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Sat 18 Jul 2009 04:00 AM

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Egypt’s PPP framework

A look at the legal framework for Public Private Partnerships in Egypt.

Egypt’s PPP framework

Public Private Partnership (PPP) is an arrangement under which public and private sectors collaborate to ensure the fulfillment of a public service. In 2006, the Egyptian government, in an attempt to increase the role of the private sector, adopted the PPP model as a way to refurbish and establish the country’s infrastructure. Hence, it is important to examine the legislative framework, which PPP is subject to in Egypt.

Administrative contracts

Generally, PPP should be subject to Egyptian administrative law, which deals with the domestic activities of the state. It is not codified and the source of its legislations are (i) the Egyptian constitution issued in the year 1971 and amended in 1981 and 2007, (ii) the judgments of High Administrative court and (iii) State Council (Majlis Al Dawla) law, which has a department for opinions and legislation that advises public entities on different issues of public law such as administrative contracts and tenders.

Administrative Law vs Commercial Law

The Supreme Administrative Court of Egypt has defined administrative contracts as “a contract entered into by a moral person of public law for the purpose of managing a public utility”. The contract should also include clauses that identify it as being subject to public law, and are unconventional in private contracts. Consequently, to characterise a contract as administrative, (i) an administrative body should be party to the contract, (ii) the subject matter should be the provision of public utility, which is described as the activity performed by the administration to satisfy the public needs of individuals and (iii) the contract should also reflect public law contractual methods, such as the right to amend the agreement unilaterally, or rescind it.

The association of a contract with public utility does not automatically characterise it as an administrative contract, but rather the mentioned requirements should collectively apply, hence, any PPP contract concluded in Egypt will be considered as administrative contracts. The impact of administrative law

As a consequence of the above, the administrative courts will have the right to supervise the execution of the contract in accordance with its terms, by issuing mandatory decisions to the contracting party. Moreover, the General Authority will have the right to penalise the contracting party in case of non compliance with the contract terms. Sanctions may include appointing a substitute to perform the contract at the expense of the contracting party, the General Authority may also unilaterally amend the terms of the contract or even terminate it, if this fulfills public interest, and finally, any dispute between the parties will be subject to the jurisdiction of the State Council.

In exercising these rights, the contracting party cannot claim the concept of party autonomy against the General Authority, and cannot refrain from carrying out his obligations under the contract. Closing remark

It is important to understand that administrative contracts are based on the concept of good faith, hence the administrative authority may choose to terminate the contract for the purpose of public interest, however, adequate compensation should be granted to the other party. In addition, any amendment from the administration’s side shall not alter the financial equilibrium of the contract, or the other party may have the right to terminate the contract. These concepts have, to some extent, balanced the powers that may be exercised by the administration against the private party and provided a stable and coherent legal framework for PPP in Egypt.

Khaled El Dardiry has an LLM degree from the University of London and is currently an in-house legal advisor for Orascom Construction Industries. El Dardiry has also advised Commercial International Bank and worked as a public prosecutor. For Orascom, he has advised on a number of transactions including the bid for the New Cairo Waste Water Treatment Plant, a Ministry of Finance project to construct 300 schools in Egypt, development of a green field fertiliser plant in Algeria and divestment of Orascom’s cement business to La Farge.

The opinions expressed in this column are of the author and not of the publisher.

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