1. PUBLIC PRIVATE PARNERSHIP TRAINING
CWC
PUBLIC PRIVATE PARNERSHIP TRAINING
ABUJA, November 17, 2009
Legal & Regulatory Framework For Public Private Partnership In Nigeria Under the Infrastructure Concession Regulatory Commission Act 2005
Ayuli Jemide, Lead Partner.
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2. AYULI JEMIDE, Lead Partner,
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
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3. Highlights of the ICRC Act
Is the ICRC Act meant for only “Concessions” or all forms of Public Private Partnerships?
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4. Forms of PPP’S SERVICE MANAGEMENT LEASES JOINT VENTURES CONCESSION/BOT
Increase Private Sector Risk
Increase Private Investment
Institutional Changes
Longer Tenures
More Complicated
MANAGEMENT
LEASES
JOINT VENTURES
CONCESSION/BOT
BOO - Divest

5. AYULI JEMIDE, Lead Partner,
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?
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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”
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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”.
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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?
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9. Key Actors under the ICRCA
The Infrastructure Regulatory Commission
Federal Ministries, Departments, Agencies
Mr President
The Federal Executive Council
The private proponent
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10. AYULI JEMIDE, Lead Partner,
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
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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)
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12. AYULI JEMIDE, Lead Partner,
Mr President
Appoint ICRC Board
Give general directives – S 33
Receive yearly reports – S 26
Approve regulations of the Commission – S 34
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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
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14. AYULI JEMIDE, Lead Partner,
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.
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15. AYULI JEMIDE, Lead Partner,
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
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16. AYULI JEMIDE, Lead Partner,
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.
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17. AYULI JEMIDE, Lead Partner,
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?
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18. Highlights of the ICRC Act
What about the States?
Is the Federal Capital Territory Abuja a State?
What about the Local Governments?
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19. Other Key Legislations Related to PPP’s
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20. AYULI JEMIDE, Lead Partner,
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.
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21. Note the existence of Sector Legislations: NCC NERC etc
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22. AYULI JEMIDE, Lead Partner,
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.
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23. Constitutional Power to Legislate
Exclusive
Federal Roads
Maritime
Aviation
Mines & Minerals
Railways *
Nuclear Energy
Concurrent
Electric Power
Industrial, Commercial & Agric Dev.
Education
Residual
Urban planning
Transportation*
State Roads *
Water
Housing
Health
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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
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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
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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.
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27. AYULI JEMIDE, Lead Partner,
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.
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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.
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29. AYULI JEMIDE, Lead Partner,
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”
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30. AYULI JEMIDE, Lead Partner,
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
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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.
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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”.
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34. AYULI JEMIDE, Lead Partner,
Land Vesting Title Act 1975
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.
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35. AYULI JEMIDE, Lead Partner,
The Act is in dispute?
Oba Yekini Adeniyi Elegushi & Ors v Attorney General of the Federation and others case.
– Fed High Court. (FHC/L/CS/669/95
Challenged the validity of the Land Vesting Title Act.
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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.
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37. AYULI JEMIDE, Lead Partner,
Federal Highways 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?
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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
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39. Federal Roads Maintenance Agency 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”
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40. AYULI JEMIDE, Lead Partner,
Preview of Regulators 40
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41. Securities & Exchange Comm.
ICRC
All PPP’s by Federal Govt, its ministries and agencies.
Securities & Exchange Comm.
Bond Financing;
Shares of PLC’S;
PPP with Trusteeship or corporate restructuring
Bureau of Public Procurement
Federal Government procurement above N50 million naira
Federal Executive Council
All Federal Government contracts above 50 Million Naira need FEC approval.

42. Debt Management Office
Bureau of Public Entp.
All entities listed in the BPE Act
Debt Management Office
State or FGN debt
State or FGN Sovereign Guarantees,
Bond Financing
PPP’s with Govt cash contribution or equity
Nigerian Railway Corporation
All railway related Projects (state or federal)
Federal Airports Authority
All Airport Projects - state or Federal

