G531_B_UNECE

1. ***« Conditions for success of Concessions and otherPPPs in developing countries : How to makeitwork ?  »***Marc FriletManagingPartner « Frilet – Société d’Avocats »Secretarygeneral of the French Institute of International legal Expert (IFEJI)Global Construction and Infrastructure Legal Alliance (GCILA) – Founding Law firmHead of the PPP Working Group « IFEJI/Paris BarHead of the draftingcommittee CICA PPP Working Group Frilet - Société d'Avocats G531_B_UNECE

2. Introductoryremarks (1) • What is the relevance of our topic? Without massive investments in the public infrastructure service sector many countries will continue to lose several percentage point of GDP. Nowhere in the world the public budgets permit to finance such massive investments. • Example in Africa: The gap which cannot be filled by the international community and donors is S$ 40 billion per year. If the gap is not bridged the millennium goals will not bereached. The industry and PPP champions are losing appetite . The financial crisis further limit the capacity of the industry to consider PPP. • Nevertheless, under precise and inclusive conditions innovative for most stakeholders, there is a promising future virtually in any country in the world. Frilet - Société d'Avocats

3. Introductoryremarks (2) • What are we talking about and why: focus on Concessions and other PPPs for public infrastructures services in developing countries • Delivery of public infrastructure services having a strong element of general interest (or public interest) : In most countries in the world, general interest triggers similar consequences that the parties cannot modify by contract. Examples in water : Source Michael Klein (former vice-president of the Private sector World Bank) • Can a private operator actually turn off the tap because he owns the water? • Can a water service provider take the pipeline and dig it out and take it at home or throw it away? • What happens at the end of the Concession of the license period? • How the pricing arrangements are regulated? Frilet - Société d'Avocats

4. Introductoryremarks (3) • Reasons for cautious optimism if innovative approaches are promoted in an inclusive manner in three directions: • Improvement of the overall governance and investment climate (by region or by country) A minimum level of conductive investments climate is necessary. • Identification and promotion of « Gold standards » and related best practices • Promotion of an inclusive institutional, legal, regulatory and contractual framework. Frilet - Société d'Avocats

5. Outline of the lessonslearnt on the conditions of success • Why it is both necessary and simple to distinguish two families: Concession and assimilated schemes vs PFI and assimilated schemes: • The socio-economic rationale • Illustrative chart outlining the various forms of private participation in public infrastructure • Statistics on Concessions and PPP projects (number and investment value) Frilet - Société d'Avocats

6. Illustrative chart outlining the various forms of private participation in public infrastructure Frilet - Société d'Avocats

7. Statistics: number and investment value of Concessions and PFI Frilet - Société d'Avocats

8. Proposeddefinition : Concession- PPP vs PFI-PPP (1) • Concession – PPP • “A physical infrastructure which is the basis of a public service is designed, financed, built or rehabilitated or maintained and always operated by a commercial company in accordance with the terms of a contract concluded with the public authority in charge of delivering the service which the commercial company to deliver the service on its behalf based on performance parameters and providing for the compensation entirely or mainly of the commercial company by the end users […] • PFI – PPP “A physical infrastructure based on public functional requirements is designed, financed, built and operated by a commercial company in accordance with the terms of a contract concluded with the public authority in charge of delivering the serviceunder agreed conditions including performance parameters and providing for the compensation of the commercial company by the public authority […] Frilet - Société d'Avocats

9. Definition : Concession- PPP vs PFI-PPP (2) • Concession – PPP • […] upon the delivery of the service to the end users for a time period calculated in such a way that the private company is able to fully recover all its costs including financial costs and make a reasonable profit. • At the expiry of period, the infrastructure is transferred to the Public Authority in good operating conditions, without”. • PFI – PPP […] upon the delivery of the service to the public authority for a time period calculated in such a way that the private company is able to fully recover all its costs including financial costs and make a reasonable profit. At the expiry of period, the infrastructure is transferred to the Public Authority in good operating conditions, generally without consideration or with a consideration agreed at the outset” Frilet - Société d'Avocats

10. The main practical conditions of success: a composite chaincomprising more or less 20 to 30 links (1) Compliance index in developing countries • 1. PPP preparation • 2. PPP procurement • 3. PPP contract conditions Conceptual evaluation Preliminary business case Eco-fin. scenario Prefeasibility studies Final evaluation Average? (To be discussed) Pre-selection RFP (Functional) First evaluation Tunnel exchanges Final evaluation Frilet - Société d'Avocats Average? Public service obligations Business case transparency Adaptation to changes Early termination Partnering ADR Low?

11. The main practical conditions of success: a composite chaincomprising more or less 20 to 30 links (2) Compliance index in developing countries • PPP underlying principles • To be discussed) • 2. Central level institutions • Project level institutions Public service priority Sovereign interference Economic equilibrium Effective compensation rights Ownership Security rights Low? (To be discussed) Governance Integrity Efficiency Planning infrastructure General PPP promotion Project monitoring Choice of outside advisers Frilet - Société d'Avocats Low? Governance Integrity Efficiency Project unit Procurement Committees Monitoring Committee Choice of outside advisers Average?

