Public Private Partnership Contracts

The Middle East and North Africa

Mohamed Ismail

• Publisher: Routledge
• Year: 2020
• eBook ISBN: 9780429799105
• Edition: 1
• Topic: Derecho
• Subtopic: Teoría y práctica del derecho

This book provides a comprehensive overview of the law surrounding PPPs in the Middle East and North African region.

The significance of liberalised and integrated Public Private Partnership Contracts as an essential component of the world legal and policy order is well documented. The regulation of PPPs is justified economically to allow for competition in the relevant public service and to achieve price transparency, thus resulting in significant savings for the public sector. In parallel to the economic justifications, legal imperatives have also called for the regulation of PPPs in order to allow free movement of goods and services and to prohibit discrimination on grounds of nationality. The need for competitiveness and transparency in delivering public services through PPPs is considered a safeguard to achieve international standards in delivering public utility services. First, it assesses the compatibility of the current PPPs legislation and regulation in the MENA region with the international standards of legislation and regulation prevalent in many other countries, including the UK, France and Brazil. Secondly, it compares the practices in the MENA region with those of international bodies such as the OECD and World Bank. Comparisons are then made between the MENA countries and those in Europe and Asia with regard to the influence of culture, policy and legal globalization.

The book will be of interest to scholars and students in the field of international contract law, public law and state contracts, finance law and private law.

1 The constitutional framework of state contracts in the MENA countries

Introduction

Arab MENA countries constitutions have adopted significant developments and interpretations regarding state tools and mechanisms of contracting, whether through domestic or international contracts. As Adam Smith¹ pointed out, the state role has to be confined to its basic functions. In the light of Adam Smith’s views, MENA countries’ constitutions have not adopted a specific economic ideology. MENA countries’ constitutions have adopted a dynamic economic ideology that enables states to change their economic model from a socialist model to a free market economy model to adapt the international market dynamic theories and practices as was the case in Egypt. Meanwhile, the political ideology in the MENA countries’ constitutions is static. The legal framework of state contracts in the MENA countries has significantly developed whether in legislation, regulation, polices or in contractual patterns. The chapter explores the new developments in the constitutional framework of state contracts and PPPs in the light of the MENA countries’ constitutions.

The constitutional framework of administrative contracts in the MENA countries

The constitution: the economic ideology in Arab constitutions

The influence of the French constitution of the Fifth Republic 1958 upon the Egyptian Permanent Constitution of 1971 was clear, in particular the fundamental (core) rights and liberties in the latter constitution.² The Egyptian constitution of 1971 had four amendments since promulgation and until 2007. In the aftermath of the events of 2011 this constitution was replaced in February 2011 with the constitutional declaration of 2011, which was issued by the Military Council in Egypt. In 2012 and 2014 new constitutions were promulgated respectively and the 2014 constitution is still valid. The Egyptian constitution since 1971 and until the present stipulates that Sharia’a law is a main source for legislation. The 2011 Constitutional Declaration, and the 2012 and 2014 constitutions have adopted most of the constitutional provisions of the 1971 constitution, except for Marxist ideology.

1 Adam Smith, The Wealth of Nations, Wordsworth Classics of World Literature 2012.

2 Fathy Fekry, Constitutional Law, Dar Al Nahda Al Arabia 2009, in Arabic. For more elaboration see: Mohamed A.M. Ismail, Arab Constitutions Facts and Prospects, Al Halabi Publishing 2015, in Arabic. Sarwat Badawy, Administrative Law, Dar El Nahdah El Arabia 1985, in Arabic and for the same author see: Administrative Contracts, Dar El Nahdah El Arabia 1988, in Arabic. See also: Soliman Al Tamawy, General Principles of Administrative Contracts, 5th edn, Dar El Fikr El Araby 1991, in Arabic.

The promulgation of the Egyptian constitution has several procedural steps, which end with a people’s referendum. It was debatable whether there was a constitutional ban in the constitution of 1971 that prohibits PPPs and private public arbitration or not as this constitution had adopted Marxist ideology since promulgation in 1971 and until the 2007 amendments. Further, Article 172 of the 1971 constitution stipulates expressly the exclusive jurisdiction of the Egyptian Conseil d’État courts for the settlement of administrative disputes and administrative contracts.

The 1971 constitution in Egypt adopted socialist ideology as a result of the strong political ties between Egypt on one hand and the Soviet Union and the Eastern European countries on the other. Socialist ideology was the governing economic ideology in Egypt for decades after the promulgation of the 1971 constitution. Pursuant to this constitution, the public sector (whether public juristic entities or state-owned companies) was the owner of all tools for economic development pursuant to this constitution and the public sector has the lead in all economic activates with a restricted role in the private sector. The private sector during the sixties and until the mid-seventies exercised commercial activities, despite the nationalization of all economic sectors in Egypt pursuant to nationalization legislation by President Nasser in 1961, which considered severe economic crises that affected all economic sectors, and which had very strong negative impact on the Egyptian economy since 1961 and until the present.³ Pursuant to Law No. 203 of 1991,⁴ the Egyptian government started a new program for economic reform and privatization of the public sector entities particularly state-owned companies, with the target to fully privatize public sector companies.

Currently in Egypt, the constitutional declaration of 2011, the 2012 constitution, and the 2014 constitution have not adopted a specific economic ideology and left the door open to the parliamentary and presidential elections to determine the economic pattern that governs the economic life in Egypt during the presidential or parliamentary term. Egyptian constitutions left the elections’ results to determine the economic ideology according to the presidential and parliamentary elections results and the candidates’ political and economic programs.

