Public Private Partnerships
Panama enacts Law regulating Public-Private Partnerships for Development as an incentive for private investment, social development and job creation.
Through Law 93 of September 19, 2019, published and in force on the same date, the Republic of Panama seeks to provide a legal framework for Public-Private Partnerships (“PPPs”) in order to encourage investment in the country.
PPPs are defined as means for attracting private capital while incorporating experience, know-how, technology, equipment and technical and financial capabilities, distributing risks and resources, in order to create, develop, improve, operate or maintain public infrastructure for the provision of public services. It is embodied in a long-term contract signed between one or several public entities and a private sector entity.
Through this new instrument, the Panamanian State seeks to enhance opportunities to develop public works and services through private contractors that can self-finance or co-finance projects that exceed fifteen million dollars. In self-financed PPPs, all project costs will be financed by the contractor who will be entitled to recover the investment through rates, prices, tolls, fees or charges transferred directly to the end user. On the other hand, in co-financed PPPs, the State, through the contracting public entity, may assume part of the costs, if these cannot be transferred to the end user or if said charges do not cover the project expenses.
With the purpose of regulating and managing PPP projects, the following administrative structure has been created: a Governing Body composed of Cabinet Council members, an Advisory Committee composed of four private sector members, two members of the academic sector and two members of the labor force, and the National PPP Secretariat. It is the responsibility of this National Secretariat to evaluate potential projects presented by public entities and the Advisory Committee, and forward their recommendations to the Governing Body.
PPP projects will be tendered through a procedure established in the new law, and the Public Procurement Law will apply when no express provisions are available.
This supplementary application includes the use of the appeal to the Public Procurement Administrative Court.
The result of the public tender will be recorded in an PPP contract signed with a specific purpose company that must be constituted by the winning private contractor. In the case of co-financed contracts, the funds must be managed through a trust that will include all assets and liabilities, present and future, linked to the project. The contractor that retains the PPP will only receive as compensation the agreed price, rate, subsidy or benefits. These contracts will be deemed public law, subject to ratification by the Comptroller General of the Republic and may be modified by reasons of public interest or at the request of the contractor.
The maximum term of the PPP contracts will be thirty years, extendable for up to ten years. PPP contracts do not imply a delegation of public functions such as inspection and regulation, as well as others exclusive to the contractor from the State. Contractual disputes will be resolved in a phased manner, initially through direct negotiation, and subsequently through a technical board or an arbitral tribunal.
Exclusions
The National Institute of Aqueducts and Sewers, the Panama Canal Authority, the Social Security Administration, the National Bank, the Savings Bank, the Agricultural Development Bank, the National Mortgage Bank, the Agricultural Insurance Institute, the Securities Market Superintendence and the Superintendence of Banks, are all excluded from this Law. Services such as public security, medical health, official education and metal extraction concessions, are also excluded.
Author: Joaquin De Obarrio