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Written by Prince Kyssama, Louis-Raymond Gomes and contribution by Othmane Anice

 

 

The public-private partnership contracts have become since the creation of the Ministry of International Cooperation and Promotion of Public-Private Partnership on July 06, 2021, the spearhead of economic renewal in the Republic of Congo.

In a communiqué dated January 12, 2023, by the said ministry, the law n°88-2022 of December 30, 2022, relating to the contracts of public-private partnership was promulgated by the Congolese Head of State Mr. Denis Sassou N’Guesso.

This law is part of the reforms carried out by the Congolese government, which wishes to create a favorable ecosystem around private investment to develop several sectors including agriculture, tourism, special economic zones, forestry and other services[1].

The law on public-private partnership contracts has come to fill a legal vacuum and to give confidence to investors while guaranteeing objectivity, transparency, competition and equal opportunities for private sector actors.

According to the provisions of Article 3 of the law on public-private partnership contracts, the contract is defined as “the administrative contract by which the State, a local authority, a public establishment or a company with a majority holding, entrusts to a legal person under private law or a group of legal persons under private law for a determined period of time, all or part of the design, construction, financing, transformation, operation, management, maintenance, rehabilitation or upkeep of a public asset, equipment, infrastructure or public service“.

Indeed, this is a legal instrument, distinct from public procurement contracts, intended to govern the legal relationship between the Congolese State, local authorities, or legal persons under public law and national and international private partners, to whom the former have recourse for missions of general interest.

It is in this sense that the legislator wished to provide these contracts with their own legal regime, through this law on public-private partnership contracts, which we will analyze below:

1. Rules for the award of public-private partnership contracts
   • The guiding principles of public-private partnership contracts

Public-private partnership contracts are, like public procurement contracts, subject to “the principles of freedom of access, equal treatment, objectivity, competition, transparency and respect for the rules of good governance” in accordance with the provisions of article 15 of the law on public-private partnership contracts. They therefore imply liberalized access for all to public procurement.

However, only legal entities governed by private law under Congolese law are eligible to bid. Similarly, legal entities that are prohibited from exercising or participating in public procurement; in conflict with the members of the administrative bodies in charge of public-private partnership contracts or the contracting public entity; and those in a state of receivership or judicial liquidation are excluded.

• Implementation of the procedure for awarding public-private partnership contracts

As part of their implementation, the contracting public entity, also known as the contracting authority, must express its needs in clear terms and submit them to a prior assessment by the Permanent Secretariat for Public-Private Partnerships. Under the terms of Article 16 paragraph 3 of the law relating to public-private partnership contracts, this evaluation will take into account “in particular, the complexity of the project, its overall cost during the term of the contract, the sharing of related risks, the level of performance of the service rendered, the satisfaction of the needs of users and sustainable development, as well as the financial arrangements for the project and its methods of financing“.

Once evaluated, the draft contract must be the subject of a mandatory pre-feasibility and feasibility study by the contracting authority, which may be the State, a local authority or a public institution, or by the private partner. However, the law does not determine in which case this study is the responsibility of one or the other party.

The multiplication of the above-mentioned controls and verifications are intended to justify the use of public-private partnership contracts, the choice of the award procedure, the restriction of the contract to companies controlled by nationals, etc.

Once these steps have been completed, the draft public-private partnership contract is validated by the Technical Committee and made available to the public for bidding. The bidding procedures will be the subject of a decree by the Council of Ministers, which has not yet been published.

• Award of public-private partnership contracts

Article 22 of the law on public-private partnership contracts includes, but is not limited to, the overall cost of the bid and the performance objectives of the contract, particularly in terms of sustainable development, the technical, aesthetic or functional quality of the bid, its innovative nature, and the completion time.

At the end of the selection process, the contracting public entity publishes the results, organizes the finalization of the terms of the contract with the selected candidate and initiates the procedures for prior control, approval and signature of the contract.

The successful candidate, also known as the “contract holder”, must, under the terms of Article 24 of the law relating to public-private partnership contracts, be established “in the form of a project company under Congolese law dedicated to the public-private partnership contract“. This new company will be constituted in the forms provided for under OHADA law, but its corporate purpose will be limited to the execution of the public-private partnership contract and all related activities. The same applies if several companies have made a joint bid.

