PRIVATISATION AND PUBLIC PRIVATE PARTNERSHIPS

Mamo TCV provides a comprehensive range of corporate and commercial legal services in relation to proposed privatisations to both domestic and foreign investors, including government bodies. Our firm was appointed as legal counsel to render assistance and advice in relation to several high-profile privatisation processes and takeovers. 

 

In this area, our firm’s work has required involvement in many aspects of the privatisation process, including the planning of the structure of the transaction and participation in the negotiation for the conclusion of the same, consideration of the appropriateness of the regulatory regime applying to the particular privatised industries and drafting of new legislation as may be required for the efficient operation of the privatised industry. 

 

Our specialist privatisation team is well acquainted with the procedures, issues and policy considerations which arise during the privatisation process and is capable of providing the specialist knowledge and practical solutions as may be required in view of the complexities encountered in this type of work.  

 

 

Mamo TCV has advised involved parties on wide-ranging legal matters in relation to Public Private Partnerships (“PPPs”) and was closely involved in the drafting of the legal framework for PPP projects, including the standard PPP agreement and payment mechanism, and tailor-made agreements for specific PPP projects. 

 

In this area, the firm combines its in-house expertise on public procurement rules, commercial and civil law, corporate law, finance, insurance, planning and environmental legislation, employment and industrial relations, intellectual property law, Community law and alternative dispute resolution. 

 

 

Legal Background  

 

Privatisation 

 

Over the past decennia, the Maltese Government has liquidated over 40 companies, fully privatized 22, and transferred its shareholding in several others.  

 

In November 1999, the Government of Malta published a White Paper entitled “Privatisation: a strategy for the future”, pursuant to which, a Privatisation Unit was established within the Ministry of Finance to oversee the implementation of the privatisation process. 

 

The strategy outlined in the White Paper resulted in the privatisation of several entities, including the Malta Freeport Corporation, Public Lotto and Malta International Airport. 

 

 

Public-Private Partnerships (PPPs) 

 

The term PPPs refers to forms of cooperation between the public and private sector aiming at ensuring the funding, construction, renovation, management or maintenance of an infrastructure or the provision of a service. Certain forms of Public-Private Partnerships (“PPP”) are considered to entail the public benefits from privatisation while avoiding the transfer of public goods to the private domain.  

 

In February 2005, the Maltese Government embarked on the drawing up of a template PPP Agreement based on the UK’s PFI model. A Public Private Partnership Unit was set up to implement and monitor PPP projects, the first of which concerned the construction and operation of a community home for the elderly.  

 

PPP contracts will, as a rule, be awarded following the competitive dialogue procedure or the negotiated procedure provided for in the relevant Community Directives, as implemented by the Maltese Public Contracts Regulations, 2005. 

 

In the “standard” PPP scenario, that is, the one for which the Maltese standard PPP Contract is designed, the selected private partner is required to set up a Special Purpose Vehicle (SPV) to design, construct and manage the project and to find adequate equity and debt financing. In principle, the public sector will only pay for the services to be provided. The amount of the so-called Unitary Charge payable by the public sector is established in accordance with a Payment Mechanism devised to take account of the numerous factors that could influence the performance of the tasks attributed to the private partner over the contract period (15 to 30 years is not uncommon). 

 

An essential feature of the PPP model contemplated is that the risks attached to the project are identified and limited. The risk are transferred to the private partner, who will reallocate them to the other private sector parties (e.g. sub-contractors) participating in the project. 

 

Banks and financial institutions may play a significant role in PPP projects, because they typically provide loan capital to the SPV and as senior lenders they function as a sort of “watchdog” for the contractor. This clearly emerges from the Direct Agreement which is to be concluded between the Government, the PPP Contractor and the senior lenders in the standard PPP/PFI scenario. In terms of the Direct Agreement, the senior lenders enjoy certain step-in rights and the Government acknowledges the senior lender’s security interest over the contractor’s right under the PPP contract. 

 

Since PPPs are meant to offer tailor-made and flexible solutions for complex projects envisaged by public entities, variations on this model are obviously not excluded.