Dissecting PPP contracts #8: ADR

Dissecting PPP contracts #8: ADR

During the life of a public-private partnership (PPP) arrangement, which may last for 50 years, disputes and controversies may arise. These cases typically come about after the term of the officials who vetted and awarded the project. Philippine PPP history has seen the effects of such successor risk.

Cases have been lodged in connection with canceled contracts, changes in interpretation of contractual provisions and breach of material obligations. These happen unilaterally or without the knowledge, consent or participation of the other contracting party. Aggrieved parties may either seek redress and relief from courts, quasi-judicial bodies or “neutral third persons.”

Publicized arbitration cases. In at least three instances, the Philippine Government, through its implementing agencies, has been hailed to arbitration proceedings before international neutral third persons. The private sector proponents of Metropolitan Waterworks and Sewerage System, Ninoy Aquino International Airport Terminal 3 and Laguna Lake Rehabilitation and Dredging Project filed arbitration cases after unilateral adverse action by the successor administration.

Executive Order 78, series of 2012. Under this executive issuance, referral to “neutral third persons” is now the rule. Provisions on Alternative Dispute Resolution (ADR) mechanisms must be included in PPP, Build-Operate-and-Transfer Law-related and joint venture agreements, whether entered into by national government agencies, government corporations or local government units. This executive order is anchored on Republic Act 9285, or the ADR Act of 2004.

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PPP conversations #10 with Metro Pacific Tollways Corp.

PPP conversations #10 with Metro Pacific Tollways Corp.

ALL over the world, public-private partnerships (PPPs) are undertaken for roads. In the Philippines road infrastructure is done through either build-operate-transfer, build-transfer-operate, joint venture, concession or procurement arrangements with national government agencies, local governments or government corporations.

Metro Pacific Tollways Corp.(MPTC) has done and continues to operate over 200 kilometers of road PPPs in North Luzon Expressway (Nlex) and Cavite Expressway (Cavitex) and will soon complete three more—Cavite–Laguna Expressway (Calax), Nlex-South Luzon Expressway (Slex) connector road and Cebu-Cordova link expressway.

MPTC President and CEO Rodrigo Franco shares his insights on the need for resource exchange, the readiness of the government and the private sector to enter into such collaborative arrangements, and the successes and risks of PPPs. He calls on us to support and be patient with this alternative development strategy. Thank you MPTC for keeping the PPP flame burning.

• What is your concept of PPP?

PPP is a joint endeavor of the government and private entities to
deliver essential services, especially infrastructure, to the public.  As its resources and capabilities are never enough, the government through the PPP Program contracts private- sector entities to help deliver basic services. The government and its private-sector partner share the risks and rewards of the endeavor. The private entity generates returns from a stream of payments either from the government or the recipient of the services.

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Contrasting 2 joint-venture frameworks

Contrasting 2 joint-venture frameworks

Every time this columnist lectures on public-private partnerships (PPPs), he cannot de-emphasize the differences in the frameworks on joint ventures (JVs). A JV is a PPP modality whereby both public- and private-sector proponents (PSPs) contractually agree to a common purpose, contribute, exchange resources, jointly perform functions and proportionately share in governance, revenues, profits, losses and risks. The two types of JVs are contrasted as follows:

  1. Classes of public entities. JVs, on the part of government, can be entered into between government corporations and instrumentalities, state universities and colleges and government financing institutions (GFIs) and PSPs; and between local government units (LGUs) and PSPs.
  2. Governing frameworks. GFI-PSP JVs are currently governed by the 2013 Guidelines issued by the National Economic and Development Authority (Neda JV Guidelines), while LGU-PSP JVs are anchored on the 1991 Local Government Code and its implementing rules. However, the “how to” or details—definition, requirements, conditions, form of contributions and procedures—are supplied by LGUs through their respective ordinances. To date, some 90 LGUs already have theirs. The template PPP ordinance annexed to the Department of Interior and Local Government Memorandum Circular 2016-120 (DILG MC) incorporates LGU JVs.
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Questions fro Dentons Law Firm, Beijing on PPP in the Philippines

Questions fro Dentons Law Firm, Beijing on PPP in the Philippines

This columnist had the privileged of speaking about the Future of public-private partnerships (PPPs) in the Philippines before lawyers and clients of Dentons in Beijing on September 22. Dentons, a global law firm that has around 600 lawyers in its Beijing office, recently bagged the International Firm of the Year at the Lawyer Awards 2017.