2. The procedure for awarding public-private partnership contracts

The legislator has provided four procedures for the award of public-private partnership contracts. These are: the invitation to tender, the competitive dialogue, the unsolicited bid and the direct agreement. The choice of procedure depends on the nature and specificity of the need expressed by the contracting public entity.

• The call for tenders

The call for tenders is the common law procedure, while the other three are derogatory procedures. It implies a call for competition between the various candidates wishing to meet the need expressed by the contracting public entity. In the case of a call for tenders, Article 3 of the law relating to public-private partnership contracts teaches us that the successful candidate will be the one whose offer “complies with the specifications of the tender documents and is evaluated as the most advantageous economically”. In clear terms, the candidate who best meets the technical specifications and criteria and whose financial offer is the lowest, as in public contracts, will be selected.

• Competitive dialogue

The competitive dialogue procedure, on the other hand, is one in which the nature of the need is known by the contracting authority, but the means, techniques, technologies, resources and skills required to meet it satisfactorily are not. Consequently, the contracting authority invites several private partners to an exchange in order to lift the veil on the above-mentioned points of questioning, which will enable it not only to materialize its offer in clear terms, but also to allow the candidates to respond in a satisfactory manner.

• The direct agreement

The direct agreement is “the procedure by which the contracting public entity directly engages in discussions that it deems useful with a pre-identified candidate and then awards the public-private partnership contract”. This procedure can only be used for contracts which, because of the particularity of the field and the expertise required; an emergency related to national defense and security; or previous achievements by the private partner of similar projects on behalf of the contracting public entity or exclusive experience in the field, cannot be the subject of an invitation to tender.

• The spontaneous offer

Finally, the spontaneous offer is the only procedure in which the contact is not initiated by the contracting public entity. It is the private partner who proposes, submits to this first one, a project of innovative ideas on the technical, economic or financial level, in order to meet an existing need, with a view to carrying it out in the framework of a public-private partnership contract. In this framework, the contracting authority has not yet initiated a procedure aiming at its satisfaction, and in fine, in its role of public purchaser, decides to accept, to modify or to reject the project of innovative ideas, generally without generating any responsibility with regard to the spontaneous submission of the concerned project made by the private party. It is an invitation to the private initiative on the one hand, and to the listening by the public authorities, on the other hand

Whatever the type of procedure, their implementation modalities have not yet been foreseen and will be fixed by means of a decree.

3. Content of the public-private partnership contract

The public-private partnership contract is a contract whose framework has been established by the legislator. The rights and obligations of the parties have been provided for in Article 26 of the law relating to public-private partnership contracts, under which the contract must contain provisions relating in particular to:

• Terms of financing and remuneration of the private partner;
• Quality, safety and durability requirements for the work, equipment or service covered by the contract;
• Terms and conditions of supply of the good or service covered by the contract;
• Duration, renewal and extension, if any;
• Risk sharing arrangements;
• Mechanisms for continuity of the public service in the event of default by the private partner, and for rebalancing the contract in the event of force majeure;
• Mechanisms for controlling and monitoring the performance of the contract;
• Performance criteria;
• Rules for occupying the public domain;
• Transfer of skills and technology;
• Contractual securities and guarantees;
• Penalty clauses and contractual interest stipulations;
• Dispute resolution

Nevertheless, the legislator has not provided for any sanction in case of non-compliance with this legal obligation. On the other hand, there is no legal provision that prevents the possibility of supplementing or even amending the initial contract by way of an amendment.

Furthermore, the legislator attaches great importance to the role that public-private partnership contracts must play in the fight against unemployment, youth employment, environmental protection and, above all, in strengthening the economic and social fabric. These are essential criteria for the selection of candidates that are mentioned in the contract.

4. The execution of the public-private partnership contract
   • Performance by the contracting public entity

As with all public law contracts, the contracting public entity benefits from the prerogatives of public authority. These prerogatives are provided for in article 31 of the law relating to public-private partnership contracts. They allow the contracting public entity to substitute the private partner for another in the event of: It can also obtain the termination of the contract in the event of a “serious and duly noted breach of contractual obligations“. It can also obtain the termination of the contract in the event of “the occurrence of other events that may justify the early termination of the contract“.

