Qatar: PPP Law Published

Introduction

The State of Qatar (Qatar) has recently published Law No. 12 of 2020 (the PPP Law) to regulate the operation of public private partnerships (PPPs) in Qatar. This is a key move for the development of Qatar's infrastructure as the World Cup approaches in 2022, and in light of the Qatar National Vision 2030.

Pursuant to the Qatar National Vision 2030, Qatar aims, by 2030, to become an advanced nation capable of sustaining its development and providing a high standard of living for its citizens. It has been reported that as a part of this project, Qatar is set to award projects with an estimated combined value of USD 85 billion in the coming years.

At a conference held on 7 July 2020 to discuss the role of PPPs in Qatar, the Minister of Commerce and Industry, Ali bin Ahmed Al-Kuwari (the Minister) advised that the issuance of the PPP Law amounted to a critical step in providing a legislative framework for regulating the private sector's contribution to the implementation of major development projects.

A first step in the process of rolling out a range of PPP projects in Qatar, the government has announced a PPP initiative in the education system, whereby it plans to build forty five new schools at an estimated cost of USD 1 billion. The initiative has been divided into six investment packages, to be offered on a staggered basis.

As such, as Qatar's appetite for PPP projects appears to be accelerating. Opening up the infrastructure market to the private sector indicates a shift from State balance-sheet spending for the construction of infrastructure, to longer term partnerships involving both construction and operation. This article considers the provisions of the PPP Law and key points to note.

Forms of PPP

Article 3 of the PPP Law provides that the partnership can be governed by any of the following procurement models:

allocation of land through a lease (or usufruct licenses) to be developed by the private sector (this model has previously been seen in projects in the Aspire Zone in Qatar);
build operate transfer (BOT) (whereby typically a public body grants a concession to a private entity to both build and operate a project, which after a defined timeframe would revert to the public body) (this model has previously been seen in the development of hotel infrastructure in Qatar);
build transfer operate (which differs from a BOT model as a public body would effectively grant a management agreement to the private entity to operate the project following the completion of construction);
build own operate transfer (which differs from a BOT model as the private entity would own the project during the project period);
operation and maintenance (where essentially a private entity steps in to operate and maintain a project, once it has been constructed by a public body); or
any other model approved by the Council of Ministers.

Approval of PPP Projects: Pre-Tender

The PPP Law provides that initially a public body will select a project for implementation through a PPP and recommend it to the Minister for 'in principle' approval. Following this:

the public body will prepare a report on the project, which will then be provided to the Minister for submission to the Prime Minister, together with his recommendations; and
a committee (the Project Committee) will be formed, by a decision of the Minister. The Project Committee will prepare a document governing the main aspects of a project study (the Project Policy Document) and present the same to the Minister for approval. Later in the process (described below) the Project Committee is responsible for evaluating bids, negotiating the project contracts and recommending a successful/preferred bidder to the public body at the conclusion of the bid process.

Once the Project Policy Document is approved, the public body, in coordination with the Project Committee will prepare a comprehensive detailed study into the project (the Project Study) containing information on such matters as the strategic and operational advantages of implementing the project, a description of the contract model, a detailed plan for the implementation of the project and an estimate of the project's cost. The Project Study will be presented to the Minister for submission to the Prime Minister, together with his recommendations.

Tender Processes

Once the Project Study has been approved, the public body will circulate a prospectus (the Prospectus) (prepared together with the Project Committee) to potential bidders including details on:

the project;
the project company's legal form and the conditions to be met by it;
the PPP contract's main terms and conditions;
incentives to be granted to the successful bidder;
the standards and methods by which the bidding and bid evaluation shall take place;
the forms and documents to be submitted by the bidder (including any bid bond); and
the timetable of the bidding process.

