Guide to PPP Investment Under Egyptian Law

Public Private Partnerships Projects for Infrastructure, Public Utilities and Services (“PPPs”) has received focused attention from the Egyptian Government since the issuance of the Public Private Partnerships Law in 2010 and its amendment in 2021.

World Bank records that in the period from 2010 till 2023, 45 PPPs were concluded with total investment value of USD 13,258 million in infrastructure fields of electricity, ICT, greenfield, ports, railways, water disposal and sewage.

There is still an increased government focus on PPP as the Egyptian Minister of Finance has also declared that:

During 2024, 10 PPPs were signed at a total investment cost of about EGP 19.8 billion, nine other new projects under offering at an investment cost of about EGP 53.9 billion, and 10 other projects being prepared for offering - upon approval of the Supreme Committee for Partnership with the Private Sector - at an investment cost of about EGP 37 billion.

Said Projects are in the sectors of: electricity distribution networks, solid waste conversion, dry ports, transmitter stations, sewage, strategic goods warehouses, desalination plants, sewage treatment, technical schools, distinguished language schools, service centers, and industrial drainage.

Public Private Partnerships Law No. 67 issue of Year 2010 and its Regulatory Statutes (“PPP Law”) was amended in 2021 via law No. 153/2021 which gave an enhanced organization of inception and management of PPPs under oversight of the Supreme Committee of Partnership headed by the Prime Minister.

This is a guide to potential PPPs investors on legal requirements for setting up and managing a PPP under said law.

The Public Private Projects Law in Egypt provides a focused regulation of almost all aspects of a PPP. This focused approach eliminates the need to navigate among several laws to cover the elements of a PPP and provides a clear exclusion from the application of several laws related to public infrastructure or concessions. Here is how;

The PPP Law;

I. Defines the parties to a PPP and governing bodies and sets the roles of each clearly;

Provides separate regulation of PPPs from other Public Procurement/ Administrative/Concession laws ;

III. Sets Powers of Public Party and Administrative bodies for approval and oversight of PPPs;

Stipulates Mandatory Contractual Arrangements for PPP Parties;

and finally, regulates dispute resolution for disputes arising out of PPPs at any project stage;

I. PPP Project Parties and relevant Government Bodies defined by PPP Law:

Private Partner:

The PPP law requires that the Private Sector that is allowed to be an investor in a PPP is a juridical person or consortium of such, either Egyptian or Foreign, with private Shareholding and might include public shareholding of a percentage not exceeding 20%.

Public Partner:

The law states that a Prime Minister’s decree is to be issued stipulating which public entities are allowed to take part in a PPP as the Public Partner. To this date, such General Ministerial Decree has not been issued yet. Nevertheless, PPP projects have taken place by virtue of laws issued by precedential decree following public tender run and administered by the relevant public entity and overseen by Supreme Committee for Public Private Partnership. The PPP Law regulates the Public Party’s powers over the PPP as shown below.

Project Company:

This must be formed by the Private Partner after winning the project bid/tender or direct contract for the purpose of developing and possible utilization of the Project.

Government Bodies Approving and Supervising PPPs:

The PPP Law sets two central Government Committees and enables Public Entities to constitute partnership units.

The two central bodies are:

• • Supreme Committee for PPP (“PPP Supreme Committee”): is a Cabinet Committee headed by the prime minister who selects its members. The Supreme Committee oversees approving an annual list of PPPs as suggested by the Government Authorities, approval of each PPP, its budget and follow-up thereof.
  • The Central Unit for PPP (“PPP Central Unit”) is established within the Ministry of Finance and is mainly responsible for:
    • Preparing and publishing studies, information, and statistics related to PPP projects, both locally and internationally as well as the selection of advisers for the tender of a PPP.
    • Preparation of PPP annual list to be approved by the PPP Supreme Committee. This is done in liaison with the Ministry of Planning, Economic Development and International Cooperation through sending a unified questionnaire to all Administrative Bodies for suggested PPPs. The Ministry then selects which PPPs to be submitted to a further technical committee constituted by a prime minister decree.

II. Separate Regulation for PPPs:

Independent from Administrative/ Public Procurement/ Concession Laws:

PPPs are given separate legal regime under the PPP Law from administrative or public utilities contracts in Egypt

PPP contracts are solely governed by the PPP Law with explicit exclusion of laws on public utilities concessions, natural resources concessions and public procurement tenders & bids, namely, Law No.129 for Year 1947, Law No. 61 of Year 1958 and Law No. 89 for Year 1998. This comes in addition to any law relating to granting public utilities concessions. It is understood that requirements of the Egyptian Civil law still apply.

Prohibition of Judicial Seizure of PPP assets:

Except for a pre-approved financing of a PPP, the PPP Law prohibits and considers null and void any seizure or executive procedures undertaken with regard to facilities, tools, machinery, or equipment allocated for the implementation of a PPP contract and operation or utilization of a PPP.

Project Company is prohibited except for financing arrangement pre-approved by the Public Party as regulated by the contract to dispose of or arrange any right over the project's monies, assets, and facilities that are being constructed or rehabilitated, except for the purpose of a maintenance or renewal stipulated in the PPP contract.

PPP Financing:

PPP law allows PPP parties to arrange for financing programs including step in rights for the lenders according to the PPP Contract under a pre-approval of the Public Party. The asset seizure prohibition does not apply to relevant lenders under said financing arrangements.

Ministry of Finance as Guarantor for Financing

PPP Law allows contractual agreement that the Ministry of Finance acts as guarantor for the Public Party obligations under a financing arrangement set directly by the Public Party for financing the PPP.

Land Allocation:

Proper Land allocation and documentation for the project must be ensured by administrative review by Central PPP Unit before approval of initiating any way of contracting for the PPP by the Public Party.

Procedures for Ways of PPP Contracting:

PPPs could be the result of either Public Party initiation via public or private tender/bid and also private sector proactive initiation. The PPP Law includes its own procedures detailed in its statutes on said ways of contracting for PPPs in Egypt, namely;

(a) Public Party request Tender/Bid or (b) Direct Contract by the Public Party on its own initiative or in response to initiatives by Private Parties;

a)Public Tender/Bid

Public Tenders or Bidding procedures are stipulated in detail in the PPP Law and its Executive Statutes. It is a two-stage bidding /tendering process, and the PPP Law regulates options from pre-tender discussions, pre-envelope opening clarifications to contractual negotiations of terms of the tender contract template not announced as mandatory by the Tender Issuing Public Party.

b) Private Tender/Bid: For projects of financial and technical efficiency requirements that are found among a few specified parties.

c) Direct Contract;

• • • For projects that are urgently needed by the State to fulfil economic or social needs
    • For existing PPP Private Parties that have fulfilled their obligations in a highly satisfactory manner and the Supreme PPP committee views. In light of Central Unit recommendation, there is a high economic or social benefit in allowing the Private Party to continue to provide its services. A new contract would apply.
    • For projects proposed by the private sector to the Public Party with efficient feasibility studies and financing and are of economic and social value.

Egypt’ Sovereign Trust for Investment and Development PPPs Carved out from PPP Law Regulation:

PPP projects entered between any public authority with Egypt’s Sovereign Trust for Investment and Development (created by Law No. 177 for Year 2018) or any sub trusts or sub companies thereof may be exempted from governance of PPP Law via a Prime Ministerial Decree.

III. Powers of Public Party and Government Bodies Over PPPs:

In addition to the relevant Public Party having authority to some extent on managing the PPP as shown below, the Central Unit and PPP Supreme Committee are in charge of certain duties at both the time of inception and during the life of a PPP;

A. Inception of a PPP

a. PPP Central Unit:

It reviews all tendering papers for the PPP Tender Process including assurance of proper allotment of necessary lands as the case might be and provide technical, financial, and legal expertise to the PPP Supreme Committee and to the PPP units at the Administrative Authorities. It also lays out and follows up on procedures for tender for PPP contracts and their execution. The PPP central unit might receive fees from the project company for rendering mentioned services subject to approval of and a fee set by the Supreme PPP Committee. The executive Statutes of the PPP regulate details of such processes.

b. PPP Supreme Committee:

• • • Approves the initiation of a particular PPP from the approved PPP list, its way of contracting and initiating its tender and contracting process. This occurs after Central Unit submits its review report of the proposed PPP and relevant tender process.
    • Approves requests that a Project Company, in addition to its original obligation to operate the project, utilize the project via presenting Project Products/Services to the Administrative Party or directly to the public.
    • Reviews and resolves any administrative complaints presented regarding administrative decisions taken during the PPP pre-contracting Process.

c. Public Party:

Issues and directly manages the PPP Tender/Bid Requests including pre-bid qualifications/clarifications meeting and pre-financial envelope opening discussions in liaison with the Central Unit.

B. During the life of the PPP

a. Central Unit:

• • • Reviews prospective contracts to be signed by the Project Company as submitted by the Public Party and provides its recommendations to the Public Party.
    • May issue a recommendation to the Supreme Committee at the end of the PPP Contract Term that the Private Party be re-selected as party for a similar project or the same PPP via a new contract.

b. Supreme Committee:

Approves any amendments proposed by the Public Party relating to prices/valuation, termination or extension of the Project.

c. Public Party:

• • • Oversees the Project Company’s proper development of the PPP.
    • Quality Assurance of provision of Services and Products with the right of inspection, audit and certification of acceptance as regulated by PPP Law Executive Statutes.
    • Reviews and Approves - in liaison with Central PPP Unit - all shareholders' agreements and draft contracts intended to be entered into by Project Company with third parties for the purpose of executing the works and services subject of the PPP contract. It may object to such within 60 days from submission by Project Company, obliged by the PPP Law to submit such before signature. Rejection of contracts would be for reasons that relate to national security considerations or reasons pertaining to reputation or bankruptcy of proposed third parties. Procedures and timing for submissions are specified in the Executive Regulations.
    • Amends requirements of building, development or maintenance of PPP plus provision of products or services according to processes and compensations set in contract and pre- approved by Supreme Committee.
    • Steps in Project Company’s role of operation and utilization directly or via third party in case of Project Company’s material breach of its obligations in operating the project or meeting the quality levels set by law or in the PPP contract, provided it does not remedy such breach, and the lenders do not step in to remedy such breach from the date of default notification of such breach within the contractually agreed time frame.
    • Reviews periodic reports on development, operation utilization, maintenance of health and safety mandatorily submitted by the Private Party.

