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Public- Private Partnerships: Insights on the Iraq Public- Private Partnership Law draft

Post By: Mustafa Muayad - Founder & Managing Partner mustafa.muayad@muayadandassociates.com Print Post

Public- Private Partnerships: Insights on the Iraq Public- Private Partnership Law draft

Overview

The formation of a public-private partnership can have significant legal consequences for the contracting parties, including the establishment and maintenance of effective corporate structures to ensure the partnership’s ability to achieve its goals and remain in compliance with applicable laws and regulations. The Iraqi government has recently drafted a new law for Public-Private Partnerships (PPP) in an effort to spur economic growth and attract foreign investment to the country. The new law, which yet to be issued, aims to create a more favorable environment for private sector investment in public infrastructure and services, such as transportation, healthcare, education, and energy. The Iraqi government believes that PPPs will help the country to address some of its most pressing development challenges, including the need to modernize its infrastructure and improve access to essential services.

Scope of Application

In accordance with article 3 of PPP Law, the Law shall govern all the PPP contracts and projects funded by the private sector or share funding with the public sector to implement infrastructure projects, public service facilities projects, or production projects, and it applies to all public infrastructure projects in Iraq, regardless of their size or location, as long as they are in line with the country’s development priorities and are consistent with its laws and regulations. The law applies to both local and foreign investors and is intended to promote economic growth and attract investment from multinational corporations. However, it is worth noting that the application of PPP Law is limited to the contracts concluded after enforcing the mentioned law.

PPP Contracts

A PPP contract requires careful consideration of all the possible risks from the partnership before it is drafted. In order to avoid such risks, the PPP Law regulates, inter alia, the duration, choice of law, allocating risks, and sets a number of mandatory provisions to be included in the PPP contracts.

Duration of PPP contract under the PPP Law.

  • The PPP’s contractual term according to the PPP Law draft shall not exceed 30 years, however, the PPP council, under its discretion, may extend this period of time to a maximum of 50 years.

The duration will vary depending on the project type, however, it must be long enough to provide an incentive to integrate service delivery costs and to use a whole-life costing approach to project design and service management, ensuring the best services at the lowest possible cost.

  • Choice of law and laws’ Extension.

One of the most essential terms of a PPP contract is the choice of law, hence attorneys who draft these contracts must evaluate all potential consequences that may affect the partnership, including relevant laws and the extension of any prospective laws.

The choice of law provisions in the Iraqi PPP law draft suggests that the governing law for PPP contracts will be the laws of Iraq. However, these provisions may be subject to negotiation between the parties and may not necessarily be applicable in all cases.

  • Allocating Risks

Risk allocation in PPP contracts is a complicated procedure that necessitates a thorough legal knowledge of how the risk may be allocated and covered in line with the partnership.

According to the PPP Law, risks must be distributed among the parties in line with the PPP contract. It is worth mentioning that the PPP Law regulated the legal framework for PPP contracts. However, the PPP Law does not regulate the relationship between the public and private sectors or the public and private sectors and the funding entity if the public and private sectors do not fully fund the project and receive funding from third parties. This may cause some challenges in risk distribution, and it would be preferable if the legislature established a comprehensive legislative framework to control the side relationship.

  • The PPP Contract Provisions

The PPP Law set a number of provisions that should be regulated in PPP Contract including but not limited to:

  1. Description of the project
  2. Term of the partnership
  3. Financing
  4. Operation and maintenance
  5. Dispute resolution
  6. Termination
  7. Performance guarantees

 

These are just a few examples of the provisions that may be included in PPP contracts under the new Iraqi law. The actual terms of the contract will depend on the specific circumstances of the project and the needs of the parties involved.

 

It should be noted that PPP contracts should be viewed as a long-term commitment by the private sector. Thus, it should cover all the potential outcomes to avoid any gaps that may rise a number of disputes in the future.

 

In conclusion, the new Iraqi PPP law draft is a major development in the country’s legal landscape and represents a unique opportunity for businesses to participate in large-scale projects and drive positive change. Our firm is eager to assist clients in navigating this exciting new development, and we look forward to playing a role in promoting economic growth and private investment in Iraq.

 

In our expertise, a well-defined legal structure is vital for the achievement of Public-Private Partnerships (PPPs). Our law firm is dedicated to offering exceptional legal counsel and support for PPPs in Iraq. We are ready to assist clients in preparing and negotiating contracts, and provide in-depth legal and regulatory analysis. Book your consultation now and plan your ten steps ahead.