Guinea: A New Attractive Law On The PPP In Republic Of Guinea

Last Updated: 9 February 2018
Article by Leïla Hubeaut and Ergen Ege

Republic of Guinea has passed on 4 July 2017, a new law n°2017-32 relating to public-private partnerships ("PPPs") (hereafter the "New Law"), that was enacted on 24 October 2017 by decree and which modernizes the existing legal and institutional framework in order to make it more attractive.

The scope of application

Prior to the New Law, public service delegations were governed by the Code of Public Procurement. A law L/97/012/AN known as the "BOT Law" of 1 June 1998 governed the financing, construction, operation, maintenance and transfer of development infrastructures by the private sector. From now on, the New Law regulates all forms of PPPs and expressly repeals all provisions relating to the delegation of public services in the Code of Public Procurement as well as the entire BOT Law.

The New Law thus has a very broad scope of application. It is applicable to all forms of PPP contracts except public procurement, which remains subject to the Code of Public Procurement. However, the notion of "public procurement", which is excluded from the scope of the New Law, should be defined in order to ensure a better visibility of the applicable texts.

According to the definition set out therein "the Public-Private Partnership Agreement means the written contract entered into on remunerated basis between the Contracting Authority and the Holder, which sets out the obligations of the parties under a PPP. The PPP Contract may take the form of a Partnership Agreement, a Public Service Delegation or any other contractual agreement in accordance with the definition of PPP, such as the Build, Operate & Transfer agreement (known as "BOT") and its derivative forms." The New Law also emphasizes on the criterion whereby the compensation of the holder, regardless of the modalities, is at risk and refers to a decree that will fix the threshold.

The New Law is also applicable to all public bodies to which it assimilates any legal person or public body controlled by the State or a local authority.

Finally, the New Law is applicable to all socio-economic sectors, including sectors subject to special regulations except for the mining and hydrocarbons sectors. Nevertheless, it intends to regulate PPPs relating to public infrastructures in connection with the operation of mining or hydrocarbons projects. The question then arises as to how the provisions of the New Law will interact with the ancillary infrastructures rights contained in the existing mining agreements. The lack of a statutory definition of the term "Public Infrastructure" in the New Law may also contribute to the uncertainty on that issue.

The institutional framework

Regarding the institutional framework, there is a reinforcement of the existing bodies. Indeed, alongside the Ministry of Finance and the existing regulatory and steering bodies, the New Law provides for the creation by decree of the PPP Committee which will be in charge of PPP policy and of the PPP Unit whose composition, missions and operational methods of operation will be fixed by presidential decree.

The New Law also refers, among the competent bodies, to the ACGPMP, which is in charge of monitoring the procurement procedures as well as the execution of PPPs, and to the ARMP, which is responsible for the regulation of PPPs. Pending the implementing decree, the respective powers and interaction of these four bodies remain to be clarified.

Procurement procedures

Two procurement procedures of PPP contract are provided: the tender procedure, which is the rule, and the direct agreement procedure which constitutes the exception. Moreover the legislator innovates by providing for the possibility of making unsolicited bids. Neither the Code of Public Procurement, nor the BOT Law provided for such possibility. The conditions governing the use of these three procedures as well as the modalities of their implementation will also be fixed by decree.

Qualification and content

The New Law expressly classifies PPP contracts as administrative contracts and therefore provides for the possibility of unilateral termination of the contract by the contracting authority on grounds of public interest, subject to the approval of the Minister of Finance. It should be noted that the New Law also provides that any unilateral termination of the contracting authority entitles the contract holder to a compensation without prejudice to the contractual compensations provided for in respect of events of termination.

With regard to the content of PPP contracts, the New Law makes a reference to implementing decrees that will provide more detailed information on mandatory clauses and the procedures for amending, extending and renewing of the aforementioned contracts. The New Law specifies that the term of the PPP contract must take into account the required depreciation period of the investment. However, contrary to the BOT Law, it fixes a maximum term of thirty years, which can only be changed with the authorisation of the Minister of Finance. It also states that the compensation of the holder of the PPP contract is to be freely fixed.

Finally, contrary to the BOT Law, which first of all promotes the principle of party autonomy relating to the applicable law and dispute settlement provisions, the new framework imposes the Guinean law as the law exclusively applicable to PPP contracts and introduces an obligation to include a prior amicable settlement of disputes mechanism in such PPP contracts, before launching any judicial or arbitration procedure set out contractually.

The different applicable regimes

The New Law provides important clarifications regarding the regime applicable to the PPP assets. It specifies the regime for the transfer of ownership of the infrastructures and assets covered by the PPP at the end of the contract. The New Law also provides for the possibility for the holder to be authorised to earn revenues in connection with the development of the assets and infrastructures at its disposal. Finally, it facilitates access to financing by providing for the possibility to the PPP holder to benefit from property rights over the assets, infrastructures and equipment over which security may be granted. Additionally, the holder will also be able to undertake assignment of receivables, which it holds over the contracting authority, under specific conditions.

It is important to note that, like the BOT Law, the New Law provides for incentives relating to tax and customs duties, but does not establish a stabilisation of the tax regime and of the incentives throughout the duration of the PPP contracts. Nevertheless, it provides investors with various guarantees deriving from the foreign exchange regulations1 and the investment code2.

Finally, the New Law introduces an ethical and governance framework to prevent conflicts of interest, corruption and any breach of PPP contract regulations. Thus, it provides for various dissuasive sanctions which go up to and including the cancellation of any contract obtained by fraud.

In short, the New Law deserves to be welcomed as a modern text in line with the evolution of the international practice. Finally, it is necessary to underline the need for the prompt adoption of implementing decrees which is required not only for its application, but also to confirm whether it will meet the investors' expectations.

Footnotes

1. Law L/2000/006/AN of 28 March 2000 on the regulation of the financial relations in connection with transactions between the Republic of Guinea and abroad; Instruction No 112/DGAEM/RCH/00 of 11 September 2000 establishing the regime of financial relations in connection with transactions between the Republic of Guinea and abroad
2. Law L / 2015/008/AN of 25 May 2015 on the Investment Code of the Republic of Guinea

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