Dubai opens to the widely embraced investment model of Public-Private Partnership ( PPP ) and issues Law No. 22 of 2015, regulating partnership between the public and the private sector in the Emirate of Dubai (the " Dubai PPP Law "). The Dubai PPP Law was published in the Dubai Official Gazette on 20 September 2015, and will come into force 60 days from the date of its publication, on 21 November 2015.
Although a number of projects in the UAE, and more specifically in Dubai, have already been either designed or completed using the PPP investment model (e.g., the Dubai Metro), there was no legal framework in place regulating this model. Hence, there was a pressing need to formalize this model by introducing the Dubai PPP Law, with the aim of raising the confidence of investors and financing institutions in Dubai's legal system and confirm that PPPs will be used more frequently in Dubai.
The government of Dubai's direction is to decrease the need to obtain financings for undertaking infrastructure projects and to enhance the operations and management of such projects, working towards achieving the goals set under the UAE Vision of 2021.
The Dubai PPP Law stipulates that a number of secondary legislations or regulations to detail specifics of PPP projects or possibly to clarify any ambiguity are yet to be issued. Therefore, monitoring how this law will be implemented is a must.
The objectives of the Dubai PPP Law include, amongst other things, encouraging the private sector to invest in development projects of social, economic, technical and social feasibility; increasing productivity; improving the quality of public services by securing effective management to develop such services; and providing higher competitiveness for certain projects in the local, regional and international markets.
Which entities and projects are subject to the new law
All government entities subject to the general budget of the government of Dubai may conclude PPP projects.
The Supreme Committee for Financial Strategies may at its discretion approve extending the scope of application of the Dubai PPP Law to other government-related entities not subject to the general budget, or exclude other projects from the scope of application of the Dubai PPP Law.
Power and water projects governed by Law No. 6 of 2011 and procurements subject to the Dubai Procurement Law No. 7 of 1996 are expressly carved out from the scope of this law.
Partnership projects and models
The projects that may be performed using the PPP model are either proposed by the respective government entity or the private company (the "Project") and must be economically, technically, financially and socially feasible. The Project must also consider public interest and government interest.
The PPP may take various forms, such as the "Build-Own-Operate-Transfer" and "Design-Build-Operate" models.
Prior to entering into a PPP, the government entity will begin a transparent, competitive and equal bidding process. However, the government entity is entitled to directly contract with the project company without going through the bidding process if the Project is an innovation of such private company.
All interested private investors must pre-qualify prior to commencing the bidding process. The government entity may also hold preliminary meetings and discussions with the qualified private investors in order to discuss the terms and conditions of the Project, subject to maintaining the confidential nature of any disclosed information.
The government entity will invite the qualified private investors to take part in the bidding process. Qualified investors are permitted to form a consortium with other qualified investors and submit a joint bid offer.
Following review of the bid offers, all the bidders or their legal representatives will be invited to attend a public session for the opening of the bid offers, during which the selected bidder is announced. The partnership committee empowered to manage the selection and bidding process assesses the bids by balancing the financial and technical aspects of the bid.
The project company
The Project may be either (i) developed through the creation of a limited liability "project company" with the partnership of the private investor; (ii) at the option of the government entity, the project company may be formed solely by the private investor and for the sole purpose of implementing the Project without the participation of the government entity in this special purpose vehicle; or (iii) directly performed by the private investor without setting up a presence in Dubai, provided that the financial and technical capabilities are established and subject to the provision of sufficient financial guarantees to the government entity.
Projects may be financed through banks and financial institutions, subject to obtaining the approval of the government entity and in such case, the project company shall be the party to the financing and bears all the obligations under the financing without any liability on the government entity.
Once the private investor is selected, a PPP agreement is concluded with the government entity, stipulating all the terms and conditions regulating the PPP, such as:
- the nature and scope of the works and services;
- the rights and obligations of the contracting parties;
- the rules concerning the sale price of the product or the consideration of the service provided by the Project, including the rules and principles to determine and amend such price and consideration;
- the level of Emiratisation;
- environmental measures adopted by the project company;
- the termination rights and amendment rights afforded to the government entity and the compensation mechanism in such case; and
- the term of the agreement (which shall not exceed 30 years unless a special approval if sought for a longer term for public interest considerations).
Amendments to the PPP Agreement by the government
The partnership committee, overlooking the respective Project, is entitled to demand the amendment of the PPP agreement in any of the following cases:
- For public interest considerations, and in compliance with the terms and conditions of the PPP agreement
- Exceptional/emergency circumstances, and subject to paying compensation; secondary legislation is to be issued to specify the rules for applying the exceptional circumstances.
Governing law and dispute Resolution
All agreements must be governed by Dubai laws and can only be subject to arbitration in the Emirate of Dubai.