The PPP Law provides that the tender process will be announced through being published in local or international newspapers (or their websites) and the unified website for government procurement. The form of tender will be:

two stage tendering (typically used to allow the early appointment of a private body, prior to the finalisation of the full plan for a project - so in the first stage, a restricted appointment is agreed, which allows a private body to commence work on the project, and in the second stage a fixed price is agreed);
limited tender (where specific private bodies are approached);
mumarasa (typically where two bidders compete directly against one another);
competitive bidding;
bidding;
direct agreement; or
any other contracting method approved by the Council of Ministers.

BID SELECTION

Article 12 of the PPP Law provides that the selection of a successful bidder must be subject to the principles of transparency, free competition, equality of opportunity and treatment. Additionally a successful bidder is required to meet approved financial and technical standards.

Prior to selecting a bid, the Project Committee is required to present its recommendation to the Minister for submission to the Prime Minister (any tenders that do not confirm to the terms and conditions of the Prospectus will be excluded from consideration).

PPP CANCELLATION

The Prime Minister may cancel the bidding process if:

only one bid is submitted (or only one bid is left after excluding ineligible bids);
all bids are accompanied by reservations or conditions that are inconsistent with the terms and conditions of the Prospectus or cannot be evaluated;
other cases specified in the Prospectus; or
the public interest so requires.

PPP CONTRACT

The PPP Law provides at Articles 17 and 28 that a PPP contract must contain details on matters such as:

the nature and scope of the project;
ownership of the project's funds and assets;
responsibility for obtaining licences, permits and approvals;
mutual financial obligations; and
duration of the contract,

as well as containing a governing law clause providing for Qatari law and a jurisdictional clause providing for the Qatari courts (and any other provision providing for a different forum for dispute resolution requires the approval of the Prime Minister).

MAXIMUM DURATION

The maximum length of a PPP contract is stated to be thirty years, however longer contracts are permitted (or the renewal of shorter contracts) based on the requirements of the public interest after the approval of the Prime Minister.

PROJECT COMPANY

The PPP Law provides that a PPP project needs to be carried out:

by a project company, whose sole purpose is to implement the project. The contracting public body can participate in the company, but if it does not the successful bidder is required to establish the project company (which may, with the approval of the Prime Minister, be exempted from some or all legislative restrictions for instance in relation to foreign ownership percentages or the lease of real estate); or
by a private entity where it has the ability to implement the project in accordance with the Prospectus in its existing condition and with its available financial and technical capabilities.

Articles 20 and 24 of the PPP Law provide that, with the approval of the contracting public body, a project company can obtain loans from banks operating inside or outside of Qatar by guaranteeing its contractual rights and assets.

EXEMPTION

Whilst creating a framework for the operation of PPPs in Qatar, it is important to note that the PPP Law can be contracted out of, subject to the approval of the Council of Ministers.

EFFECTIVENESS OF LAW

Article 29 of the PPP Law provides that the Minister is responsible for issuing decisions to implement the provisions of the PPP Law, however in the meantime provisions of existing decisions/laws will be applied in a manner that does not conflict with the provisions of the PPP Law.

IMPACT

In the last twenty four months the Government of Qatar has launched several tenders for PPP projects, most notably the Qatar Schools PPP Development Programme. These projects follow a number of public statements in 2018 and 2019 whereby government officials emphasised the role that PPP would play in the development of Qatar's infrastructure.

Although the adoption of the PPP Law is a logical consequence of involving the private sector in Qatar's development, it is not necessary to have a law in place governing PPP projects, because in Qatar, as in most jurisdictions, PPPs are just another form of government procurement and existing laws and regulations provide a sound basis and sufficient authority to engage in and tender out projects.

Noting the above, the establishment of a legislative framework will allow all stakeholders in the public and private sectors keen to invest in PPP projects in Qatar to gain confidence in Qatar's long term commitment to PPP projects as a means of developing its infrastructure.

FURTHER INFORMATION

The Addleshaw Goddard Qatar office comprises some of the region's best known and respected projects, corporate, commercial and finance lawyers in Qatar. Our experienced team, with its Arabic and English bilingual capability, combines the standards of a top international law firm with a keen awareness of, and sensitivity to, local law and practices. For further information in relation to the PPP Law, and how we can support you, please contact: