The United Arab Emirates (UAE) has actively embraced Public-Private Partnerships (PPPs) as a key mechanism for driving economic growth, fostering infrastructure development, and advancing various sectors. PPPs in the UAE involve collaborations between the public sector (government entities) and private sector entities to deliver public services, infrastructure projects, and other initiatives.

We tackle in this article the new Federal Law No.12 of 2023 that was recently issued in the United Arab Emirates that is related to organizing public private partnership (“PPP”) between federal and private sectors (the “Law”). The Law sets new rules related to organization and supervision of PPP projects.

Scope of the Law

The law does not apply to privatization of assets, projects and public services that are not carried out through PPPs or to any projects which financial budget is less than what is stipulated in the partnership projects’ guide issued by the Ministry of Finance (the “Ministry”).

Players in PPP projects

The Ministry is directly responsible of proposing a full list of anticipated or aimed partnership projects in the country and supervising them during the execution period. It is provided under the Law that the Ministry shall release a full PPP guideline for stakeholders to comply with it and comply with in any PPP scheme that is being proposed.

The Ministry also directly deals with federal entities to provide support in tendering scheme and encouraging federal entities to use PPP.

PPP team

The project team is responsible of the organization and supervision of the procedure of awarding the project and choosing a partner. This includes preparing a preliminary budget for the project and ensuring that transparency, fair competition are applied in tender and offering stage. It is provided under the law that private sector may propose a partnership project to competent authority or federal authority. The competent authority must then submit the project scheme to the ministry.

We note that PPP projects may be proposed by the federal entities as well as private sector entities.

Governmental financial guarantee

The project’s guide specifies the partnership’s conditions and procedure for requesting a financial government guarantee. The federal entity may request from the ministry the issuance of a governmental financial guarantee to perform as a guarantee of the federal entity’s financial obligations under the PPP agreement.

Forms of PPP

The partnerships involve the following structures and projects:

• Build, operate and transfer (“BOT”);
• Build, own, operate and transfer (“BOOT”);
• Build, own and operate (“BOO”);
• usufruct of the assets;
• Build, own, lease and transfer (“BOLT”); and
• Any other types pf project stipulated in the projects’ guideline.

Public tenders and offering of the partnership project procedure

The Law provides several methods and procedures for PPP players to adopt as follows:

• Double phase procedure: this method revolves around creating a list of the potential private sector entities best suitable for the project and interested in the partnership and the second stage would include creating the tender documents and submitting to the potential exclusive private sector partners;
• Urgent procedure: this method revolves around a single stage without need to pre-tendering stage of creating list of private sector entities. Whereas, the project’s members would directly appoint certain players form private sectors due to the limited number of players in the sector or lack of technical diversity which creates a limited competition based on financial comparisons solely; and
• Direct appointment procedure: adopted in certain specific circumstances specified in the Law.

The appeal procedure of procurement decision

The competent appointed federal entity announces the winner of the tender and issues the result. Any of the bidders may upon issuance of the announcement appeal the decision within 10 days from the day of announcement of the winner before the Ministry. The appealing bidder must fulfil certain conditions before raising the appeal and thereafter a Committee shall be constituted to rule over the appeal and investigate it.

The PPP company

The private sector partners may establish a project’s company and the company shall comply with all obligations and terms of the partnership agreement.

The company is not subject to sale, assignment directly or indirectly or any form of dealing with third party without prior approval from the federal competent authority. It is further allowed under the Law for a foreign investor to have full ownership of the project’s company. This aligns with the UAE’s recent interest in attracting private foreign investors, specifically in PPPs.

The failing project

The Law introduces the failing project getaway allowing the competent federal entity to replace the partner and take over the entirety of the partnership in the event the partner fails to execute the project and consequently its failure to execute impacts public interest or leads to suspension of a public service which continuity is vital.

Conclusion

The UAE has been actively promoting partnerships between the federal government and the private sector to drive economic growth and development. In this wave, the UAE has been committed to fostering such collaborations through various initiatives and legal frameworks. This is reflected most efficiently in the new Law discussed above regulating PPPs.

It is yet to be seen the efficiency of the interaction between multiple parties to the PPP, the specifics of the guidelines to be issued by the ministry, the new PPPs that will take place within the country and the bid/tender procedures that will be established based on the new law.

Authors: Yousef Alamly, Partner, and Rana Moustafa  Associate.

For further information, please contact Alex Saleh (alex.saleh@glaco.com) and Yousef Al Amly (y.alamly@glaco.com).