2020, “Zhe Public-Private Partnership Lavreview”, Chapter 22 and Chapter 24 clarifies and explains legal and other practical aspects involved in the formation of PPP contracts for dissem
Regulation on classification of public-private partnership
PPP contracts in the UK are classified into various categories based on their specific characteristics and objectives Under the Defence and Security Public Contracts Regulations (DSPCR) 2011, Regulation 3(1) (Interpretation) sets out the definitions for:
“Services contract” is a contract under which a procurer engages a supplier to provide services The private partner is responsible for providing and maintaining the services specified in the contract, such as healthcare, education, or transportation The government retains ownership and control over the assets involved in the provision of the service.
“Supply contract” is a contract for the purchase or hire (lease or rental) of goods (and for the siting or installation of those goods where relevant) These contracts focus on the procurement and supply of physical items required for the project's implementation and operation Supply contracts cover the sourcing, delivery, and quality assurance of goods or materials They involve the private partner procuring and delivering the required items to the project site, ensuring compliance with specified standards and technical requirements.
“Works contract” is a contract for the construction or design and construction of a work or works for a procurer; or a contract where a procurer engages a person to procure the construction, or design and construction, of a work corresponding to specified requirements for the procurer These contracts involve the design, engineering, construction, and installation of the project's physical components A contract is a works contract only if its subject specifically covers execution of activities under Division 45 of the Common Procurement Vocabulary code list.
Sometimes the contract will be a mix of supply, work or services In such mixed contracts, the general guideline is to classify the contract based on the component that holds the highest value
Regulation on signing and implementation of project contracts
Under the UK`s legislation, the public bodies are responsible for PPP in the United Kingdom are His Majesty’s Treasury; the Cabinet Office; the Infrastructure and Projects Authority (IPA); procuring bodies: the authorities that structure and procure projects, independent regulators; planning authorities, the Comptroller and National Audit Office
A PPP concession is granted by the goverment under English contract law (or under Scottish law where the concession is granted by the Scottish government using devolved powers), although in some sectors of government, primary legislation has been passed to enable PPP projects to be financeable The powers of central government departments are mainly unfettered unless limited
* Guidance for The Defence and Security Public Cortracts Regulations 2011, Chapter 6. by common law or legislation Local government and other public bodies will have more restricted powers conferred by legislation.
The choice of what PPP model to use on each project is up to the procuring body to decide and there is no standard approach or correct structure when procuring a project The Cabinet Office and His Majesty’s Treasury will oversee any decision on the structure of the project and most importantly the source of funding for the project.
Through the Public Contracts Regulations (PCR) 2015, the procurement process must comply with Utilities Contracts Regulations 2016 as well as the legal framework under the Guidance for Public procurement policy The
DSPCR specify four procurement procedures, designed to ensure faimess, transparency, and competition in the procurement process: the open procedure, the restricted procedure; the negotiated procedure, the competitive dialogue procedure and the public-private partnership initiative procedure*’.
The open procedure is the most straightforward and widely used procurement procedure It allows any interested supplier to submit a tender in response to a procurement notice The process involves a single stage where all qualifying suppliers can participate and submit their bids This procedure promotes open competition and provides equal opportunities for suppliers to present their offers”.
The restricted procedure is a two-stage process where suppliers are initially pre-qualified based on specific criteria Only the pre-qualified suppliers are then invited to submit their tenders The restricted procedure allows for a
* Guidance for the Public Procurement Policy 2015, available at: hitps:/imny gov uk/guidance /public-sector-
-policy#the-be gal-framesvork - dome stic-legislation, accessed 20 Feb 2024.
~ Guidance far The Defence and Security Public Contracts Regulations 2011, Chapter 9.
* Public Contracts Regulations 2015, Regulation 27 more focused evaluation of a limited number of suppliers, streamlining the selection process while maintaining competition and transparency””.
The negotiated procedure involves direct negotiations between the contracting authority and selected suppliers This procedure is typically used in specific circumstances, such as when the open or restricted procedure is not suitable or when the project requires complex solutions or customization The negotiated procedure allows for flexibility in discussions and negotiations with suppliers to achieve the best value for the contract.
In competitive procedures with negotiation, any economic operator may submit a request to participate in response to a call for competition by providing the information for qualitative selection that is requested by the contracting authority The documents should include information regarding the subject- matter of the procurement, minimum requirements for tenders and contract award criteria”.
The competitive dialogue procedure is employed in cases where the contracting authority faces complex projects that require extensive dialogue with potential suppliers to develop innovative solutions This procedure allows for an ongoing dialogue between the contracting authonty and suppliers throughout the procurement process Initially, suppliers are pre-qualified, and then the contracting authority engages in a dialogue to explore and refine potential solutions Once the dialogue phase is complete, the procedure follows a competitive bidding stage”.
The open and restricted procedures do not allow any form of negotiation or discussion between the competent authority and the contractor, hence deemed not suitable for bidding on complex PPP projects Until 2006, the negotiated
* Public Contracts Regulations 2015, Regulation 30. procedure was used more widely Since 2006, it has been government policy that
PFIs should usually be procured under the competitive dialogue procedureTM.
However, compared to the other procedures, competitive dialogue procedure improved communication between the contracting authority and the bidders during the dialogue, which allows to better define the contracting authonity`s needs and come up with better design and innovative solutions, and enhanced competitive tension during the dialogue period which allows the contracting authority to achieve better value for money and agree on all vital commercial issues while there is still competition among participating bidders?!
