Infrastructure Financing through Islamic
Finance in the Islamic Countries
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4.6.4. Legal and Regulatory Framework for Infrastructure Investment
There is no stand-alone PPP law in the UK. Infrastructure projects are initiated with the
private sector under the general legislative powers of the government and some laws that
govern the specific sector. There is no unified procurement procedure and public bodies
dealing with different infrastructure sectors use appropriate procurement structures suitable
for the nature of the project. Given the powers given to different public bodies dealing with
infrastructure, PPP concessions are arranged using English contract law.
Although each procuring body can structure their own procedure and contracts, they have to
follow a uniform approval process. HM Treasury must approve the project which starts with
the strategic outline at the initiation stage and ends with the final business case before the last
negotiation stage. After the contracts are finalized, the Cabinet Office approves the projects and
the IPA oversees the process of procurement.
The Public Contracts Directive 2014/24/EU, implemented in the UK as Public Contracts
Regulations 2015, governs the contracts of procuring works, goods and services. The
regulation identifies three regimes depending on the threshold levels of procurement and
applies rules accordingly. Since infrastructure projects are large, they fall in the highest
procurement regime which is fully regulated.
While each public body has the freedom to structure their own PPP contracts, an initiative was
taken in 1997 to standardize the contracts used in PFI projects by issuing the Standardization
of Procurement Contracts (SOPC). Version 4 of the standardized contracts, SOPC4, was issued
in 2012 after the introduction of PF2. SOPC4 identifies required and recommended provisions
that should be included in PPP contracts. The standard form of PF2 contracts includes issues
related to payments to contractors, asset and land ownership, amendments and variations that
may occur due to the long term nature of contracts, risk allocation between parties, early
termination and compensation and refinancing. In October 2017, the government decided to
review SOPC4 to include changes in the EUROSTAT regulations and also come up with a new
contractual framework that can increase the participation of the private sector in
infrastructure development (Richards et. al. 2018).
Chart 4.6.3 shows the status of the procurement regime in the UK as discussed in Chapter 2
relative to other country groupings. The results show the high status of all three stages of the
procurement regime under PPP in the UK. The index for preparation for the UK is 96, which is
significantly higher than the average for the high income group (63) and Europe and Central
Asia (50). Similar trends can be observed in procurement and contract management with
index scores of 86 and 71 respectively for the UK.