A guidebook on public-private partnership in infrastructure

Legal and regulatory matters 
The legal and regulatory issues in implementing a PPP project need to be 
carefully examined during the project planning stage. These issues have important 
implications in project structuring as well as in contract design. Also, a concession 
agreement cannot be considered in isolation from the legal system of the jurisdiction. 
Generally, civil law
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based countries have a separate category of laws dealing with 
contracts and concessions. Rights of the parties to the contract or concession may 
have been clearly specified in such laws.
However, when a contract is awarded or a concession is granted under the 
administrative laws, as is often the case in common law countries, the 
contract/concession may be revocable at the will of the government. The private 
sector, including the lenders, would obviously be concerned considering such a 
possibility. The private parties would consider the extent to which it affects their 
commercial rights and may require some special provisions in the contract to protect 
and enforce their commercial rights. In the due diligence process, they would 
carefully consider legal issues concerning irrevocability, certainty and enforceability 
of their rights.
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The enforceability of rights, however, is also an important legal issue 
for the government, especially when a foreign private party is involved.
Besides these issues that are of a more fundamental nature concerning the 
legal systems of the jurisdiction, there could be many legal and regulatory 
restrictions. For example, not all types of PPP models may be applicable for a sector 
or type of a project. A PPP project needs to be designed around these restrictions. If 
these restrictions are not assessed early on and a project is not designed 
accordingly, the project will not pass lenders’ due diligence process. Consequently, 
the concessionaire/private party in the contract would not be able to arrange 
financing. 
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The legal systems of most countries can be broadly categorized in two systems: civil law and common law. 
Over the years, the differences between these legal systems, however, have become blurred to a great 
extent.
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The lenders, for example, would carefully assess their step-in right. They would also like to ensure as much 
security for the financing as possible. They may require security rights to allow them to take over the project 
rather than just sell the project assets, as the value of the project lies in its operation and not in its completed 
assets. They may ask for securing their interests through assignment, transfer and substitution of the 
concession to a nominated company under certain specified conditions.

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A Guidebook on Public-Private Partnership in Infrastructure 
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