Prequalification is an essential step to streamline the selection process. This stage involves assessing potential bidders' suitability and capacity to perform the contract based on predetermined criteria Evaluating factors such as financial stability, technical expertise, and relevant experience ensures that only qualified bidders proceed to the next stage Prequalification enhances efficiency and facilitates a more focused evaluation process Qualified bidders are invited to submit detailed tenders in response to the contract requirements The tender documents typically include instructions, evaluation criteria, contract terms, and specifications These documents provide a clear framework for bidders to formulate their proposals and enable consistent evaluation.
The evaluation process is a crucial stage that ensures faimess and transparency Tenders are assessed based on the stated criteria in the tender documents Evaluation panels are established to review each bid objectively, considering factors such as price, quality, and sustainability The process must be © Exropean BPP Expertise Centre (2012), United Kingdom - England PPP Units and Related Wutindional Framework, available at hitps:/Annwv tb org/attachuments/epec/epec_uk_england ppp vuớt and related. instihutional framevrork_enpaf, accessed 24 Feb 2024.
‘European PPP Expertise Centre (2010), Proctavauezt of PPP and the tse of Competitive Dialogue in Europe:
A review of public sector practices across the EU, available at hitys:/immy eb org/attachments/epeciepec pronmement ppp competitive dialogue enpdf accessed 24 Feb 2024. conducted in a manner that guarantees equal treatment and avoids favouritism. Ultimately, the contract is awarded to the bidder who offers the most advantageous tender and meets the specified criteria
The PCR 2015, specifically Sub-section 7 of Section 5 provides a comprehensive set of rules and procedures for the award of contracts in the UK. The legislation applies to public sector contracts that exceed specified thresholds, covering various sectors ranging from infrastructure projects to public services. 2.1.2.3 Signing contract
Regulation on the content of public-private partnership contract
2.1.3.1 Basics of project execution contracts
The Standardisation of PFI Contract (SoPC) is the foundation for PPP contracts used in PFI projects in England SoPC, developed by Partnerships UK and HM Treasury, is a standardised form contract that provides consistent language and terms for drafting PFI contracts The current version, SoPC4, was issued in March 2007 and has been mandatory for all PFI projects since May 2007.
SoPC4 serves as a reference point for public sector bodies when creating PFI contracts, ensuring uniformity and facilitating the dissemination of information on acceptable risk allocations It promotes commercially balanced contracts and aims to deliver the best Value for Money for public projects The contract also includes guidance on key issues that commonly arise in PFI projects
Exceptions to using SoPC4 are only permitted in exceptional circumstances and on project-specific grounds Derogations from SoPC4 or the use of approved sector-specific contracts, such as those for health or education,require approval from either a sector-specific body or the Assurance team of
Infrastructure UK This 1gorous derogation regime ensures that deviations from the standard contract are carefully considered and justified.
The standardised approach provided by SoPC4 has resulted in a relatively uniform set of PPP contracts for PFI projects in England This has been beneficial as it allows for widespread familiarity and market acceptance, enabling efficient dissemination of information regarding permissible risk allocations The uniformity promotes transparency and consistency in PFI projects, contributing to the achievement of VfM and the overall success of PPP initiatives in England.
Regarding disclosure of projects and contract information in the UK, the government has enacted a dedicated legislation called the Freedom of Information Act (FOIA) 2000 This act ensures the public's nght to access government records and imposes limitations on this nght only in specific conditions The FOIA doesn’t generally apply to limited companies, sole traders or charities However, if the private entity supplies services on behalf ofa public authority, they may hold information in connection with those services which could be requested under FOIA The public authority is responsible for responding to the request, and for deciding whether the information can be released to the public Contracting authorities are required to publish contract notices via Public Notice’, providing potential bidders with information about procurement opportunities The aim is to maximise competition and attract a wider pool of qualified suppliers Additional advertising of project contracts may be necessary for certain contracts, enhancing transparency and accessibility.
Regulation on the termination of PPP contract 3D 2.1.5 Regulation on dispute resolution
“ Cabmet Offke (2020), Procurement Policy Note - Introchution of Find a Tender, p availble at: ]tps:/wrvrr gov uk/govenmentipublic ations procurement-policy-note-0820- mtrochuction-of-find-a-tender, accessed 29 Feb 2024.
Regarding termination of PPP contracts, the authority will generally terminate the contract for contractor default or persistent breach This mechanism can be referred to as Step-in right a power under the contract or in the country’s legislation for the govemment or lender to take control of the project in certain situations Step-in nghts for the govemment are normally reserved for situations in which the project poses significant health and safety risks, threats to national secunty, or when legal requirements call for the government to take over the project The government may also terminate the PPP contract and take over the project if the project company fails to meet service obligations The project contract should allow the contractor time to rectify breaches Authority termination rights will usually be subject to the step-in rights of the project’s senior funders 33
In particular, the state party in a PPP contract has the nght to arbitranly terminate the contract for reasons of public interest Contracted compensation will usually be an amount that would leave the contractor in the same position as if the contract had mun to full term and typically comprise of the Base Senior Debt Termination Amount, redundancy payments, sub-contract break costs and compensation of contractor equity**.