Aware of the opportunities in the Philippines and the favorable PPP climate in the country, China state-owned and private corporations, and law firms, such as Dentons, would want to explore these. But like in any other investment venture, knowing the legal environment is a must. The seminar on PPP had this in mind.

Here are the questions the participants raised, and these could very well be the same ones foreign, even local, investors may ask:

Are there opportunities? Of course, there are. Under the “Build Build Build” program of the current administration, PPPs may be pursued for hard and soft projects —expressways, bridges, airports, reclamation, rail and water supply; and health care, socialized housing and rehabilitation centers. These projects may even be combined into one contract under the bundling approach.

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Dissecting PPP contracts #7: Right-of-way

Dissecting PPP contracts #7: Right-of-way

 

Need ROW. For infrastructure projects that traverse rows of private properties, access and permission must be obtained from the owners. Without ROW, there can be no such road, expressway, rail or power-interconnection project over or through private or public land.

Public purpose. PPP projects and all government projects are intended for the public good. If government funds will be used for ROW purposes, then public purpose is a must for government funds cannot be used for private purposes.

ROW is not free. When ROW is exercised, the parties to a PPP, and consumers and end-users benefit. Thus, the private owner who will be permanently disturbed or deprived of his or her land must be compensated. Apart from legal easements, ROW over or through private land requires the “taker” to pay the owner. While voluntary sale based on an agreed price is the ideal, the “taker” may seek relief from the courts by filing expropriation cases. Delay in negotiations and court proceedings are the real culprits.

ROW in PPPs. PPP arrangements require the identification and delineation of roles and responsibilities. For example, in build-operate-transfer or build-transfer-operate arrangements, the private sector assumes these three functions including the financing and designing of the facility. What remains with or what is normally assumed by the government is providing for ROW.

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Walk the talk! Talk the walk!

Walk the talk! Talk the walk!

 

This was the challenge posed to the participants of the most recent seminar organized by the Local Government Academy (LGA)-Department of Interior and Local Governments on public-private partnerships (PPPs).

Fourteen cities. Last week officials from 14 cities attended the “Enhancing Local Governance, Accountability and Reform through PPP-Technical, Financial and Environmental, Review of Policy and Legal Framework” offered by LGA. Elective and career officials from the Cities of Pasig, Malabon, Tabuk, San Fernando (La Union), San Carlos, Alaminos, Dagupan, Santiago, Muñoz, San Pablo, Santa Rosa, Puerto Princesa and Carcar actively participated in the three-day seminar from September 6 to 8.

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Dissecting PPP contracts #6: Amendments

Dissecting PPP contracts #6: Amendments

The “amendments” provision is one of the shortest, yet important and desirable, boilerplate provisions of public-private partnership (PPP) contracts.  The inclusion of this provision could address matters not contemplated or could not be contemplated as of the date of execution.

Sample texts. Some PPP contracts word this provision this way: “This agreement may be amended, modified, or altered only by mutual agreement and a duly executed written instrument signed by the parties’ authorized representatives.” Others, like this, “No amendments or modifications of this agreement shall be valid except by written agreement signed by the duly authorized representatives of the parties.”

Components. There are five parts of this provision: (1) the subject which is the agreement, (2) of the amendment, alteration or modification, (3) which requires mutual agreement, (4) embodied in a written document and (5) signed by authorized representatives of the parties to the public-private partnerships (PPP).

Optional inclusion. The insertion of this provision, like any other provision in the main PPP contract, while desirable, must be agreed upon between the Parties. All terms of the contract have a purpose and their inclusion and exclusion have an impact.

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