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 No. 2021-01 of 22 February 2021 on public–private partnership contracts (the PPP Law) and its Decree No. 2021-1443 of October 27, 2021, implementing the provisions of the PPP Law. 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.

However, there are special procedures for awarding public contracts on the basis of a legislative derogation. This is the case for the PPP Law and its implementing Decree No. 2021-1443 dated 27 October 2021, 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, Articles 2 and 3 of the PPP Law provide:

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 Law apply to public–private partnership contracts, concluded in all sectors of economic and social life, with the exception of [exhaustive list of unauthorised sectors that includes energy, mines and telecommunications].

The PPP Law excluded from its scope specific sectors such as energy, mining, telecommunications; contracts relating to national defence and security; contracts awarded to economic operators by virtue of exclusive rights granted by legislative or regulatory provisions; PPPs with an economic operator maintaining a quasi-governing relationship with the contracting authority when conditions are met; and contracts involving the privatisation or transfer of companies, property and equipment in the infrastructure of contracting authorities.

The year in review

Senegal has introduced a new legal framework applicable to PPPs, which is 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 was 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.

The new Law on PPP contracts and its implementing decree repeals all of 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 No. 2014-09 of 20 February 2014, amended by Law No. 2015-03 of 12 February 2015, the provisions of Law No. 2004-14 of 1 March 2004 instituting the Council of Infrastructures.

Furthermore, it must be specified that Article 55 of the transitionary dispositions of the new PPP Law provides that the dispositions of the present law are applicable to all of the operations whose advice on call for public procurement are published after the entry into force of the law. Thus, the present law is immediately applicable to all new calls for tender.

General framework

i Types of public–private partnership

Two types of PPPs are foreseen, namely (1) user-pay public–private partnership contracts; and (2) public–private partnership contracts with public payment.

A PPP contract with public payment is a PPP contract by which a contracting authority entrusts to an economic operator, whose remuneration comes essentially from payments by the contracting authority throughout the duration of the contract, all or part of the tasks relating to the design, construction or transformation, upkeep, maintenance, operation or management of works, services, equipment or intangible assets necessary for the general interest, for which the contracting authority is responsible, as well as all or part of their financing.

A user-pay public–private partnership contract is a public–private partnership contract by which a contracting authority entrusts the management of a service of general interest for which it is responsible, or the design, financing, construction, rehabilitation, operation, maintenance and upkeep of works, equipment or intangible assets to an economic operator whose remuneration comes essentially from payments by users. Concession, affermage and régie intéressée are public–private partnership contracts paid for by the users.

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 (UNAPPP), 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 Dispute Settlement Committee, 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
  1. the Interministerial Committee, 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

Prior assessment and advice

PPP contract projects are subject to a preliminary evaluation, carried out by the contracting authority and submitted to the UNAPPP for its advisory opinion. Private initiative bids are also subject to a counter-assessment reviewed by the UNAPPP.

The preliminary evaluation shows the economic, financial, legal and administrative reasons that lead the contracting authority to initiate the procedure for awarding such a contract. This assessment includes a comparative analysis of different options, in particular in terms of overall cost, risk and profit sharing, as well as sustainable development concerns.

Prior authorisation is required before the launch of any procedure for the PPP contract.

For a state project, prior authorisation to launch the procurement procedures is issued by the Interministerial Committee created in Article 8 of this PPP law. For projects of other contracting authorities, prior authorisation to launch procedures is issued by the competent deliberative body within the meaning of the legislation in force. However, if the prior assessment shows that the project requires financial support or a guarantee, the prior authorisation of the Interministerial Committee.

Budgeting and reporting

The Ministry of Finance ensures that the contracting authorities include each public–private partnership project in the public expenditure budget cycle, including in particular the state's budgetary projections.

The contracting authorities ensure compliance with the rules on accounting for commitments made under a public–private partnership contract, in accordance with the requirements of the laws and regulations in force.

Bidding and award procedure

i Expressions of interest

Regarding the possibility of making a private initiative offer, an economic operator may submit a private initiative offer to a contracting authority for the implementation of a public–private partnership project.

ii Requests for proposals and unsolicited proposals

Regarding a private initiative offer to a contracting authority for the implementation of a public–private partnership project, the contracting authority is not obliged to respond to the private initiative bid.

iii Evaluation and grant

The award of a PPP contract is subject to the principles of freedom of access, equal treatment of candidates and transparency of procedures.