One notable PPP decision in 2018 was Tees Esk & Wear Valleys NHS Foundation Trust v Three Valleys Healthcare Limited and Bank of Scotland PLC, which concerned the ability to terminate a project agreement pursuant to the service of termination notices under a funders’ direct agreement, provided that two specific notices had to be served by the public authority The funders disputed the validity of the second notice on the basis that the notice was to
“Thomas = Reuters Practical ôLaw (202), Glossary = Step-m_—s rights, ô= availabe at
3ttps:/Ak: practicallaw thomsonreuters cơn/- 107-7320 *ransition Typeault&econtextD ata=(sc Default), accessed 29 Feb 2014
*4 PPP Policy Note : Early termaution of contracts (2015). detail amounts owed by the project company to the public authority and other obligations of the project company (the public authonty having made ‘proper enquiry’) but did not contain such information and was therefore invalid The intention of this second notice was to give the funders the opportunity to assess whether it wanted to step into the project, and the funders’ argument was that the second notice delivered by the public authonty was invalid as it contained insufficient details The funders also argued that there was no evidence that the public authority had made ‘proper enquiry’ The judge ruled against the funders, detailing that if the funders had chosen to step into the project following the second notice, it would have only been liable for the quantified liabilities. However, the public authonty did not have to quantify the other obligations, and there was no obligation on the public authority to provide evidence of its enquiries for the notices to be valid®®.
Under PPP contracts in the UK, disputes that arise between the parties involved are typically resolved through arbitration, mediation, or other alternative dispute resolution (ADR) methods specified in the contract These mechanisms are designed to provide a structured and efficient process for resolving conflicts outside of traditional court litigation 36
Arbitration is a widely used method for dispute resolution in PPP contracts It involves referring the dispute to one or more impartial arbitrators who review the evidence and arguments presented by both parties The arbitrators then render a binding decision, known as an arbitral award, which resolves the dispute Arbitration offers advantages such as flexibility in
“ Tees Esk & Wear Valleys NHS Foundation Trust v Three Valleys Healthcare Limited and Bank of Scothnd
PLC (2018) EWHC 1659 (TCC) sd Aermutive dispute resohition Guidance 2023, available at: https s/assets publishing service gov vửcfosedia/6409f997e90076cd3a9cfc3/ADE_Guidance accessible WEB 20 pat, accessed 29 Feb 2024,p 6 procedure, confidentiality, and the ability to choose arbitrators with expertise in the subject matter of the dispute It provides a faster and more cost-effective alternative to court proceedings and is favoured for its ability to maintain commercial relationships between the parties.
Mediation is another commonly used method in PPP contracts It involves the appointment of a neutral mediator who assists the parties in reaching a mutually acceptable resolution The mediator facilitates communication and negotiation between the parties, helping them explore potential solutions and find common ground Unlike arbitration, mediation does not result in a binding decision but aims to facilitate a voluntary settlement Mediation is valued for its collaborative nature, allowing the parties to maintain control over the outcome and preserve ongoing relationships?”.
In addition to arbitration and mediation, PPP contracts may specify other ADR methods, such as expert determination or dispute boards, depending on the complexity and nature of the project Expert determination involves referring specific technical or factual issues to an independent expert for a binding decision Dispute boards, on the other hand, consist ofa panel of neutral experts who provide non-binding recommendations or opinions on disputes during the project's duration.
The use of arbitration, mediation, and other ADR methods in PPP contracts offers several benefits Firstly, they promote expeditious resolution, allowing parties to avoid lengthy court proceedings This is especially important in the context of PPP projects, where delays can have significant financial implications Secondly, these methods are generally more cost-effective compared to traditional litigation, reducing legal expenses and preserving project resources Lastly, resolving disputes through ADR minimises disruption to © ARernative dispute resolntion Guidance 2023, 2id,p 20-22. project operations, enabling the parties to focus on project delivery and maintain positive working relationships.
Overall, the inclusion of arbitration, mediation, and other ADR methods inPPP contracts in the UK reflects a commitment to efficient and practical dispute resolution These mechanisms provide a structured framework for resolving conflicts, allowing parties to address their differences ina fair, timely, and cost- effective manner while minimising disruptions to project operations.
Regulation on public-private partnership in Vietnam
Regulation on classification of public-private partnership
Classification of project contracts is one of the first and most important considerations when investors start a PPP project Depending on, amongst other factors, the subject and objectives of the projects, and most of the time, the government’s policy, the investors will select the most appropriate form of contract to meet the requirements as well as the characteristics of the projects.
In Vietnam, PPP are classified into models based on the nature of the project and the involvement of the public and private sectors The classification of PPPs in Vietnam generally follows the guidelines provided by the Ministry of Planning and Investment and Law on PPP Investment 2020 Article 45 of the Law on PPP Investment 2020 stipulates the classification of PPP contracts as follows:
The Build-Operate-Transfer (BOT) Contract Upon completion of the project, the investor is granted the nght to operate the project for a specified period of time At the end of the term, the investor transfers the project to the competent state authority.
The Build-Transfer-Operate (BTO) Contract Upon completion of the project, the investor transfers the project to the competent state authonty and is granted the right to operate the project for a specified period of time.
The Build-Own-Operate (BOO) Contract: Upon completion of the project, the investor or project enterprise becomes the owner and is granted the nght to operate the project for a specified period At the end of the term, the investor or project enterprise terminates the operation of the investment project in accordance with the provisions of investment laws.
The Operate-Management (O&M) Contract is a contract signed for the operation and management of all or part of a project for a specified period of time.
The Buiid-Transfer-Lease (BTL) Contract: After the completion of the project, the investor or project enterprise transfers the project to the competent state authonty and is granted the right to provide services based on the operation and exploitation of the project for a specified period of time The competent state authority has the nght to lease the services and make payments to the investor or project enterprise.
The Build-Lease-Transfer (BLT) Contract: After the completion of the project, the investor or project enterprise is granted the nght to provide services based on the operation and exploitation of the project for a specified period of time The competent state authority has the right to lease the services and make payments to the investor or project enterprise At the end of the service provision period, the investor or project enterprise transfers the project to the competent state authority.
