Congo: Democratic Republic Of The Congo - Adoption Of A Legislative Framework Applicable To Public-Private Partnerships

Last Updated: 13 December 2018
Article by Leïla Hubeaut and Ergen Ege

While public-private partnerships have long been considered in DRC as an option to promote key sectors development, such as the electricity sector1 and the telecommunications sector2, the Democratic Republic of the Congo was missing a comprehensive legal framework applicable to public-private partnerships.

A law dated 11 February 20143 provided the fiscal, customs and exchange rate frameworks applicable to certain cooperation projects but did not deliver the complete and comprehensive legal framework needed by investors.

Further, the existing public procurement law4 did not address partnership contracts (contrats de partenariat). Therefore, in order to equip the Democratic Republic of the Congo with a genuine regime for public-private partnerships, a law on public-private partnerships5 (the "PPP Law") was promulgated on 9 July 2018.

Scope

The PPP Law shall apply to all contracts meeting the definition criteria of a public-private partnership, to the exception of contracts governed by specific laws legal provisions6. The PPP Law therefore applies to both partnership contracts and public service delegation contracts (contrats de délégation de service public).

Contracts which relate to the exploitation of natural resources in exchange for infrastructure construction, frequently used in the Democratic Republic of the Congo, particularly in the mining sector, expressly qualify as partnership contracts7.

Institutional framework

The PPP Law provides for the creation of two entities specifically dedicated to public-private partnerships.

A public body shall be in charge of coordinating public-private partnerships related activities and of supervising the conclusion of public-private partnership contracts. Such public body shall in particular be in charge, on behalf of the contracting authority, of the project implementation entrusted to the private partner and to propose to the DRC government amendments to the PPP Law and regulations8.

Additionally, a regulatory authority shall exercise a prior and an ex post control over the tender procedure for the award of public contracts and resolve disputes relating to the award and performance of contracts9.

Finally, public-private partnership contracts shall be approved by a competent authority. A decree shall provide for the approval procedure and specify the different authorities responsible for approval10.

The aforementioned public body and the regulatory authority shall be created within six months from the promulgation of the PPP Law (i.e. before January 201911).

Procurement procedure

Public-private partnership contracts shall be awarded following a tender procedure12 and the choice of the successful bidder shall be made on the basis of the economically most advantageous offer13.

In addition to traditional criteria prohibiting an economic operator from bidding, such as where such operator is subject to bankruptcy or insolvency proceedings or has been subject to criminal sanctions14, the PPP Law takes an innovative approach by preventing corruption and conflicts of interest.

In particular, any company in which a member of the contracting or delegating authority has a financial or personal interest, any service provider (and its affiliates) which has contributed to the preparation of the tender documents or any company in which one executive has held management positions within public entities responsible for public-private partnerships within the past three years, shall be prevented from submitting submit an offer15.

To the contrary, under specific circumstances, the contracting authority may circumvent the tender procedure in particular where the tender procedure does not result in any offer, where the call for tenders has been declared unsuccessful twice or when the project can only be carried by a unique private sector contractor for technical or intellectual property reasons16.

Finally, another innovative feature lies in the fact that the PPP Law sets out a procedure for handling unsolicited proposals. The admissibility of such unsolicited offers is determined by the contracting authority after consulting with the aforementioned public body. Where an unsolicited proposal is declared admissible and the contracting authority intends to proceed with the offer, a call for tenders shall be organized17.

The economic operator which proposed the unsolicited proposal shall participate in the tender procedure under the same conditions as other candidates and shall share the preliminary studies that it conducted with the contracting authority which shall provide them to all bidders18.

The economic operator which proposed an unsolicited proposal declared admissible by the contracting authority shall be entitled to compensation for the costs it has incurred19.

Local content

Similarly, to other newly adopted laws in the DRC, such as the new mining code20, the PPP Law strives to increase the economic benefits the country derives from foreign investment.

For instance, the PPP Law requires the private sector contractor to favor the recruitment of Congolese nationals, provided that they are equally qualified, to the recruitment of foreigners21.

In addition, the use of subcontractors shall comply with the provisions of the law dated 8 February 201722 relating to subcontracting23. Thus, the outsourcing activity is reserved for companies with Congolese capital promoted by Congolese, unless unavailability or inaccessibility of expertise.

Lenders step-in rights

Without the need for parties to enter into a specific direct agreement, the PPP Law expressly provides for a step-in right to the benefit of the lenders. Should a serious breach from the private sector contractor or an event triggering termination occur, the contracting authority may authorize the lenders to step-in the rights and obligations of the private sector contractor for the purpose of ensuring contract performance24.

Dispute resolution

In the event where a bidder would consider that he has unlawfully been disqualified from a procurement procedure, such bidder may file a claim before the contracting authority which may be later challenged before the public procurement regulatory authority25.

Additionally, any party who is aggrieved in the performance of a public-private partnership contract shall notify the grounds of the dispute to the other party. Should the other party fail to reply within three months, the interested party may refer the dispute to the public procurement regulatory authority which shall attempt to conciliate the parties within a time period not exceeding three months26.

Should the parties fail to amicably resolve a dispute, the latter shall be resolved by Congolese competent courts or submitted to arbitration27.

Tax, customs, and foreign exchange

Public-private partnership contracts are subject to general provisions with regard to tax, customs and foreign exchange28.

Nevertheless, the PPP Law provides, during the first three dates from operation date, for a 15% tax cut for private sector contractors engaged in "major" investments29. However, the PPP Law fails to set out the criteria or thresholds upon which a project shall be considered as "major".

Entry into force

The PPP Law entered into force thirty days after its promulgation, on 9 August 201830.

Footnotes

1 Law No.14/011 dated 17 June 2014 relating to the electricity sector.

2 Law No. 013/2002 dated 16 October 2002 relating to the telecommunications sector.

3 Law No.13/005 dated 11 February 2014 on tax, customs and foreign exchange regimes applicable to cooperation agreements and cooperation projects.

4 Law No.10/010 dated 27 April 2010 relating to public procurement.

5 Law No. 18/016 dated 9 July 2018 on public-private partnerships.

6 PPP Law, Article 2.

7 PPP Law, Article 4.

8 PPP Law, Articles 19 and 20.

9 PPP Law, Article 21.

10 PPP Law, Article 22.

11 PPP Law, Article 114.

12 PPP Law, Article 25.

13 PPP Law, Article 27.

14 PPP Law, Article 31.

15 PPP Law, Article 32.

16 PPP Law, Article 44.

17 PPP Law, Article 45.

18 PPP Law, Article 45.

19 PPP Law, Article 45.

20 Law No. 18/001 dated 9 March 2018 modifying and completing Law No. 007/2002 dated 11 July 2002.

21 PPP Law, Article 12.

22 Law No.17/001 dated 8 February 2017 relating to subcontracting.

23 PPP Law, Article 12.

24 PPP Law, Article 57.

25 PPP Law, Article 107.

26 PPP Law, Article 110.

27 PPP Law, Article 110.

28 PPP Law, Articles 103 and 105.

29 PPP Law, Article 104.

30 PPP Law, Article 114.

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