The choice of general and imprecise terms in the wording of the aforementioned Article 31 may reflect the legislator’s wish to give the public entity a certain amount of leeway in assessing and qualifying the event that may lead to substitution or termination.

However, in order to avoid any abuse and to maintain a certain contractual balance, article 33 of the law relating to public-private partnership contracts provides that the public entity may only resort to these prerogatives of public authority in the event of “force majeure, or circumstances relating to public order“. These are factual circumstances that must be assessed on a case-by-case basis, and may expose the contracting public entity to the payment of damages in the event of prejudice suffered by the private partner due to the exercise of these prerogatives. This balance is obviously reflected in the composition of the public-private partnership contract, which will undoubtedly provide exhaustively for the hypotheses of breach of contract for each of the parties involved.

• Performance by the private partner

As for the private partner, it has the right, on the basis of article 37 of the law relating to public-private partnership contracts, to subcontract part of the tasks assigned to it under the contract. However, this subcontracting may not cover the entire contract. Therefore, it remains solely responsible to the public partner for the services provided by it, its employees and subcontractors.

However, it should be noted that the said provision expressly states that: “the private partner is required to inform the contracting public entity of all subcontracts during the term of the contract before proceeding with the execution of the said contracts“. Thus, subcontracting is not subject to authorization, but rather to prior information of the contracting public entity. Unfortunately, such a regime does not allow the public entity to verify the performance guarantees offered by the subcontracting companies, whose failure would be directly prejudicial to it.

In addition, article 42 of the law on public-private partnership contracts gives the private partner the right to assign all or part of the contract, subject to obtaining the prior written agreement of the contracting public entity. The terms and conditions of the assignment must, if necessary, be provided for in the contract. The assignment entails subrogation of the assignee in place of the assignor.

5. Termination of public-private partnership contracts

The conditions for termination of public-private partnership contracts are listed in article 44 of the law relating to public-private partnership contracts, although this list is not exhaustive.

The contract may be terminated (a) by mutual agreement; (b) at the initiative of the contracting public entity in the event of a serious irregularity affecting the contract, for reasons of public interest in return for compensation to the private partner, or for jeopardizing the financial equilibrium of the project; (c) in the event of force majeure, serious misconduct on the part of one or other of the parties, or the opening of collective proceedings for the discharge of liabilities.

With respect to dispute resolution, the legislator has placed particular emphasis on amicable settlement, as well as on recourse to national and/or international arbitration bodies. These are dispute resolution procedures that favor confidentiality and efficiency. Nevertheless, there is nothing to prevent the dispute from being submitted to the Congolese state courts. Everything will depend on the stipulations of the public-private partnership contract.

6. The institutional and administrative framework for public-private partnership contracts
   • The bodies responsible for awarding public-private partnership contracts

In order to facilitate the planning, preparation, conclusion and execution of public-private partnership contracts, the aforementioned law on PPP contracts has established an institutional framework composed of different bodies that intervene in turn in the process of awarding public-private partnership contracts.

In its article 7, the law states that:

“the institutional framework of the public-private partnership contract includes:

• the national public-private partnership committee
• The technical committee;
• The permanent secretariat for public-private partnerships;
• The public-private partnership contracting commission;
• The public-private partnership control commission“.

The national committee of public-private partnership is the key organ of this institutional framework, as it elaborates the annual portfolio of projects to be undertaken in the form of public-private partnership. The technical committee is responsible for implementing the public-private partnership projects.

As for the permanent secretariat, it is responsible for assisting each of the other bodies in their respective missions and is involved in publishing the multi-sectoral portfolio of public-private partnership projects, assisting public entities in the preparation of public-private partnership projects, preliminary evaluation and feasibility studies of public-private partnership projects, promotion, monitoring and evaluation of the practice of public-private partnerships.

Finally, the public-private partnership contracting commission is responsible for implementing the appropriate contracting procedure, in the light of the case in question, while the public-private partnership control commission checks that the contract has been properly executed, that the private partner has complied with the performance objectives set, and that the quality of the service provided has been satisfactory.