Furthermore, based on the project's characteristics, the involved parties have the option to select a hybrid contract that offers a more adaptable project agreement®®, Nevertheless, the utilisation of such contracts has sparked debates among legislators and legal experts in Vietnam.
** Article 3 (16) g Mixed contract prescribed in Clause 3 of Article 45 of this Law.
With the foundation under Article 45, the Law on PPP 2020 expands on these definitions by offering additional clarification on certain types of PPP contracts, specifically focusing on the method of project revenue collection It is categorised as follows:
The first mechanism involves directly charging users or obtaining revenue from public goods In this mechanism, the government or relevant authorities establish a system to collect fees or charges from users in exchange for accessing or utilising public goods or services These fees can be in the form of tolls, fares, entrance fees, licensing fees, user fees, or any other type of charges The revenue generated from these fees is then used to cover the costs associated with the operation, maintenance, and improvement of the public goods or services This can include expenses such as infrastructure upkeep, facility management, personnel salaries, equipment maintenance, and other operational costs The direct charging of users ensures that those who directly benefit from or utilise the public goods and services contribute to their funding.
It helps to create a sustainable financing model where the revenue generated from the fees is reinvested back into the maintenance and improvement of the infrastructure or public services, ensuring their continued availability and quality This approach is commonly used by BOT, BTO, BOO and O&M contracts.
The second mechanism entails the state making payments based on the quality of public goods Under this mechanism, the government or relevant authorities establish specific performance targets or quality standards for the provision of public goods or services These targets can include critena such as infrastructure quality, service delivery, environmental standards, or any other measurable indicators of performance The government then enters into contracts or agreements with service providers or project implementers, which can be private companies, non-profit organisations, or public entities These contracts outline the performance targets and standards that the service providers must meet By linking payments to performance, this mechanism aims to ensure accountability and encourage the efficient and effective delivery of public goods and services It incentivizes service providers to focus on achieving the desired outcomes and continuously improving the quality of their performance Two contracts that follow this approach are B TL and BLT contracts??.
In the past, the Vietnamese government employed BT contracts for PPP projects These contracts were widely utilised for various public infrastructure initiatives However, due to identified loopholes and inherent features that contributed to a notable rise in white-collar offences such as corruption and bureaucratic hurdles, the government has discontinued the use of this contract format in recent PPP legislation.
Regulation on signing and implementation of public-private partnership PED) CCH CONTA CHS se cron sseraronessarere sepesnsserasenneunnmenanseonaccrennmpunisiaaerveseamnegmnees Oe 2.2.3 Regulation on the content of public-private partnership contract
According to Article 5 Law on PPP 2020, competent authorities for signing PPP contracts include:
“a) Ministries, Ministry-level agencies, governmental agencies, central bodies affiliated to political organisations, Supreme People’s Procuracy, Supreme People’s Court, State Audit, Office of the President, Office of the National Assembly, and central bodies of Vietnam Fatherland Front and socio- political organisations (hereinafter referred to as Ministnes and/or central authorities);
*° Hoang Thi Hong Hà (2015), Public-private partersimp: theoretical ad practical issues, Master thesis,
‘Viemam National University HCM, University of Economics and Law,p 22-23. ® Adam Moncrief et al (2021), New Law on Public-Private Parmership in Viebven, VIETNAM LAW &LEGAL FORUM, avaihbl at: https /Aviectwmlammugazine vuhaw-lavy-on-public-private-patnership-in-Xietwa> 27533 hima, accessed 15 Feb 2014. b) Provincial People’s Committees; c) Agencies and organisations set up by the Government and the Prime Minister, and assigned make state budget estimates according to the provisions of law on state budget (hereinafter referred to as other authonities).”
In the field of Administrative Law, the public entity acts as a governing body and is obliged to act based on the principle of order-obedience In Civil Law, parties involved in civil relationships rely on the principle of agreement and freedom of will In PPP law, the State plays a role as a participating party in the legal relationship, which requires both adherence to the principle of freedom of agreement and compliance with the principle of order-obedience*! The combination of these two legal capacities of the public entity and the application of these two regulatory approaches in PPP legal provisions are very challenging.
Investor selection isa critical aspect of economic development and project implementation, and it plays a significant role in ensuring the principle of Vietnam’ s legislation Investor selection procedures include: (1) Drawing up the Shortlist (where applicable); (2) Preparing for selection of the investor; (3) Selecting investors; (4) Evaluating bidding documents; (5) Submitting assessing, approving and publishing investor selection results; (6) Negotiating. Jinalising and concluding a PPP contract and publishing contract information® Following this, Section 2 Chapter II] of PPP Law 2020 mentioned the investor selection approaches
Open bidding is a competitive process where the procuring authonty publicly invites interested investors to submit their bids for the PPP project*®.
* Vitram Chamber of Commerce and Industry (2023), Report on public-private parmership in Vietnam: Barriers and solutions , Publishing House for Industry and Trade ,p 23 © Law on PPP Investment 2020, Artie 28
* Law on PPP Investment 2020, Article 37
Competitive negotiation involves a process where the procuring authority negotiates with multiple investors who have expressed interest in the PPP project*
Investor appointment, also known as direct negotiation or direct appointment, occurs when the procuring authority selects a specific investor to negotiate and enter into the PPP agreement without a competitive process®
In certain special cases where conditions arising in a PPP project are so specific or that the investor selection approaches referred to in Article 37, 38 and
39 of this Law cannot be applied, competent authorities shall seek the Prime
Minister’s decision on the investor selection plan!ế,
Decree 35/2021/ND-CP also details and guidance on these modes of investor selection In particular, Open bidding is generally applicable to all PPP projects, except where the other modes of investor selection set out below apply. Competitive negotiation shall be applicable where (a) no more than three investors meet the requirements of the PPP project, and/or (b) the project applies new or advanced technology Direct appointment of investors shall be applicable to (a) projects relating to national defence and security, and or the protection of state secrets and/or (b) projects that require an altemative investor to be selected on an urgent basis to ensure continuity in project implementation Where none of the modes set out above are able to be utilised or in situations which may affect national interests, the competent authorities may propose another mode for investor selection and submit it to the Prime Minister for his approval These modes apply to the selection of both foreign and domestic investors*”.
