Public procurement and PPP

Legislation

Is the legislation governing procurement and PPP general or specific?

There is specific legislation in the United Arab Emirates (UAE) for public–private partnerships (PPPs). Cabinet Resolution (1/1) of 2017 provides a procedure manual for PPPs in the UAE (the PPP Procedure Manual). The Emirate of Dubai has issued Law No. 22 of 2015, which regulates PPPs in Dubai (the Dubai PPP Law), and Law No. 6 of 1997, which concerns contracts of governmental departments in the Emirate of Dubai. The Dubai Government's Department of Finance has also issued a very comprehensive 'Guide to Public Private Partnership in Dubai'.

In February 2019, the Abu Dhabi Government enacted Abu Dhabi Law No. 1 of 2019 and Abu Dhabi Law No. 2 of 2019 to regulate PPPs as part of a three-year 50 billion dirhams initiative to encourage private sector involvement in projects in the emirate. These two laws relate respectively to the establishment of the Abu Dhabi Investment Office (ADIO) for the implementation and execution strategy for the increasing foreign direct investment in the Emirate; and the regulation of PPPs. As part of this initiative, the ADIO will also be responsible for establishing a PPP Centre of Excellence designed to deliver best practices and facilitate investment.

Proposal consideration

May the government or relevant port authority consider proposals for port privatisation/PPP other than as part of a formal tender?

The PPP Procedure Manual requires proposals for privatisation and PPPs to be established through a rigorous tendering process, which is set out in detail in the PPP Procedure Manual, and all bidders must meet certain eligibility requirements and be registered on the appropriate e-procurement system. Each emirate also has its own tendering processes, which are available on the relevant government websites and need to be complied with. It is likely, however, that authorities have the discretion to waive requirements and processes in various circumstances.

Joint venture and concession criteria

What criteria are considered when awarding port concessions and port joint venture agreements?

Although there are no specific criteria, it is likely that port authorities will be looking at financial history, previous experience and company reputation when considering whether to award port concessions or enter into joint venture agreements. Furthermore, the contractual tendering and negotiation process will play a significant part in the selection process when a port concession is being considered or awarded. Therefore, general commercial considerations will apply.

While not formally applicable to a joint venture or port concessions, when a PPP partner (ie, corporate private sector person) is being considered by the Dubai authorities, the Dubai PPP Law states that the PPP partner must satisfy any applicable financial and technical standards, and the potential partner must have relevant speciality capability and efficiency. The overriding criteria for the selection of PPP partners are, according to article 14 of the Dubai PPP Law:

  • publicity;
  • transparency;
  • free competitiveness;
  • equal opportunities;
  • equality;
  • announcement of competition; and
  • achieving the requirements of public interest.

 

These are all factors that may be considered by the government when entering into joint ventures and port concessions.

Model agreement

Is there a model PPP agreement that is used for port projects? To what extent can the public body deviate from its terms?

There is no model PPP agreement in the UAE. Article 26 of the Dubai PPP Law, however, sets out the most important provisions to be included in a partnership contract. These include the nature and scope of the works or services; the responsibility to obtain the requisite licences, permits and approvals; and financial and technical obligations. The Abu Dhabi Law No. 2 of 2019 sets out similar provisions in article 12.

Approval

What government approvals are required for the implementation of a port PPP agreement in your jurisdiction? Must any specific law be passed in your jurisdiction for this?

In Dubai, the authority approving the project will vary depending on the financial liability to the authority arising from the proposed project. This will either be the Director General, the Financial Department or the Supreme Committee for Financial Policy. No specific laws need to be passed for the PPP agreement to be entered into.

Projects

On what basis are port projects in your jurisdiction typically implemented?

Annex 1 to the PPP Procedure Manual sets out all the types of PPPs. There are currently no port projects owned on a PPP basis. However, established build–operate–transfer and build–own–operate–transfer models have been employed in past projects.

Term length

Is there a minimum or maximum term for port PPPs in your jurisdiction? What is the average term?

The PPP Procedure Manual states that the term of a PPP must be stated in the PPP contract and suggests 30 or 35 years as a maximum term. Furthermore, Annex 1 of the PPP Procedure Manual sets out many different types of PPP and the contractual period for each. The Dubai PPP Law states that the maximum term for PPPs in Dubai is 30 years.

Although they are not PPPs, we are aware of port concession agreements extending beyond the suggested 30-year time frame for PPPs, with terms including options to extend. These options can sometimes be unilateral, only requiring written notification from the port operator.

On what basis can the term be extended?

The maximum term for PPPs in Dubai cannot be extended. However, port concession agreements can last longer as they are not specifically governed as PPPs. Elsewhere in the UAE, extensions are likely to be secured by agreement between the parties.

Fee structures

What fee structures are used in your jurisdiction? Are they subject to indexation?

No specific fee structures are required to be used. As such, all fee structures are open to contractual negotiation and will be subject to commercial considerations and requirements. In concession agreements, both fixed fees and variable fees (which may be linked to revenue or performance) are commonplace.

Exclusivity

Does the government provide guarantees in relation to port PPPs or grant the port operator exclusivity?

The guarantees provided by the government or a federal entity to a private PPP partner are set out in the PPP Procedure Manual. The types of guarantees provided are as follows:

  • service use or revenue guarantee – this guarantees a minimum level of use for the project and if there is a shortfall, the state will pay the difference;
  • guarantee of minimum service fees – this is usually required by lenders to ensure that a minimum level of service fee is paid to the private partner regardless of the actual level of the project’s performance; and
  • guarantee of law and regulation amendment – this provides the private partner with protection from any future regulatory policy.

 

It is at the discretion of the relevant authority as to whether these guarantees will apply in relation to ports.

Other incentives

Does the government or the port authority provide any other incentives to investors in ports?

There are no formal incentives, but rebates or other incentives may be agreed on a case-by-case basis.