In Gulf countries, and throughout the decades, constitutions have not adopted a socialist ideology but left the door open to a wide role for private sector participation in all economic activities and all economic sectors. This applies to the Kuwait constitution of 1962, the UAE constitution of 1996, the Oman constitution of 1996 and the Kingdom of Bahrain constitution of 2002 as amended in 2012. The same vision exists in the Morocco constitution of 2011, Tunisia constitution of 2014 and the Algeria constitution of 2016.

3 Law No. 117 of 1961 and its amendments.

4 Law No. 203 of 1991 for the Public Sector Affairs.

The Egyptian constitutional system has greatly influenced Arab countries’ legal systems and transferred French civil law legal culture to Arab countries as most of these legal systems were previously relying only on Sharia’a law. Further, Arab legal systems have been considerably indirectly influenced by the French legal culture, in particular the French constitution of 1958 and the French Napoleonic Codes through the flow of the French legal culture from Egypt to Arab countries. The Egyptian Conseil d’État played a significant role in transferring the administrative law principles, in particular administrative contracts’ principles to Arab countries.

The influence of the economic ideologies in Arab constitutions to state contracts

The economic ideology in Arab constitutions governs the concept of state contracting, particularly how can a state enter into administrative contracts with domestic or international entities? The question arises in both kinds of contracts; private contracts and administrative contracts as the latter contracts’ constraints and exorbitant clauses exist in the MENA countries’ legal culture. In the MENA countries’ legal culture, public contracts, which are in the majority of cases administrative contracts, contain excessive clauses. The purpose of the excessive clauses in administrative contracts is to achieve public interest considerations. As administrative contracts aim at public interest, an important question arises: is there any constitutional ban that prohibits Arab states from entering into PPP contracts?

In the light of the Egyptian constitution of 1971, the public sector must lead all economic activities and economic developments in Egypt, thus, the private sector cannot contribute in infrastructure and public utilities agreements through PPPs. In the light of the Marxist ideology that was adopted by the 1971 constitution the private sector was not permitted to contribute in managing public utilities through PPP techniques. There were various amendments to the 1971 constitution in 2007 that relinquished the Marxist ideology to enable the private sector to participate in infrastructure projects and public utilities’ construction and management through BOT/BOOT and PPP techniques. This constitutional trend was implemented before the promulgation of PPP legislation and after such promulgation. The constitutional declaration in Egypt 2011, the 2012 constitution and the 2014 constitution have not adopted a specific economic ideology but left the door open to private sector participation in all economic sectors and impliedly permitted private sector to participate in PPPs.

Gulf countries’ constitutions left the door open to a wide role for the private sector participation in all economic activities and all economic sectors. This vision was adopted through decades by the Kuwait constitution of 1962, the UAE constitution of 1996, the Oman constitution of 1996 and the Kingdom of Bahrain constitution of 2002 as amended in 2012. The same vision exists in the Morocco constitution of 2011, the Tunisia constitution of 2014 and the Algeria constitution of 2016. MENA countries’ constitutions adopted free market economy concepts that open doors to private sector participation in all economic sectors. Through decades, Gulf States’ constitutions had not adopted socialist ideology but left the door open to a wide role for private sector participation in all economic activities and various economic sectors.

The constitutional framework of PPPs in the MENA region: natural resources and PPPs in the Egyptian constitution

Generally, there are no special provisions governing PPP transactions in the MENA countries’ constitutions. It is important to note that there is no prohibition for PPP techniques in the MENA region current constitutions.

It is very important to differentiate between natural resources, particularly oil and gas concessions, and PPPs from the MENA region constitutional perspective.

The Egyptian constitution of 1971 stipulated that all-natural resources concessions must be granted by law in each concession (not pursuant to law).⁵ Each concession of oil or gas or any concession concerning natural resources (such as mining concessions), must be granted by law (legislation) promulgated by the parliament in each case and not by any regulatory tool pursuant to law. The current constitution of 2014 stipulates the same.⁶

The constitution of Kuwait 1962 stipulates that any obligation to invest in natural resources or public utilities shall be granted by law and for a limited period of time.⁷

The Omani constitution 1996 provides that the income from natural resources is owned by the state, which maintains to keep it and offer the best exploitation for it taking into consideration state security constraints and the national economy interests. Granting any concession or investment to any of the country natural resources must be by law, for a certain period of time and consistent with national interests.⁸

The Bahraini constitution of 2002 as amended in 2012 stipulates that any concession to invest a natural resource or a public utility shall be granted by law and for a limited period of time. The preliminary procedures for granting such concession shall facilitate research, disclosure, publicity and competition.⁹

The Tunisian constitution of 2014 provides that ‘natural wealth’ (wealth from natural resources) belongs to the Tunisian people, and the state exercises sovereignty over it in its name. Related investment contracts are presented by the competent committee of the parliament. The agreements to be concluded shall be submitted to the parliament for approval.¹⁰

5 Article 123 of the Egyptian constitution of 1971.

6 See Article 32 of the 2014 constitution.

7 The Kuwaiti constitut...

Table of contents

• Cover
• Half Title
• Series Page
• Title Page
• Copyright Page
• Dedication
• Table of Contents
• Preface
• About the author
• List of abbreviations
• Introduction
• 1. The constitutional framework of state contracts in the MENA countries
• 2. The substantive theory of states’ contracts in MENA countries
• 3. The principles of Le Contrat Administratif theory in MENA countries
• 4. The trajectory of the legislative and regulatory intervention from MENA countries to permit PPP techniques
• 5. PPPs in MENA countries’ public procurements
• 6. The international dynamics of PPPs
• 7. The main substantive mechanisms of PPP contracts in MENA countries
• 8. Arbitration as dispute resolution mechanism in PPPs in MENA countries
• Conclusions
• References
• Index