TM Law on PPP Investment 2020, Art 38.
* Law on PPP bwestment 2020, Arte 39.
* Law on PPP Investment 2020, Artick 40.
Allen & Gledhill (2021), Guidance on Vietnam’s Lav on Public-private parmership in force from 29 March
2021, available at https /Avvrve allenandgle dhill comAmipublic ation /articles/18353 guisiance-on-s-lavy-on-publix- private-partnership-mr-forc e-fram-29-mar2021, accessed 10 Feb 2024.
In recent years, especially during the initial phase of the legal framework for PPP, the majority of PPP projects have been implemented through direct appointment of contractors Furthermore, from 2016 to 2020, among the 32 PPP projects issued Investment Certificates by ministries and sectors since the effective date of Decree No 15/2015/NĐ-CP, most of them were also implemented through direct appointment of contractors Additionally, out of the
264 PPP projects in which localities have determined the investor selection method, only 107 projects (41%) were implemented through competitive bidding, while the remaining 157 projects (59%) were implemented through direct appointment of investors Among those, 154 projects were directly appointed to an investor because only one investor met the prequalification requirements For example, in Hanoi, out of the 15 BT projects with signed contracts, only one project was selected through competitive bidding, while the remaining 14 projects were directly appointed to contractors Experts have assessed that these results indicate a lack of competition and transparency in the implementation of PPP projects*®
Over time, the legal basis for PPP has been further improved, though decree No 63/2018/NĐ-CP did not provide for direct appointment of contractors for PPP projects but clearly states that investor selection should be conducted according to the provisions of procurement laws, until Law on PPP 2020 finally solved this problem.
According to the law, specifically Article 49 of Law on PPP 2020, and Article 65 of Decree 35/2021/NĐ-CP, once the investors selecting process has
* H Thoan (2020), Traruparent selection of contractors for PPP projects is crucial to prevent loss and waste, avaible at: —_http://backismtomnvniminh-bach-hu-chon-nha-thaw cha-an-ppp-de-ngarthat-thoat-lng-phi-
7375 bumal, accessed 31 Mar 2024 finalised, the competent state authority is responsible for arranging the signing of the project contract There are two ways in which this can be done:
The first approach, the competent state authonty and the investor sign the project contract In this case, the competent state authority and the investor signa document regarding permission granting, nights and obligations of the party involved With this approach, signatories to the project contract consist of the competent state authority (public partner) and the Investor (private partner) The project enterprise, though not being the signatory to the project contract, is in the position to exercise the rights and obligations of the Investor as per the project contract For this to happen, lawmakers have formulated regulations that allow for an agreement (as an addendum to the contract) to reflect the intentions of the signatories of the project contract to assign the project enterprise the responsibility of fulfilling the investor's nghts and obligations as outlined in the project contract Another approach is that the investor and the project enterpnse jointly sign the project contract with the competent state authority In this approach, the signatories to the project contract include the competent state authority as the public partner, the investor, and the project enterprise as the private partner As both the investor and the project enterprise are key signatories to the contract as a single private partner, they share the same rights and obligations and are involved in the exercise of the private partner's rights and obligations as outlined in the project contract.
2.2.3 Regulation on the content of public-private partnership contract
2.2.3.1 Basics of project execution contracts
According to Article 47 of Law on PPP 2020, the regulation concerning the content of PPP contracts terms on rights and obligations that the parties agreed upon through negotiations.
Firstly, the contract addresses the objective, scope, location, timing, and project schedule, including the construction period It also specifies the technical specifications, technologies, project quality, and the products or services to be delivered Furthermore, the total investment capital and financial plan of the project are covered in the contract.
Moreover, the contract addresses the value, conditions, ratios, and progress of the implementation of the portion of state responsibility in a PPP project, if applicable It also includes matters such as compensation, land acquisition, and resettlement Additionally, it outlines the construction process, including requirements for inspection, supervision, and quality management during construction The contract also includes provisions for the final check, taking over, and final payments of completed works.
Next, the contract defines the allocation of nsks and responsibilities among the parties involved, including the competent state authorities, authonsed organisations, and the investor It also establishes principles for dispute settlement and addresses the occurrence of force majeure events Additionally, the contract may outline any investment incentives and bonds that are applicable to the project.
The contract also specifies the governing law for project contracts, relevant contracts, and the mechanism for resolving disputes It establishes the effectiveness and validity of the project contracts and outlines the principles and conditions for amending, supplementing, and terminating the contracts. Moreover, it covers the transfer of rights and obligations in accordance with the project contract To ensure the contracts are comprehensive and suitable for the specific project requirements in different areas and sectors of authority, Ministries and ministerial agencies provide detailed standard form contracts
Regarding disclosure of projects and contract information, the Law on Public Investment in Vietnam sets out the principles and procedures for implementing and managing investment projects, including PPP projects Public disclosure of project contracts is a mandatory procedure to ensure the publicity, transparency, and assurance of access to information by the society and communities'° Public disclosure of project contracts is the responsibility of the competent state authority, which shall be done on the national procurement network system within 07 working days of the signing date of the project contract.
