The Public-Private Partnership Law Review: Senegal

Overview

Senegal is a leader among West African countries with regard to public-private partnerships (PPPs), having already put in place important projects for both service management and infrastructure development. PPPs are governed in Senegal mainly by Law 2006-16 amending Law No. 65-51 of 19 July 1965 on the Obligations of the Administration Code, Law 2014-09 of 20/02/2014 on partnership contracts (of which a draft bill relating to PPP contracts repeals all its provisions), Decree No. 2014-1212 of 22 September 2014 on the Public Procurement Code as amended by Decree No. 2020-22 of 7 January 2020 and Decree No. 2020-876 of 25 March 2020. This legislation establishes the regime governing the preparation, procurement, execution and control of contracts concluded by legal persons to meet their needs for performing work and purchasing supplies or services, as well as the award and control of contracts participation in the execution of a public service.

Unless otherwise provided by law or regulation, the conclusion of public procurement contracts (i.e., contracts involving the participation of co-contractors of public persons in the performance of a public service referred to in Article 10 of the Code of Obligations of the Administration) is subject to the rules of control provided for in this Decree. Public procurement contracts are written contracts entered into by a contracting authority for payment to meet its needs for works, supplies or services, or a combination of the three. Public procurements are administrative contracts.

However, there are special procedures for awarding public contracts on the basis of a legislative derogation. This is the case for Law No. 2014-09 of 20 February 2014 regarding Public-Private Partnerships (PPP Law) and its implementing Decree No. 2015-386 dated 20 March 2015, which provide for other contractual conditions owing to the fact that it is the co-contractor of the administration that finances and operates the constructed structure for a time before transferring ownership to the administration.

In this sense, Article 2 of Law No. 2014-09 provides:

This Law applies to partnership contracts entered into by the State, a local authority, a public body, an agency, a majority public corporation, a national corporation and any other body or corporation of public law, and the associations formed by these people . . . The provisions of this Act apply to all sectors of economic and social life, with the exception of sectors subject to special regulation, including the energy, mining and telecommunications sectors.

Therefore, it is the contract that provides for the transfer of ownership of the plant.

The year in review

Senegal is about to introduce a new legal framework applicable to PPPs, which will be a major event. The draft law relating to PPP contracts was adopted by the Council of Ministers on 23 December 2020, and transmitted to the National Assembly on 31 December 2020 for adoption. This will be followed by the promulgation of the aforementioned law by the President as well as its publication in the Official Gazette for its entry into force.

In view of the above, in future the Senegal chapter for this publication will have to be profoundly readapted to the new PPP texts.

This draft law on PPP contracts and its implementing decree will repeal all the provisions resulting from the PPP regulations in force. This is at least what its Article 57 on the final provisions provides in the following terms: 'Are repealed, the provisions of Law n° 2014-09 of February 20, 2014, amended by Law n° 2015-03 of February 12, 2015, the provisions of Law n° 2004-14 of March 1, 2004 instituting the Council of Infrastructures'.

Between 4 December 2017 and 6 December 2017, the Minister of Investment, Promotion, Partnerships and Development of the State's Teleservices organised an international forum conference on the funding of PPPs.

General framework

i Types of public-private partnership

Partnership contracts may be awarded in three ways – by competitive bidding, direct agreement or a negotiated procedure – according to the conditions defined by this law.

The PPP Law eases the terms and conditions for dealing with unsolicited offers to better capture investment opportunities, which is a significant change from the previous law of 2004.

ii The authorities

The PPP Law applies to partnership contracts entered into by the state, a local authority, a public institution, an agency, a majority public-participation company, a national company and any other body or legal person governed by public law, as well as the associations formed by these legal persons. It provides for different structures in charge of the governance of these contracts, such as:

  1. the National Committee of Support to Public-Private Partnerships, which is responsible for validating the project preliminary assessments prepared by the contracting authorities to provide support to public sector entities in the preparation, negotiation and monitoring of PPPs and to disseminate and promote PPPs. The composition, organisation and functioning of the Committee are fixed by decree;
  2. the body of regulation and settlement of disputes, namely the Infrastructure Council, which is responsible for the regulation of the system of PPP contracting and the settlement of disputes related to the execution of such contracts; and
  3. the Tendering Commission, which is the structure responsible for bid opening and bid evaluation, whose composition and functioning are specified by decree. It is constituted by the contracting authority.

iii General requirements for PPP contracts

There are provisions for adapting by means of regulations the award procedures described in the draft law, for local authority partnership contracts on the one hand, and for those of other public authorities on the other, not reaching a certain threshold specified by decree (Article 2). In addition, the provisions of the PPP Law apply to all economic and social sectors with the exception of sectors subject to special regulations, notably the energy, mining and telecommunications sectors. This Act does not apply to contracts entered into by a contracting authority with a legal person of public law or with a corporation majority-owned by Senegal.

