The Dubai Public Private Partnership Law, established in November 2015. Law No 22 of the Dubai Public Private Partnership Law, commonly referred to as the P3 Law, seeks to pave the path to financing and construction by providing clarity and efficiency to the public-private process. Previously, there were no clear federal P3 regulations in Dubai. Contractual arrangements were left to fill the gaps, leaving investors drifting in uncertainty.
What's the main objective of the Dubai P3 Law?
The P3 Law regulates partnership agreements between all government entities under the Dubai government's general budget, and private establishments and companies (i.e. the "private sector partner"). The private sector partner may be a corporate entity or a consortium of corporate entities. The P3 Law was designed to decrease the strain previously placed on the government's budget, to obtain the best services, and to transfer information from the private sector to the public sector.
The P3 Law encourages competitive bidding
According to the P3 Law, both a government entity or a private company may propose partnership projects. However, any private sector partner must form a limited liability project company licensed to operate and implement the partnership contract in Dubai. Once a government entity has received the required consents for a project, it may invite prospective partners to bid on the project. Under the P3 Law, the government must provide the project details, to include financial, administrative, and technical specifications that the bidders must meet. Additionally, they must specify the securities and insurances necessary to bid on the project. These new requirements are designed to create full transparency for potential partners, encouraging faith and confidence in their potential investment. When it comes to the selection of bidders, regulations imposed by the P3 Law include the principles of transparency, free competitiveness, and equality. More specifically, it requires that project bids are appraised by price and the technical proficiency of the bidder.
The P3 Law ensures the best services
Not only does the Dubai P3 Law establish confidence for potential investors but it also strives to ensure only the best service providers bid on a specific project. Under the Law, the potential bidder must obtain a license from the Department of Economic Development in Dubai. It's important to note that P3 projects generally include large investments, and they are usually financed by several lenders. Under the P3 Law, lenders will maintain sound security over the project. This not only pertains to financial securities but also ensures that all approvals and licenses to complete the project are granted to the Project Company from within Dubai.
Partnership contracts and obligations of the project company
Once the government entity awards the project bid, they will enter into a partnership contract that establishes how the project will be implemented. The P3 Law includes a robust list of mandatory clauses that must be included in the project contract. Some of such conditions include:
- Extent of works to be executed by the project company
- Ownership of assets
- Financial and technical conditions
- Duration of the contract
- Proof of insurance
- Division of risks
The maximum period of any partnership contract is 30 years and any disputes resulting from the partnership agreement must be resolved in Dubai through arbitration.
Unlike the conditions for establishing a Project Company in Dubai, the P3 Law does not require finance sources originate in Dubai (Article 36). In short, private investors can now fund these projects. This favorable feature paves the path for international sponsors to enter the scene as investors for capital, opening a huge window of opportunity for investors in the region.
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