Regulation on the termination of public-private partnership contract
Law on Public Investment 2019, Artic 14 © Law on PPP Investment 2020, Art 9; Decree 34/2021/NĐ-CP, Artich 4,5
The Law on PPP 2020 mentioned the contract termination shall comply with the provisions of the contract and may serve as a basis for the contract discharge It also provides that a PPP project contract can only be terminated early in certain circumstances In case of an early termination ofa contract, the contracting authority shall cooperate with the lender in selecting an alternative investor to sign a new PPP contract, put on pending the implementation of the response plan, ifan alternative investor has not been selected yet, the contracting authority shall be responsible for the safety and anti-deterioration of the work or infrastructure system with respect to the project under construction; the operation and commercial use of the work or infrastructure system to ensure the continuity of the provision of public products and services with respect to the project in operation®!
The law does not seem to provide for any flexibility for the parties to agree on any other termination events in the PPP contract, although this may be managed to the extent that the parties are able to negotiate what is defined as a material breach Early termination payments to investors are allowed only if such payments are due to national defence or national secunty reasons or if the contracting authonty materially breaches the PPP contract.
Regulation on dispute resoẽution eee cssceereee 44 2.3 The similarities and differences regarding regulations on public-private
Disputes arise when parties have disagreements or conflicts regarding their rights and benefits According to statistical data and research, disputes in PPP projects often anse within the first 10 years after reaching financial agreements In the first year, disputes account for 4.2% of cases By the fourth year, approximately 15% of disputes occur Furthermore, there is a significant increase to 30% of disputes arising in the tenth year after reaching financial agreements Mr Giang Doan, expert from US Agency for Intemational
*! Law on PPP bwvestment 2020, Art 52 (4) (ab)
Development, states that projects implemented through public-private partnerships typically involve large values and have long implementation and operational periods® Disputes in public-private relationships usually include three common types of disputes: disputes between the public sector and the private sector, disputes between investors and relevant parties during project implementation, and disputes between investors or project companies and service users.
The PPP Law provides four methods for dispute resolution, namely negotiation, mediation, arbitration, or court, with negotiation being mandatory. For litigation, disputes involving a state agency or disputes where all parties are Vietnamese entities can only be resolved through Vietnamese courts or Vietnamese arbitration Disputes outside of this category have flexible options for dispute resolution bodies, including Vietnamese courts, Vietnamese arbitration, foreign arbitration, international arbitration, or arbitration established by mutual agreement of the disputing parties®.
Currently, for PPP projects implemented by domestic enterprises, dispute resolution primanily relies on negotiation without much intervention froma third party Conversely, there have been cases where investment projects with foreign involvement have resolved disputes through procedures involving third parties such as arbitration Regarding dispute resolution for foreign investor PPP projects, Vietnam has established internal guidelines within state agencies through Decision No 14/2020/QD-TTg Under the law on PPP, regulations pertaining to dispute resolution primarily focus on violations and sanctions within PPP projects These regulations particularly address (1) the types and
“ Ngayen Thi Hong Proc (2022), Resohing ủneipuent project disputes under the PPP modality through
Viemamese arbitration, Jnstinae of Legisianve research, availabk at http :Mapphap savPage sitintuc Ainchitiet aspx tinacid!1366 , accessed 20 Feb 2024.
* Law on PPP Investment 2020, Arte 97. timing of disputes, (2) the methods of resolving disputes, and (3) the competent authorities and procedures for resolving disputes arising from PPP investments. While the specific legislation may vary across jurisdictions due to different legal systems, objectives, and societal norms, the typical mechanisms available for parties to resolve their disputes include negotiation, conciliation, arbitration, or litigation in court Furthermore, in cases involving disputes between the local government and other parties, private parties often have the option to pursue administrative procedures to address their complaints.
In some cases, governments address dispute resolution mechanisms in intemational instruments such as bilateral investment treaties or multilateral agreements Altematively, they may outline these mechanisms in local PPP legislation that applies to all PPP contracts By establishing these mechanisms, governments aim to provide a structured framework for resolving disputes, ensuring that they are dealt with in a fair and timely manner, while minimising any negative impact on service delivery.
2.3 The similarities and differences regarding regulations on public-private partnership in The United Kingdom and Vietnam
Since 2021 until July 2023, there had been three transportation BOT projects that have been transitioned from the previous phase and have been signed Additionally, there are eight new projects in the preparation stage for investment, but no PPP contracts have been signed yet Among these, seven projects are in the transportation sector, and one project is in the BTL model for the clean water sector Therefore, no new PPP contracts have been signed from the effective date of the new PPP Law until now®* Clearly, the PPP legal framework in Vietnam still faces numerous obstacles and complexities, causing
“ Ministry of Fwwawe (2023), From 2021 snl now, no PPP contracts have been signed availabe at: hits /ittcg mof gov wbrebcenter portalttphc pages z/Uchi-tiet-tin-ttphtc 7D ocName=MOFUCM2S1109, accessed 3 March 2024 hesitation among investors There is also a lack of clarity in certain laws, making project management more challenging for public entities These figures demonstrate a significant contrast to that of the UK, where during the period of
May 2021 to May 2022 had made £337 million, implemented projects ranging from highways, undergrounds, hospitals, etc.*°
In both countries, investor selection criteria typically include assessing the qualifications and capabilities of potential investors Both regulations provide criteria such as the investor's track record, technical expertise, financial strength, and managerial capabilities to identify investors who possess the necessary skills and resources to successfully deliver and operate the PPP project Moreover, both Vietnam and the UK regulation set the framework for investors to compete. Necessary legal frameworks are designed to evaluate various aspects, such as the investor's technical capabilities, financial offer, value for money, sustainability, and alignment with project objectives, while still ensuring consistency and transparency in the selection process.