IV. Contractual Terms Requirements:

PPP Law sets mandatory requirements for certain contractual terms to be included in the PPP Contract:

Term of the Contract:

The term of the contract is between a minimum of 5 to 30 years from completion of construction/development. Extension or renewals are not left to the will of the parties.

The contract term could be agreed to exceed 30 years upon a decree of the Ministerial Cabinet upon recommendation from the Supreme PPP Committee.

This official mechanism could indirectly apply to requests for extension/renewal. This is as the law amendment in 2021 deleted wording on contractual terms of renewal (i.e. parties cannot stipulate automatic renewal terms per contract).

Value of Contract not to be less than EGP 100 million.

Governing Law

The PPP Law mandates that Egyptian Law is the governing law of the contract. Parties are allowed to agree on arbitration or any other alternative dispute resolution processes.

Change in law:

The PPP law expressly allows parties to the PPP contract to stipulate a contractual mechanism for renegotiating/amending the contract, in case of unexpected changes in law applicable at the time of contracting and unexpected changed circumstances generally.

Public Party’s ability to make changes to the PPP against contractual compensation mechanism:

The PPP grants the right to the Public Entity Party to the PPP subject to approval by the PPP Supreme Committee to inflict changes to the PPP project for public welfare reasons. However, such is to be regulated by a contractual mechanism to be pre-agreed with the private party to the PPP contract setting mechanism for change and calculation of fair value for compensation for any losses incurred.

The Public Party may accordingly amend requirements of building, development, preparation of the project or value of such relevant services - in case of operation or utilization of the project by the Private Party – and the price of the product/services provided to the public.

Mandatory topics of Contract:

The law requires that the parties to the PPP contract stipulate contractual regulations of the following contractual topics but does not mandate certain mechanisms for dealing with such topics leaving flexibility for Parties to tackle those matters contractually according to nature of each PPP.

a) The scope of works/services and conditions for their implementation by the Project Company;

b) Ownership of the project’s funds and assets, the obligations of parties related to the handover and receipt of the project site, and the provisions for ownership transfer at the end of the project.

c) Responsibility of obtaining authorizations, permits, and approvals;

d) Mutual financial obligations and their relation to the funding mechanism;

e) Prices or rules of its determination for sale of Project products/ service and price amendment mechanism, as well as the method of adjusting prices for inflation indexes and changes in interest rates, if required;

f) Means of quality assurance and quality control, and supervision as well as administrative, financial, and technical monitoring of the project operation, utilization, and maintenance;

g) Regulating the right of the Administrative Authority to amend the conditions of the project’s construction, equipment, maintenance, operation, and utilization and other obligations of the Project Company, in addition to the basis and mechanisms of compensation for such amendments;

h) Types and amounts of insurance on the project, and the risks of its operation or utilization, and executive warranties issued in favor of the Administrative Authority, and provisions and procedures for their release;

i) risk allocation in respect of change in law, sudden accidents, force majeure, or discovery of antiquities, as the case may be, and the resultant compensation;

j) Duration of the contract and cases of early or partial termination, and the rights of the related parties;

k) Stipulate cases where the Public Party has the right to unilaterally terminate the PPP contract, the resulting financial obligations from the use of such right;

l) Regulation of handing over the project at the expiry of the PPP contract duration, or in case of unilateral, early or partial termination of the PPP contract;

m) Provisions regulating the ownership of the project facilities and assets for the PPP contract duration and upon its expiry or early termination.

V. Dispute Resolution:

PPP Law regulates disputes arising both pre and post contract;

a) Bidding/Pre-Contractual Disputes:

Complaints regarding any administrative procedure taken during the pre-contractual stage are to be submitted to a Complaints Committee with the Minister of Finance as head and membership of head of Central unit, two counsel members of state chosen by the counsel and a technical expert chosen by the Minister of Finance. Complaints must be submitted within 15 days of issuance or knowledge of the relevant administrative decision. The Complaints Committee’s decision to be taken within 30 days of submission is final, effective from its issuance date and mandatory for the Administrative Authority.

A relevant party is still able to submit an administrative cancellation claim before the Counsel of State but only after this mandatory complaint procedure is taken.

b) Alternative Dispute Resolution for Contractual Disputes

Parties may agree on arbitration or other alternative dispute resolution methods after approval of the Supreme PPP Committee, with Egyptian law as a mandatory governing law.

Although not specifically mentioned in the PPP Law, foreign shareholders to the PPP Project Company might have access to ICSID arbitration provided the interpretation of the applicable Bilateral Investment Treaty qualifies them as investors and said BIT includes express approval of the Egyptian state to the Jurisdiction of ICSID. With Egypt as member to more than 90 BITs, this option is worth exploring on a case-by-case basis.