The PPP legal framework comprises all the laws and regulations that control whether, and how, PPPs can be implemented. Both governments and private companies looking to implement or enter into PPPs need to scrutinize the relevant laws and regulations, to identify any provisions, requirements, or constraints that may apply to PPPs.
Governments embarking on PPPs may also need to adapt the existing legal framework to ensure that PPP contracts can be entered into and clarify the legal rights and processes that apply, and in some cases to introduce PPP-specific processes and responsibilities. Some governments do this by adapting existing laws, others through the introduction of specific legislation.
The nature of the legal framework for PPP depends heavily on the type of legal system in place: common or civil law.
- In civil law systems, the operations of government are tightly prescribed in administrative law. This establishes legal rights and processes that apply to PPP contracts.
- Common law systems are much less prescriptive, with fewer provisions implied into a contract by law. As a result, contracts in common law countries tend to be larger than in civil law countries. This is because importance is attached to specifying in the contract the terms governing the relationship between the parties to a contract, as the absences or ambiguities cannot so easily be remedied or resolved through the application of the law.
Scope of the PPP legal framework
The PPP legal and regulatory framework can include specific PPP legislation; however, the legal framework for PPP is broader in scope, and can comprise a range of types of law.
In civil law countries, PPP contracts are housed in general administrative law, which governs the functions and decision-making processes of government agencies. This body of law can create legal rights for both the contracting authority and private party, in addition to (or overriding) those specified in the contract. Some protections of the operator are also implied by law. Administrative law may also define processes and institutional roles relevant to PPPs, such as those for procurement, or resolution of contractual disputes—including the ultimate jurisdiction of administrative courts, unless otherwise specified.
In both civil and common law jurisdictions, there may also be specific laws that apply to aspects of the PPP process. These can include:
- Procurement law: the transaction process for a PPP must typically comply with public procurement law and regulations, unless PPPs are specifically exempt.
- Public financial management law: institutional responsibilities, processes, and rules established in public financial management laws and regulations can contribute to the PPP framework. This could include project approval requirements, fiscal limits, budgeting processes, and reporting requirements.
- Sector laws and regulatory frameworks: PPPs are often implemented in sectors that are already governed by sector-level law and regulatory frameworks. These may constrain the government’s ability to contract with the private sector, or provide rules for doing so.
Other laws affecting the operation of private firms, which also apply to PPP companies, should be taken into consideration when defining PPP projects and processes. These can include:
- Environmental law and regulations;
- Laws and regulations governing land acquisition and ownership;
- Licensing requirements, particularly for international firms;
- Tax rules; and
- Employment law.
These laws, taken together, may comprise the legal framework for implementing PPP—that is, there may be no need for PPP-specific legislation.
Some countries enact special PPP laws. These may be used a means to adapt the existing legal framework, if this is not clear or comprehensive, or constrains the government’s ability to structure and manage PPPs well. The same can be achieved by adapting existing laws to accommodate PPPs. A PPP-specific law can help raise the profile and demonstrate political commitment to the PPP program.
PPP laws may establish guiding principles, processes, and institutional responsibilities for a PPP program (such as for procurement, and dealing with disputes), along with policies such as public financial management rules for PPPs. A well-designed PPP law typically sets out principles that may be supported by more detailed regulations, with the intention of avoiding rigidity and enabling the PPP program to adapt over time.
PPP laws are most common in civil law countries. For example, all Latin American countries implementing PPPs do so under a specific PPP or concession law (or both). Some common law countries also adopt PPP laws as a more binding commitment by government than a PPP policy.