Region: Sub-Saharan Africa
Keywords: Transport Core, Transport, Rail
The sample Rail Convention provides an example of an agreement on a “build-operate-transfer” model. It is to be signed by the State, the infrastructure owner entity (who will construct the rail infrastructure) and the operating entity (who will operate the rail infrastructure).
Given that in this model, it is private entities who will bear the risk of the financing, design, construction and operation of the port, the Convention is drafted to obtain optimal rights and security for those entities. This represents one model for PPP projects, where project risks and upsides are substantially transferred to the private sector.
Key features of the Pro-forma Rail Convention:
- Duration – under the Convention, the length of the term is 50 years from the completion of the project (which is longer than the 30 years contemplated under the PPP Law). This is to allow sufficient time to recoup the initial investment through fees paid by users of the port services.
- State Guarantees and Obligations – there are broad obligations on the State to facilitate the construction and operation of the rail infrastructure. These include the grant of all necessary land rights, authorizations (including authorizations to construct ancillary infrastructure) and rights to use certain natural resources in order to deliver the project. The State undertakes not to take any measures which may adversely affect the project.
- No restrictions on foreign labor – there are no restrictions on the ability of project contractors to recruit expatriate employees with the expertise to deliver the project. The State must issue work and work-related visas as required.
- Stabilization Regime – the Convention guarantees a stabilization regime for taxes and duties throughout the lifetime of the project. There are also no restrictions on the opening and use of foreign currency accounts in connection with the project.
- No restriction and taxes on dealings with interests in the project – under the Convention the project participants can freely transfer their interests in assets or shares in the project or take security over those assets during the lifetime of the project without government consent or incurring additional tax liability.
- Regulatory framework – there are detailed provisions for dealing with breaches of the Convention by the relevant parties including a compensation regime. The Convention also deals with the expropriation of assets by the State.
- Dispute resolution – arbitration by the International Centre for the Settlement of Investment Disputes.
- PPP Law excluded – the PPP Law is explicitly prohibited from applying to the Convention.
Find more @ Public-Private Partnerships for Transport
Image by Pixabay
Updated: October 25, 2021