25 November – LAWFUEL – The Law News Network – Allen & Overy LLP said today that, with estimates for capital investment needs across Europe by 2020 in transport alone ranging from EUR200bn-EUR600bn, there are a wealth of opportunities for PPP market participants to share their expertise in developing markets, as long as they understand the risks.
The main area for debate is no longer over whether the private sector should ever be involved in the delivery of public services, but instead what the appropriate responsibilities are that attach to that delivery.
Each jurisdiction of the European Union is at its own stage in the development of PPP and there are nearly as many differences as there are similarities in the individual countries’ approaches to PPPs. Allen & Overy LLP will today published a European Guide to Public-Private Partnerships to help market participants navigate the variety of issues that need to be addressed in implementing successful PPP projects in various jurisdictions of the European Union.
“As PPP markets develop across Europe the question is whether newer markets can learn lessons from the more established ones and cherry pick best practices from the suite of possible solutions, or if the new legal structures that are emerging will merely re-enforce old prejudices and lead proponents around in the same circles,” said Anne Baldock, Head of Allen & Overy’s Global PPP Practice.
Despite the growth of PPP across Europe considerable uncertainty still exists as to how PPPs interact with current EU policy, for example in the field of procurement policy. The European Commission released a clarification of its Interpretative Communication on PPP and Concessions in Community Law on 17 November, suggesting legislation would be proposed but not before further in-depth analysis, including an Impact Assessment, is carried out during 2006.
While a European-wide standard approach to PPPs might be welcome, a rigid, centralised legal framework may lack the flexibility to meet the infrastructure needs of countries at very different stages of development. Striking the right balance of legislation and flexibility is crucial in order to offer opportunities for improved infrastructure within Europe and the chance for European businesses to compete more effectively for such projects internationally.
“Those countries still developing PPP frameworks may have to look at adopting different risk profiles if they wish to attract investors from more established PPP jurisdictions to participate in their market,” added David Lee, Partner in Allen & Overy’s Global PPP Practice.
As governments work toward a more unified framework, differences in approach and legal treatment of PPPs will remain. Some of the issues highlighted in the guide include administrative law obstacles in France’s dispute resolution process and how to best navigate the PPP laws at several levels of authority in Belgium. Italy has seen delays in concessions being awarded that have led to added levels of risk. In Spain there remain some questions about the robustness of termination provisions, although these can be avoided by negotiation. Portugal has some issues relating to security and Austria is lacking a general PPP strategy guidance from the government. Meanwhile in Germany the complexity of the various interfaces between federal, state and municipal levels of government mean it is hard to identify and deal with any “standard” issues.
In Central and Eastern European governments face competing pressures to raise infrastructure to Western European standards while being mindful of constraints on public borrowing, such as the requirements to meet the Maastricht criteria, PPP projects seem an ideal way forward. However, the main problem for PPPs in jurisdictions such as the Czech Republic, Slovak Republic and Poland is the need for legislative changes in several key areas of law such as the law on concession agreements and the ownership of public property.
PPP has made immeasurable progress since its inception. There is no question that issues remain to be addressed in all jurisdictions. But an awareness and understanding of how to address these manageable issues is central to the successful implementation of PPPs across Europe.