The regulations in both countries regarding disclosure of project and contract information recognize the importance of providing the public with access to information related to public investments and procurement opportunities Both acknowledge the right of the public to seek relevant information within a specified timeframe and through designated platforms or systems
Both Vietnam and the UK recognise the value of mediation as a voluntary and non-binding form of dispute resolution Parties in PPP contracts can choose to engage in mediation to reach a mutually acceptable settlement with the
** SIafield Ltd (2023), PPP Aruual Report Executive Smmmury YEAR 3: MAY 2021 - MAY 2022 - An intelligent client publication,p 4. assistance of a neutral third party Moreover, administrative procedures can be utilised to resolve disputes in PPP contracts This may involve negotiation, mediation, or arbitration conducted by specialised dispute resolution organisations or administrative bodies
The specific terms and procedures for dispute resolution in PPP contracts are often determined by the contract itself Parties could include dispute resolution clauses in the contract, which may specify the preferred methods of resolution, such as mediation or arbitration Both jurisdictions also provide for the option of litigation in their respective court systems Parties in PPP contracts can bring their disputes before the courts to seek a resolution through formal litigation proceedings.
Regarding classification regulations, in Vietnam the PPP Law provides a clear definition of PPP contract types based on the payment method This format helps both contract parties easier to follow the context of the law Vietnam’s regulations aim to provide for many types of PPP contracts and enables investors to select the most appropnate form of investment, which fits investors’ conditions, capability and encourages investors’ participation® In contrast, the
UK has a comprehensive legal framework that categorises projects based on their primary objective, making it easier to determine the applicable between the processes It also helps in aligning the specific requirements and expectations of each project type with the corresponding legal provisions Each category has its own set of regulations, guidelines, and best practices that cater to the specific requirements and challenges associated with the respective project types This is because the UK follows the common law legal system, which relies on precedent
RECOMMENDATIONS FOR PERFECTING THE
REGULATION ON PUBLIC-PRIVATE PARTNERSHIP IN VIETNAM
Vietnam's enactment of the Law on PPP 2020 represents a significant advancement, reflecting the government's strong commitment and strategic focus on utilising the PPP model to attract domestic and foreign private sector capital This law is anticipated to serve as a crucial tool for fostering economic development, particularly in the realm of public service provision in the foreseeable future The independent PPP Law consolidates previous regulations into a comprehensive legal framework, ensuring consistent and comprehensive guidelines for implementing various forms of public-private partnerships. However, it is essential to establish detailed guidelines for effective execution going forward.
3.1 Guiding principles for the proposals to improve provisions on regulations on public-private partnership in Vietnam
Firstly, the regulations on PPP model and the content of PPP contracts must clearly reflect cooperation between the public and the private sector in constructing projects for the common benefit of society Currently, PPP contracts in our country still face obstacles and shortcomings Inevitably, Investment under the PPP model and PPP contracts will encounter challenges and continue to impact the perception and mindset of both parties to the contract Therefore, the process of refining specific mechanisms and related policies requires time and persistence, with a proper understanding of the long-term benefits that the state, private sector, and society as a whole can derive from the contractual relationship between the relevant entities
Secondly, the laws must align with Vietnam's policies of international integration It is essential to leam from and inhent the experiences of implementing PPP projects and executing PPP contracts from countries around the world This principle is crucial as a foundational element for the ongoing innovation and improvement of Vietnam's investment legal system In recent years, PPP projects in Vietnam have not been solely imported products However, it cannot be denied that while the demand for PPP primarily reflects the internal needs of each country, the method of addressing those needs requires objective factors (such as social capital and the desires of society, including foreign investors) and learning from the experiences of countries that have come before By meeting this principle, the development of PPP laws and PPP contracts will have the potential to achieve positive outcomes
Thirdly, it is important to expand and develop the freedom of business and ensure the investor's nghts in investment activities, equal rights among entities and in line with intemational practices and market economic principles The principles of freedom and equality in business investment are clearly enshrined in the 2013 Constitution In an economy with diverse ownership forms, the emergence of conflicting and contradictory interests is inevitable, thus it is necessary that the state respects the investors' business autonomy while recognizing and protecting their legitimate ownership rights and interests in business The principles of equality, non-discrimination, and respect for the autonomy and freedom of business of all investment entities must be considered as one of the key principles that govem the entire process of policy and legal planning for investment contracts to be compatible with international practices. Within the legal framework of PPP, in addition to the consistent provisions of investment laws, when constructing and issuing specific legal regulations, attention should be paid to ensuring the principles of contract law that are in line with international practices
Fourthly, ensuring the unity of Vietnam's legal system in general This includes commercial law, investment law, bidding law, construction law, and specifically in relation to investment in the form of PPP and PPP contracts. Contracts in general, and PPP contracts in particular, are subject to the regulations of the entire legal system depending on the specific case Unity is an important attribute of the law, which is concretely manifested in its consistency, appropriateness, comprehensiveness, lack of contradiction and differentiation between legal components regulating similar behaviours In recent times, for the investment sector and investment through PPP contracts, there have been differences between the two legal frameworks governing investment activities, and insufficient attention has been paid to the principles of contract law This has caused many shortcomings and difficulties for investors when participating in investment as well as their status as contractual parties in PPP contracts Lawyer Nguyen Hong Chung, Chairman of the Board of Directors of DVL Ventures, stated that despite the clear provisions on the preparation and implementation process of PPP projects in the PPP Investment Law and Decree 35/2021/NĐ-CP, many specific procedures during the project implementation are subject to adjustments from other legal documents Without proper harmonisation, it will be challenging to enforce them effectively Therefore, the improvement of laws governing these investment activities should be accompanied by a comprehensive review of the entire legal system relating to the projects.