43. Basic Legal & Contracting Issues In PPP’s
Note the difference between the enabling Law (which sets up an entity and empowers it to own an asset or contract) and the regulations emplaced by that entity pursuant to the enabling law.
ICRCA Deals with only PPP’s by Federal Government and Its Ministries
States are in dire need of their own ICRCA Act _
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44. AYULI JEMIDE, Lead Partner,
Is there an Enabling Law? - Enabling Law goes beyond giving legal authority for a deal, it also sets the playing field:
Note the difference between the enabling Law (which sets up an entity and empowers it to own an asset or contract) and the regulations emplaced by that entity pursuant to the enabling law.
ICRCA Deals with only PPP’s by Federal Government and Its Ministries
States are in dire need of their own ICRCA Act _
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45. AYULI JEMIDE, Lead Partner,
Who Is The Contracting Party? - Preferred Bidder/SPV or both - Government/Agency or both - Lenders via substitution Agreements Note: Section 54 of Companies Act.
Note the difference between the enabling Law (which sets up an entity and empowers it to own an asset or contract) and the regulations emplaced by that entity pursuant to the enabling law.
ICRCA Deals with only PPP’s by Federal Government and Its Ministries
States are in dire need of their own ICRCA Act _
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46. AYULI JEMIDE, Lead Partner,
Who owns the Asset? a) Asset owner may not be the dealing authority – Example of BPE b) One transaction may have different asset owners – NIWA, NRC, Federal Ministry of Works own different assets on the Lagos Light Rail Project.
Note the difference between the enabling Law (which sets up an entity and empowers it to own an asset or contract) and the regulations emplaced by that entity pursuant to the enabling law.
ICRCA Deals with only PPP’s by Federal Government and Its Ministries
States are in dire need of their own ICRCA Act _
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47. 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.
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48. AYULI JEMIDE, Lead Partner,
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.
Where it is NOT a BOT but certain infrastructure have been provided by Govt (i.e LAMATA red & blue lines), then the govt has an insurable interest in its assets.
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49. AYULI JEMIDE, Lead Partner,
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?
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50. AYULI JEMIDE, Lead Partner,
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
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51. AYULI JEMIDE, Lead Partner,
Dispute Resolution
What are the options?
1. DRC (Dispute Resolution Committee)
2. Experts determination
3. Arbitration
Courts (domestic or foreign)
5. Note other options like UN Centre for Settlement of Investment disputes.
Parties should learn to caucus first
Expert resolution on purely technical issues saves a lot of time.
Expert (b) Referee under ICC (c) Independent Traffic Consultant
3. Arbitration is good – but has some sensitivities:
- Venue (Abuja or London?)
- Applicable Rules (ICC is pro EU (civil law) Uncitral is pro UK (common law)
Some agreements specify English courts – be careful.
This internationalizes the Agreements, the International Centre for Settlement of Investment Disputes (“the Centre”) has several advantages:
Does Conciliation or Arbitration or both
Pursuant to the Convention on Settlement of Investment Disputes between States and Nationals of Other States, so the obligation now becomes one under International law.
Many investors find comfort in this as a trustworthy institutional 3rd party.
d) Many enabling laws insist on resort to ICSID (We tried to suggest it on Greater PH City Bill
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52. AYULI JEMIDE, Lead Partner,
7. Force Majeure
As a general rule force majeure operates on the “NO FAULT PRINCIPLE”
PPP agreements have redefined force majeure and allocated compensation based on the role that Government had to play in the event.
Why is this? What is the difference between PPP’s and private contracts?
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53. Force Majeure Compensation Flow Event Defined Payee
Political Event
A direct act by Govt affecting the contract
Govt pays on full Indemnity basis
Indirect
Political
An act of Govt that causes an FM event.
Govt splits with private sector
Non- Political
FM event from an Act of God
Govt may pay little or nothing
Non Political Force Majeure Events
Acts of God - weather conditions, lightning, earthquake, cyclone, flood, volcanic eruption,fire, or landslide;
Strikes or boycotts
(c) Any judgement or order of any court of competent jurisdiction or statutory authority in Nigeria made against the Concessionaire
Indirect Political Force Majeure Events:
(a) an act of war (whether declared or undeclared), invasion, armed conflict or act of a foreign enemy, blockade, embargo, riot, insurrection, terrorist or military action, civil commotion or politically motivated sabotage.
(b) industrywide, statewide, nationwide strikes, public agitation or industrial action which prevent collection of Fees by the Concessionaire for a period exceeding 30 consecutive days;
Political Force Majeure Events:
Change in Law,
expropriation or compulsory acquisition by any Governmental Agency of any assets or rights of the Concessionaire or of a Contractor; or
(c) unlawful or unauthorized revocation of, or refusal to renew or grant without valid cause, any consent or approval required by the Concessionaire or any of the Contractors to perform their respective obligations
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54. AYULI JEMIDE, Lead Partner,
8. Permits & Licences - What permits are required? Note: State transaction requiring Federal Permits
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55. AYULI JEMIDE, Lead Partner,
CONCLUSIONS
Things will continue to evolves
The Pending Bills particularly the National Transport Commission Bill will change the landscape
The ICRC Regulations will bring a sense of organization, certainty and fluidity to PPP deals on the Federal level
States will begin to come up with their frameworks
The PPP market will grow exponentially in the next 5-10 years.
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56. AYULI JEMIDE, Lead Partner,
THANK YOU FOR LISTENING
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