12. The main practical conditions of success: a composite chaincomprising more or less 20 to 30 links (3) 1) Underlying economic conditions and Project preparation by the public sector • Conceptual evaluation • Preliminary business case • Prefeasibility studies • Economic and financial scenario • Final evaluation Frilet - Société d'Avocats

13. The main practical conditions of success: a composite chaincomprising more or less 20 to 30 links (4) 2) Project procurement : distinctive features and innovative approaches • The possible scope of unsolicited proposals: limits and consequences • The main rule: competitive bidding • Pre-selection • How to design Request for Proposal and bidding documents (how to identify and draft some key contractual conditions) • How to identify the appropriate awarding criteria and how to choose the best procurement road: • two stages procedure ? • competitive dialogue? • competitive negotiation ? • The preferred bidder status: misprocurement issues and efficient challenging procedures Frilet - Société d'Avocats

14. The main practical conditions of success: a composite chaincomprising more or less 20 to 30 links (5) 3) Project contract conditions and underlying legal framework • The particular nature of the contractual relationships: a long term venture where the two contracting parties have a common obligation: to render a service satisfactoryand affordableto the public. • Consequences in term of contract nature: • Incomplete contract subject to adjustments • Adjustment must be organized in a simple and clear manner without giving rise to hazardous negotiations (a set of ad hoc clauses and related legal principles, including ADR and partnering techniques and/or with the help of outside regulators) • Reference to some important conditions for the delivery of public infrastructure services: • Continuity of the service •  Non discrimination between the users • Adaptability of the service • Transparency of the financial and operating condition Frilet - Société d'Avocats

15. The main practical conditions of success: a composite chaincomprising more or less 20 to 30 links (6) • The key role of an agreed baseline economic scenario for concession PPP • Outline of some particular contractual rights and obligations in case of concession-PPP • Rights of the conceding Authority:   • to terminate: how? • to impose changes: how? • to use the equipment and workforce of the concessionaire even when dispute arises for continuing the operation of the service: how? • Rights of the Concessionaire: •  full indemnification when the Public Authority exercises sovereign rights : how? • adequate compensation when an unforeseen impediment (“sujétions imprévues”) occurs: how? • right to reinstate the equilibrium of the contract conditions when a hardship (“imprévision”) situation arises: how? Frilet - Société d'Avocats

16. The main practical conditions of success: a composite chaincomprising more or less 20 to 30 links (7) 4) Project adaptation and regulation options • Regulation by contract: is it desirable? how can it work? The case of simple and well known public contracts laws • Regulation through renegotiation: is it desirable? how can it work? • Regulation by an outside regulator: is it desirable? How can it work? 5) Project financing • The project financing techniques: Among others: • Diverting the project income flow for the ownership of the lenders, • Transferring the ownership of the project to the lenders • Collateral guarantees : sovereign guarantees, political insurances • Their desirability, • Their consequences on project delivery and sustainability: how can it work? Frilet - Société d'Avocats

17. The main practical conditions of success: a composite chaincomprising more or less 20 to 30 links (8) 6) Institutionalframework Prerequisite : Design and promotion of reinforced principles on Governance, Integrity and Efficiency and related procedures (including improved procurement rules for outside consultants and experts) • Central level: • Central PPP Unit: • Center of expertise • Planning infrastructure • General PPP promotion • Project monitoring • Regulatory bodies and special courts Frilet - Société d'Avocats

18. The main practical conditions of success: a composite chaincomprising more or less 20 to 30 links (9) • Line ministries level : • Sector PPP Unit • Monitoring project preparation • Monitoring projectimplementation • Project development committee • Project level (contractingauthority) • Project PPP Unit: preparation and monitoring • Procurementcommittees Frilet - Société d'Avocats

19. Conclusions, take-away and further exchanges (1) 1) Immediate action: Better information to public sector and private sector on the inclusive conditions of success for existing projects • Disseminating conditions of success around the world for securing existing projects or projects in a pipeline. • How to accelerate the process? Reference documentation • The Vademecum and other international efforts • The blueprint of a PPP Evaluation Index • How to proceed efficiently in a coordinated and integrated international effort? • the organization • the resources Frilet - Société d'Avocats

20. Conclusions, take-away and further exchanges (2) 2) Six month horizon: innovative approaches for designing appropriate regulations • Need of aggressive actions for design, adoption and effective implementation of an appropriate institutional, legal, regulatory and contractual framework on a country or regional basis. • Additional reference to lessons having given raised to the emergence of innovative and efficient methodological approach based on a new science: « the legistic ». • Main questions to adress: • How to design and promote efficient methodology in line with the real need and expectation of the stakeholders? • How to identify the best expertise? • What are the costs and how to finance the process? Frilet - Société d'Avocats

21. Marc Frilet Frilet - Société d’Avocats91, rue du Faubourg Saint Honoré75008 Paris – France Tel : + 33 1 56 26 00 40e-mail : avocats@frilet.com Frilet - Société d'Avocats Thankyou !