Initial PPP negotiation with grantor PPP negotiation to achieve financial close Midterm tariff review Early termination event Wrap up and conclusions Course review questionnaire to assess course Distribution of reading material Overall Q&A Course summary and close