See Section III.iii on the pre-qualification procedure.

According to Article 16 of the PPP Law, a pre-qualification notice is published by the contracting authority. This publication may be made in print, electronic or audiovisual media, national or foreign, specialised or not. The dissemination of the pre-qualification notice is made to inform all potential candidates of the existence of the project. Applicants who successfully apply for pre-qualification are invited by the contracting authority to submit an offer under the conditions set out in Articles 13 et seq. A tender committee is then set up. The contracting authority must inform each candidate of the decision it has taken in this regard and communicate to any candidate who requests it the reasons for the rejection of his or her candidacy.

In addition to this main procedure, there is a special procedure for dealing with spontaneous supply. A private operator may send a spontaneous offer to a contracting authority. In this case, the operator carries out the preliminary studies so as to present a coherent project, including appropriate technical proposals and the corresponding financing solutions.

An unsolicited offer may also relate to the completion of a project whose studies were conducted by the contracting authority at least five years before the date of submission of the unsolicited tender.2 The unsolicited bidder submits a complete file to the contracting authority with technical and financial specifications. If the unsolicited bid is accepted, the contracting authority must refer it to the National Committee of Support to Public-Private Partnerships and the Minister of Finance for their examination and opinion on the basis of the file submitted by the holder of the spontaneous offer.

On the basis of the opinions obtained, the contracting authority shall request the Prime Minister or the deliberative body of the public authority to apply for authorisation to proceed with the negotiation of the contract with the holder of the unsolicited bid. In the event of a favourable opinion, the contracts are submitted, after signature by the parties, to the approval of the Prime Minister.3

To conclude, a contract governed by the provisions of the PPP Law may be passed by a contracting authority, following the opinion of the Infrastructure Council on referral of the National Committee of Support to Public-Private Partnerships if:

  1. it is imperative to ensure the continuity of public service under conditions of delay that are incompatible with the implementation of the tender procedure provided for in this Law, and where the contracting authority cannot provide the service itself; and
  2. the infrastructure can be realised or exploited, for technical reasons or reasons relating to the protection of exclusive rights, only by a single economic operation.4

The end of the procedure is sanctioned by a report drawn up by the contracting authority. The final partnership agreement, together with the minutes of the finalisation of the development and the tax schedule, if applicable, is sent for approval to the Minister in charge of Finance, after the opinion of the National Committee of Support to Public-Private Partnerships.

The partnership contract, once approved by the Minister of Finance, is sent for information to the Infrastructure Council and the National Committee of Support to Public-Private Partnerships.

Partnership contracts are published in the Official Journal with the exception of clauses relating to business secrecy.5

Bidding and award procedure

i Expressions of interest

The selection of the project operator must pass global tender procedures in two stages preceded by a pre-qualification. In the first stage, the technical proposals are opened in public session, and in the second stage, the financial offers are opened in public session by the tender commission.

ii Requests for proposals and unsolicited proposals

Candidates are pre-qualified exclusively on the basis of their ability to perform the contract and according to the following criteria:

  1. specific technical experience;
  2. the material and human resources that candidates have to fulfil the contract; and
  3. financial capabilities.6

The pre-qualification procedure shall be conducted by the contracting authority assisted by the tender commission referred to in Article 5 of the PPP Law. The commission meets at the request of the contracting authority.

According to Article 16 of the PPP Law, a pre-qualification notice is published by the contracting authority. See Section III.iii.

iii Evaluation and grant

Candidates are pre-qualified according to the aforementioned criteria (see Section IV.ii).

The contract is awarded to the candidate whose bid is evaluated as the best one in view of the selection criteria set out in the tender documents.7

The contract

i Payment

Article 6 of the PPP Law provides that the remuneration of the co-contractor, under a partnership contract, comes mainly from payments by the public body throughout the duration of the contract. It is linked to performance objectives assigned to the contracting party or to the availability of works or equipment.

The partnership agreement may provide for the possibility for the other party to receive income on the basis of ancillary activities; or for a mandate from the contracting authority to the counterparty to collect, in the name of and on behalf of the public body, the payment by the end user of benefits accruing to the latter.

ii State guarantees

According to Organic Law No. 2020-07 of 26 February 2020 relating to the finance laws, for PPP contracts in which the state entrusts a third party with the financing, implementation, maintenance or operation of operations of public interest investments, the commitment authorisations cover the entire legal commitment as of the year in which the contracts are entered into.

The guarantee and endorsement accounts track the state's commitments resulting from financial guarantees granted by the state to an individual or legal entity, in particular, guarantees granted by the state for PPP contracts.

The net change in the outstanding amount of guarantees and endorsements that may be granted by the state on each guarantee and endorsement account is capped annually by a Finance Act.

Guarantees and endorsements are given by decree.