• Bodies responsible for monitoring public-private partnership contracts

In addition to these bodies, article 45 of the law on public-private partnership contracts provides that public-private partnership contracts may be audited by the Court of Audit and Budgetary Discipline, the High Authority for the Fight against Corruption, an independent auditor appointed by the parties to the contract, or any other administrative authority recognized as having such competence by the laws in force.

The legislator’s stated objective is to ensure effective control of these contracts, given the economic and social stakes involved. However, notwithstanding the independence of each control body from the others, it is imperative to note that their proliferation is likely to lead to a conflict of competences and authority, which may slow down or even compromise the proper execution of these contracts.

7. Financial, fiscal and customs regime

The legislator wished to provide public-private partnership contracts with a financial, fiscal and customs regime that derogates from the norms of ordinary law. The regimes provided for this purpose are essentially consensual. This is most certainly a manifestation of the legislator’s desire to obtain a relatively balanced framework between the opposing interests of the parties involved.

• The financial regime

From a financial point of view, articles 50 to 53 tell us that the contract may be financed by one or more private partners, third party organizations to the public-private partnership contract, or even by the public party to the contract. A mechanism is also provided for the transfer of financing by the private partners and organizations to third parties, subject to the prior authorization of the contracting public person.

Article 54 of the law also provides for the creation of “a support fund for public-private partnership projects, whose mission is to support and finance the preparation, award and execution of public-private partnership contracts.

Although the implementation and financing methods of this fund are still unknown, we would be tempted to say that these sums could be allocated to the operation of the administrative bodies in charge of these contracts, to the constitution of guarantees, or to the acquisition of goods, services and technologies for the benefit of the contracting public entity.

• Tax and customs regime

In terms of taxation and customs, the legislator has provided for regimes that depart from ordinary law. Thus, the various tax and customs advantages to which the private partners will be entitled will be set out in the public-private partnership contract, in accordance with Article 57 of the law. On the other hand, any operation, transaction or acquisition whose tax and customs regime is not expressly provided for in the contract will be subject to the applicable tax and customs regime under ordinary law.

Similarly, additional tax and customs benefits may be granted on an exceptional basis by the Minister of Finance. Such advantages are essentially aimed at attracting and maintaining investors, but can also be sources of aggressive tax optimization and evasion schemes, or even tax fraud.

8. Land and property regime

Although the legislator has not provided for a derogatory system of common law in the area of land, he has nevertheless introduced a specific system for property. Indeed, the so-called “return” goods made available by the public entity must be returned to it free of charge, because of their indispensable nature for the public service or for the execution of the missions devolved to the contracting public entity.

On the other hand, the so-called “take-back” assets will be returned to the contracting public entity, in return for the payment of a price fixed by agreement between the parties and which must be subject to an optional return clause. These goods are distinguished from the first ones because of their useful but not indispensable character. It is therefore an assessment made on a case-by-case basis, which may give rise to litigation, given its discretionary nature.

Finally, Article 61 of the law on public-private partnership contracts provides in its seventh paragraph that the “private partner has, during the performance of the contract, unless otherwise stipulated, real rights over the works and equipment that it builds, within the limits and under the conditions intended to guarantee the integrity and use of the public domain.”

From this provision, we can retain that the private partner can have, according to the modalities agreed upon by the parties, the right to use, to fructify, to grant an easement or a usufruct on the works and equipment that it realizes, as well as the right to grant real securities or guarantees on these works and equipment.

9. Conclusion

The law relating to public-private partnership contracts is a real ambition to set in motion a dynamic around private investments to develop large-scale projects that aim to contribute to the development of the Republic of Congo.

Its promulgation is intrinsically linked to a governmental and national will to deliver infrastructures and other quality economic projects for the Congolese people. This ambition will obviously be tested by the first projects to be developed under the aegis of this law, which may leave room for error in its application as is the experience of almost all African countries and the world.

Public-private partnership contracts are relatively tied to the overall business climate of a given country, leaving an opening for national specificity, which is only developed through the demonstration of future projects and the ability to adapt to meet the multi-sectoral needs of which the public entity is a stakeholder. Nevertheless, it is the right trajectory for the country, which will see itself in the years to come, being able to found a national economic fabric competitive at the regional level and why not world, thanks to this law.

[1] Press release from the Ministry of International Cooperation and Promotion of Public-Private Partnership

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