PPP contracts may be awarded by contracting authorities in six ways. It may be awarded through one of the following standard procedures:

  1. a one-stage open tender procedure, with or without pre-qualification; or
  2. the two-stage open tender procedure, preceded by prequalification.

It may be awarded through one of the following derogatory procedures:

  1. restricted tendering procedure;
  2. the competitive tendering procedure;
  3. the competitive dialogue procedure; or
  4. the direct agreement procedure.

The launching of a derogation procedure is subject either to the assent of the body in charge of a priori control or to the prior approval of the Interministerial Committee after the advisory opinion of the body in charge of a priori control.

The PPP contract is awarded to the candidate whose bid is evaluated as economically most advantageous on the basis of objective criteria, in accordance with the general principles defined in the PPP law. These selection criteria are set out in the tender documents.

The contractor shall set up a company under Senegalese law dedicated to the PPP contract. A part of the company's shareholding is reserved for national economic operators.

The contract

i Payment

Article 12 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.

Regarding securities, the holder may, with the authorisation of the contracting authority and in compliance with the legal provisions in force, grant security to the financing bodies over the assets acquired or realised as part of the performance of the PPP contract, by pledging the proceeds and receivables arising from the contract or by providing any other appropriate security, without prejudice to any legal provision prohibiting the provision of security over public property.2

iii Distribution of risk

Article 12 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 in its Article 41 that a public–private partnership may be amended, the conditions for which are set out in Article 117 et seq. of the Decree. First, under Article 117, any modification that has a financial bearing on the contract is the subject of an amendment submitted to the organ in charge of the a priori control and the Finance Minister following a consultation of UNAPPP. These controlling organs have 30 days to pronounce an opinion.

In addition, under Article 118 of the Decree, any substantial modification of the PPP contract under execution is necessarily subject to a new tender procedure, and must be procured in conformity with the dispositions of Chapter V of the Decree.

An amendment is defined as substantial if it: 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; changes the economic balance of the partnership contract; or considerably modifies the scope of the partnership contract.

However, in derogation of the above-mentioned Article 118 of the Decree, a substantial modification does not lead to a new tender procedure if the following cumulative conditions are met: the modification is a necessary result of the execution of the contract but was not foreseeable by the contracting authority at the time the contract was made, either because it cannot be technically or economically separated from the initial contract and it is required for its strict execution; and the additional costs to be supported by the contracting authority or the users are less than 25 per cent of the initial costs of the aforementioned.

Any amendment must be authorised beforehand by the UNAPPP and the organ in charge of the a posteriori control.

v Ownership of underlying assets

Article 34 of the PPP Law and Article 26 of the Decree provide 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 33 per cent of the capital contributions from national economic operators. National economic operators are defined in Article 24 of the Decree, as company's who are headquartered in any member state of the WAEMU region for at least one year from the procurement of the PPP contract and whose managers and executive managers represent 50 per cent of persons who are nationals of the WAEMU region.

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 Chapter VI, Paragraph III. 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 Chapter VI. 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 Chapter VI. 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.

vii Local content

Local content is a set of requirements for projects related to local development aspects, including employment, education, social or environmental considerations. Depending on the purpose of the project and the social, economic and environmental context, there is a possibility for contracting authorities to include local content as award criteria in the tender documents requirements for the envisaged PPP project, including:

  1. initiatives relating to employment and vocational training;
  2. initiatives for the integration of local craftsmen and SMEs; and
  3. concrete actions and proposals for sustainable development.

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.

Recent decisions

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.

Any candidate for the award of a PPP must, prior to a legal appeal, submit a written request to the person responsible for the contract, indicating the references of the procedure for awarding the contract and setting out the grounds for his or her complaint by registered letter. This appeal may relate in particular to the decision to award or not to award the contract, the conditions of publication of notices, the rules relating to the participation of candidates and the capacities and guarantees required, the method of award and the selection procedure used, the conformity of the tender documents with the regulations, the technical specifications used and the evaluation criteria.

Any dispute arising in the context of the execution and termination of the contract will, prior to any litigation, be submitted to an attempt at amicable settlement by the Dispute Resolution Committee before any litigation.

Failure of the amicable procedure leads to resolution by arbitration or court according to contractual provisions.

However, the attempt at amicable settlement by the Dispute Settlement Committee is not required if the dispute has already been the subject of an attempt at amicable settlement by an independent expert appointed by the parties.

In the absence of an amicable settlement, disputes relating to the execution or interpretation of PPP 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 re-examination 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.

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.

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
  1. 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 and Franck Allessie is senior legal counsel at Houda Law Firm.

2 Article 16 of PPP Law.

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