The conditions for granting guarantees must comply with the provisions of the Regulation on the Reference Framework for Public Debt Policy and Public Debt Management in WAEMU Member States.

iii Distribution of risk

Article 7.2 of the PPP Law states that PPP contracts include clauses relating to the conditions under which risk-sharing is established between the contracting authority and the project operator.

iv Adjustment and revision

The PPP Law provides for two kinds of adjustment and revision. First, under Article 30, a complementary contract to a partnership contract may be entered into by direct agreement by a contracting authority where a project under execution has been the subject of a partnership contract. For reasons of economic, social or cultural necessity, or related to consistency requirements in the technical and financial management of the project, the contracting authority decides on its extension. The authorisation to conclude the complementary contract by direct agreement is given by the Prime Minister, on referral to the National Committee of Support to Public-Private Partnerships, after consulting the Infrastructure Council and Minister of Finance.

In addition, under Section 31, any changes to the work, supplies, services or deadlines of the original contract initiated by the holder or the contracting authority must be subject to prior agreement between the parties by an amendment to the partnership contract. These changes cannot be substantial. Failing this, a new allocation procedure is necessary. An amendment is considered substantial if it:

  1. introduces conditions that, if they had been included in the initial award procedure, would have permitted the selection of a candidate other than the one initially selected;
  2. changes the economic balance of the partnership contract in favour of the partner for a cost greater than or equal to 30 per cent of the initial amount of the financial offer selected; or
  3. considerably modifies the scope of the partnership contract. This is particularly the case when the addendum has the effect or purpose of substituting another contract for the original contract either by upsetting the economy or by changing the object.

Any amendment must be authorised beforehand by the Infrastructure Council.

v Ownership of underlying assets

Article 23 of the PPP Law provides that, within three months of the signing of the partnership agreement, the project operator must be constituted in the form of a company incorporated under Senegalese law whose capital is made up of at least 20 per cent of the capital contributions from national economic operators.

The offer of securities is made after the determination or valuation of securities by an independent expert selected by the operator and the public person by mutual agreement or by an expert chosen by the Infrastructure Council, within a maximum time period of three weeks, by public company advertising or investment mandate with a bank.

After fixing the price of the securities, the sale takes place for a period of 45 days. The operator or the authorised third party shall notify the Infrastructure Council of the list of acquirers, the number of securities acquired and their prices, and the number of securities not sold at the end of this period.

Securities not acquired by national investors at the end of the period indicated in the above remain property of the operator unless the state of Senegal decides to acquire them provisionally. In this case, the state must transfer the securities to national operators within two years or transfer them to the operator.

vi Early termination

The partnership agreement may provide grounds for termination for:

  1. serious deficiencies of the contracting authority, whereby the judge decides to cancel the judgment at the request of the project operator, under the conditions laid down in Section VII. The project operator can then claim damages to the contracting authority;
  2. serious misconduct by the project operator, whereby the contracting party terminates the contract partnership. The contracting authority may review the responsibility of the project operator before the judge in light of any mistakes he or she has made. Nevertheless, the contract of partnership may provide that, in this case, the contracting authority pays financial compensation related to infrastructure recovery;
  3. a reason of general interest, in which case the termination is then pronounced by the contracting authority. The project operator is then entitled to an allowance covering expenses incurred and loss of profits;
  4. cases of force majeure, at the initiative of each of the parties, under the conditions provided for in the contract; and
  5. following a challenge to the financial balance of the project resulting from an action or decision of the contracting authority. Termination is pronounced by the judge at a request from the project operator under the conditions of Section VII. The project operator can then claim damages from the contracting authority.

The project operator may challenge the termination of the partnership and the amount of compensation owed by the contracting authority before an arbitration body or national court under the conditions laid down in Section VII. However, the judge does not have the power to annul a termination decision taken by the contracting authority; he or she can only grant compensation to the project operator.

Finance

Senegal has put in place important measures for both service management and infrastructure development regarding PPPs:

In 1996, an agricultural PPP was achieved in the water subsector between the Senegalese Water Company, the private operator exclusively responsible for the operation of drinking water installations, and the National Water Company of Senegal, a public body responsible for managing the assets and controlling the quality of the operation of this public service. The original 10-year contract has since been extended by various amendments.

In the rail transport sector, Senegal and Mali granted the concession of the Dakar–Bamako railway to the company Transrail SA in 2003.

A concession contract relating to the financing, construction and maintenance of the toll motorway linking Dakar to Diamniadio was signed in 2009 with SENAC SA. The motorway has been in operation since August 2013. An amendment to this contract was signed in June 2014 for the extension of this highway to Diass and the Blaise Diagne International Airport.

In 2012, an axle load control concession involving the financing, construction, equipping and operation of weighing stations and measuring the gauge of heavy goods vehicles was signed.

