Viewpoint: Mélanie Guérinot
On November 8 2017 the National Assembly adopted the Law No. 202/AN/17/7th on strategic infrastructure contracts. The law gives the government the power to renegotiate or, if necessary, terminate infrastructure contracts when it considers that they are contrary to Djibouti’s fundamental economic and social interests. This law also applies to contracts signed prior to the date of its enforcement, and in the event of termination of the contract, compensation is provided to the necessary parties. The introduction of this law was necessary because of the complicated history of infrastructure development in Djibouti and the rest of Africa. While colonisation had, until the 1960s and 1970s, monopolised decision-making powers, these were decentralised once African nations became independent. In a post-colonial setting, however, projects still require significant private financing as countries seek to build infrastructure to match their strong economic growth; and Djibouti is no exception.
An important aspect of investment in any country is the clarity of the legal landscape, something studied by investors before participating in any infrastructure bid. As a result, foreign investors devise contracts, together with specialised legal teams and international law firms, which are then handled by legal and technical advisers of the relevant government ministry. This sometimes creates an imbalance in the negotiation structure between investors and the government. Too often, government entities prefer to dedicate their own resources to negotiating investment agreements rather than recruiting local and/or international law firms that have specialists in a particular field, and which are used to handling investor pressure.
However, this trend appears to be shifting, and we are now seeing a rebalance in the dynamic between investors and the government in contract negotiations. Overall, however, no sustainable investment is possible without legal certainty, which in this case comes in the form of transparent and comprehensive contracts.
Public-private partnerships (PPPs) can roughly be defined as long-term contractual agreements between public and private entities, which can used to boost the quality and quantity of infrastructure projects. Since early 2017 Djibouti has put in place a PPP law that clearly sets out the legal and institutional regime governing the use of the investment instrument.
The law clearly stipulates the accompanying rules and basic principles that apply to these agreements, such as their legal provisions on governance, contract-enforcement terms and to a variety of dispute-resolution procedures. This legal framework also resulted in the creation of a government entity specialised in the control and supervision of PPPs.
In 2018 various decrees extended the powers of the National Commission for Public Procurement to include the awarding of PPP contracts. The decrees also resulted in the establishment of the PPP Regulatory Commission, which governs the awarding procedure of PPPs. As its end goal is to boost infrastructure development across the country, the law and its comprehensive and controlled implementation of PPPs aligns closely with the national development strategy, Djibouti Vision 2035. However, through this conduit, the government is also providing a clear example of how it is strengthening legal certainty for both domestic and foreign investors. In addition, the PPP law and all the implementing decrees have allowed the state to more clearly set out its powers to award and terminate infrastructure agreements. It has also provided further legal and financial guarantees to both sides through the creation of a more transparent, accessible and controlled procedure governing bidding and operation.
Overall, the efficient and universal nature of the framework is fair for both investors and the state. The innovative financing approach will also enhance the attractiveness of Djibouti to foreign investors, give investors more clarity and boost the government’s capacity to interact with a variety of foreign investors.