Risk Management in Transport PPP Projects
In the Islamic Countries
34
Legal provisions
PPP-specific legislation and regulations are defined by the World Bank and the Public–Private
Infrastructure Advisory Facility PPIAF (2017) as the laws which outline the rules and
procedures governing PPP contracts, including issues such as the contract extension and
termination, security interests, the operation of the project, the takeover by the public sector,
dispute settlement.
In addition, the legal framework includes laws that apply to aspects of the PPP process and
someway affecting PPP contracts, decision processes and implementation procedures.
According to the World Bank PPP Knowledge Lab, these laws can include:
 Public contract and procurement laws that PPP contracts must typically comply with,
unless PPPs are expressly exempt;
 Public financial management laws such as fiscal limits or reporting requirements;
 Sector-specific laws and regulatory frameworks;
 Other laws affecting contractual arrangements and the operation of private companies
implementing PPP projects, such as law and regulations on environmental issues, land
acquisition, ownership and expropriation, tax rules, licensing requirements and
employment.
In order to guarantee to the private sector the possibility to enter into contracts for the delivery
of public services, in some cases governments may need to adapt the existing legal framework,
for example to allow a private company to charge and collect user fees. Such necessary changes
can be performed by adapting existing laws, but in order to provide clarity to stakeholders,
many countries have introduced PPP-specific legislation. Many of the economies with more
mature PPP markets rely on general regulations complemented by specific PPP guidelines (e.g.
Australia and the United Kingdom), while economies aiming to launch and develop major PPP
programs have frequently done so based on a stand-alone PPP law (e.g. Colombia and the
Philippines). In fact, in recent years a general trend to regulate PPPs with standalone laws has
been recognized (The World Bank, 2018a), also in OIC countries (e.g. Afghanistan and Pakistan).
There is however no single model to adopt, and different legal systems can be successful in
creating an adequate environment for the development of PPPs. As an example of trade-off, it
has been noted that even if a stand-alone PPP legislation simplifies the regulatory framework, it
can also generate legal vacuums and inconsistencies (The World Bank, 2018a).
As part of the legal framework on PPPs, many countries have put in place norms aimed at
encouraging businesses and other non-government entities to propose PPP project ideas that
may be considered by government. Countries can benefit from such an approach by harnessing
on the suggestions of the private sector on how to tackle transport infrastructure challenges.
However, developing PPPs outside the usual public investment planning process increases the
risk of insufficient integration with wider transport sector plans and priorities (The World Bank
et al., 2017).
In terms of risk governance dimensions, as PPPs are essentially contractual agreements with
risk sharing provisions at their core, the legal provisions regulating contracts and the