A subsidiary of DP World has been a concessionaire since 2008 and for 25 years for the container terminal of the Autonomous Port of Dakar. DP World is not only in charge of the operation, but also the extension and rehabilitation of the container terminal in the northern area of the port.

The operation, management and maintenance of the Baux Maraîchers urban and inter-urban bus station was entrusted to a private company as part of a PPP.

In these different partnerships, various financing schemes have been adopted in response to the specific nature of each operation.

Litigation proceedings

In the absence of an amicable settlement, under Article 37 of Law No. 2014-09, disputes relating to the execution or interpretation of partnership contracts fall within the jurisdiction of the Senegalese courts or arbitral tribunals. Arbitration is conducted in accordance with the stipulations of the arbitration clause contained in the partnership contract. This clause opens a route of arbitration both before not only the regional arbitration bodies (i.e., the Common Court of Justice and Arbitration of the Organisation for the Harmonisation in Africa of Business Law; and the Organisation for the Harmonisation of Corporate Law in Africa (OHADA) but also international (the International Chamber of Commerce, the International Centre for Settlement of Investment Disputes, the United Nations Conference on Trade and Development, etc.). Concerning the recognition of awards, a distinction must be made between Cour Commune de Justice et d'Arbitrage (CCJA) (based in Abidjan, Cote d'Ivoire) awards and international awards.

On one hand, any arbitral award rendered in accordance with the Arbitration Rules of the CCJA shall be binding on the parties and shall have the force of res judicata in the territory of each state party to OHADA in the same way as decisions rendered by the courts of the state.

On the other, arbitral awards not awarded by the CCJA are subject to the exequatur procedure. The exequatur is granted under the conditions set out in Articles 787 et seq. of the Senegalese Civil Procedure Code.

More precisely, an award rendered by the International Chamber of Commerce or by the London Court of International Arbitration will be valid and recognised by the Senegalese courts without reexamination of the merits of the case if the conditions of the exequatur procedure are respected, it being specified that the state of Senegal has adhered to the New York Convention of 10 June 1958 on the Recognition and Enforcement of Foreign Arbitral Awards.

There has been no significant case law yet. Nevertheless, considering the significant interest in PPPs from private and public actors, we expect litigation in the future.

Outlook

The Emerging Senegal Plan will offer many opportunities to develop PPP projects. Promulgated by a priority action plan, this strategy aims to complete a series of infrastructure projects by 2023. To this end, the government has set up an institutional and legal framework favourable to PPPs aimed at carrying out infrastructure projects to achieve the objectives set.

Indeed, significant investments are required for infrastructure development in Senegal. The lack of financial capacity of Senegalese public entities has led to an increase in the number of PPPs.

Those upcoming PPP projects are listed below:

  1. the Corn Value Chain Project in Grain Corridors;
  2. the Dakar–Bamako Railway Project (South) and the Rehabilitation Project;
  3. the Commercial Infrastructure Rehabilitation Project;
  4. the ANAM Port Project;
  5. the Bargny 'Port du Futur' Mineral Project;
  6. the Cheikh Anta Diop Student Housing Project;
  7. the Construction and Equipment Project for a Network of Higher Institutes of Professional Education;
  8. the Electricity Transmission Investment Project;
  9. the Niokolo-Koba Park Management Project;
  10. the Electronic Waste Management Project;
  11. the Seawater Desalination Plant Project;
  12. the Integrated Special Economic Zone Project;
  13. the Court Construction Programme;
  14. the Falémé Zone Iron Project (Eastern Senegal-MIFERSO iron mines);
  15. the Aristide le Dantec Hospital Reconstruction Project;
  16. the Daga Kholpa Urban Pole Project; and
  17. other projects, such as the construction of prisons, courts, sports facilities, tourist centres (e.g., seaside offers in Pointe Sarène, the proposed development of the Mbodjène tourist site and development of the Joal Finio tourist site), agribusiness projects and projects on infrastructure (e.g., highway-development programmes).

The Emerging Senegal Plan was adopted in 2014 to accelerate socioeconomic and infrastructural developments in Senegal. This plan constitutes the frame of reference for the country's economic and social policy for the next 20 years, and is based on three tenets:

  1. the structural transformation of the economy through the consolidation of the current drivers of growth and development of new sectors that create wealth, jobs and social inclusion, and attract high-level experts and investment opportunities;
  2. the significant improvement of living conditions in the country, with more sustained action against social inequality; and
  3. strengthening security, stability and governance, the protection of rights and freedoms, and the state of law to maintain public policy.

Footnotes

1 Khaled Abou El Houda is a partner at Houda Law Firm.

2 Article 24 of the PPP Law.

3 Article 27 of the PPP Law.

4 Article 29 of the PPP Law.

5 Article 22 of the PPP Law.

6 Article 15 of the PPP Law.

7 Article 14 of the PPP Law.

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