3.2 Specific proposals to improve provisions on regulations on public- private partnership in Vietnam
3.2.1 Proposals regarding the subject of project contracts
Regarding the public entity according to the Law on Public Investment, projects are clearly divided and approved by competent authority entities at various levels Therefore, in regulations regarding the subject of the PPP
** Khanh An (2022), Lack of specific gdkove has ccased businesses to hesitate with PPP projects, available atIuttps /baodauta vivthiew-Imong-dan-cu-the-domb-nghiep-ngurngai-voi-ppp-di70049 html, acessed 31 Mar2024 contract, which aims to determine the legal capacity of the contracting parties and the implementation of the contract, there is a need for more specific provisions to identify the corresponding authorised state authority for each type of project The unique nature of the PPP contract requires a more specific and clear definition of the authority in signing the PPP contract to determine jurisdiction and procedures in the preparation, negotiation, signing, and implementation of the contract This can be addressed through legislation on public investment, or legislation specifically on PPP investment, or legislation on investor selection through bidding processes.
Regarding the private entity, the essence of a PPP contract reflects public cooperation to leverage the advantages of all parties involved Private investors, as participants in signing and implementing PPP contracts, are expected to demonstrate their financial arrangements and provide technological and managerial solutions Therefore, the law should establish control measures to ensure that the private sector possesses the capabilities required to carry out the project and fulfil the substantive commitments of the PPP contract (based on quantitative criteria such as experience, financial capacity, technical expertise, etc.) This will prevent the state from having to step in as a substitute for the investor in explaining and resolving related issues.
The Law on PPP 2020 does not grant permission to engage in PPP contracts with local authorities at the commune and district levels However, the
UK has successfully executed numerous PPP contracts with local authorities, demonstrating the proactive nature and accountability of local governments in providing public services within their respective regions Given the ongoing decentralisation and empowerment of local governments in Vietnam, as outlined in the 2013 Constitution and the Document of the XIII Party Congress, it is imperative to authonse local governments to enter PPP contracts in the near future Moreover, in practice of a PPP contract, the investor usually owns the project enterprise, so it is advisable to designate only one of the parties as the contracting party to avoid conflicts and legal complexities Unfortunately, Vietnam lacks a similar agency, which has resulted in delays in addressing pressing matters such as the repercussions of the Covid-19 pandemic and other significant issues related to PPP contracts.
According to Mr Nguyen Quang Vinh, Vice Chairman of Vietnam Chamber of Commerce and Industry, PPP is a model in which both the State and investors benefit and develop together It helps promote and significantly improve the upgrading of domestic infrastructure, aiming to provide the best services to the people and build strong community relationships® Having a more balanced relationship between parties is also what investors expect when the provisions in the PPP Law are designed to create a breakthrough in attracting resources for infrastructure development in the coming years.
3.2.2 Proposals regarding regulation on signing and implementation of project contracts
It is necessary to enhance the regulation related to open and competitive bidding to ensure the selection of capable investors for PPP projects The practice of direct appointment of contractors for PPP projects should be limited. The results of contractor selection, as well as the project operation and utilisation processes, should be publicly disclosed and transparent Hence, experts suggest that there should be more specific provisions on transparent and highly competitive contractor selection Additionally, it is necessary to establish regulations on state agencies' appraisal and approval of feasibility study reports, investment policies, and then proceed with investor selection for the project.
* VCCI Extemews (2023), Prblic-private parmersiips for sistainable development, availble at https Jen.veci com vapublic-private-parterships-for-sustanble-deve lopment, accessed 20 Mar 2024
Moreover, current legal provisions do not specify or impractical, in terms of procedures and sources to compensate the contractor on termination For example, regulations on budget sources to share the revenue shortfall from the local contingency fund are not feasible Therefore, to build trust for investors and credit institutions regarding such situations, the State needs to establish appropriate mechanisms Besides the substitution options provided under Article
53 of the Law on PPP 2020, it would be more efficient for the private sector to apply step-in right With the choice of “cure nght” and “step-in right under a strict sense”, the private sector will have more options with limited liability or even free of liability to save the project from termination Furthermore, Vietnam should also review the principle of applying step-in night under the UK legislation, which allows the lender to invoke this nght with complex agreements As a matter of the fact that Vietnam has never had a precise regulation on such step-in rights regardless of the type of investment, it would be essential to establish a new set of mules regulating this subject matter.
3.2.3 Proposals regarding regulation on the content of project contracts
As mentioned above, one of the key characteristics of PPP regulation is the imbalance in the relationship between the public and private sectors The terms of a PPP contract can include both mandatory provisions and ones that favour the public parties The private parties, especially the financial institutions, must always bear such an enormous financial burden To improve faimess and balance in PPP projects, one suggestion is to amend the legal framework to ensure greater transparency regarding the responsibilities of the public party.
After reviewing the PPP contract, these financial institutions would be less likely to participate in the project even though the project might attract most of the interest of these parties during the pre-qualification phase®! Hence, it is essential to establish legal limits on such provisions to prevent potential abuses of power by public authorities and any attempts to alter the contract in case of contract enforcement failure Additionally, there is a need for a more comprehensive and detailed mechanism to share nsks between the public and private sectors.