9/18/2015 1 Legal Issues With Railway Public Private Partnerships In Nigeria CWC NIGERIA...

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Legal Issues With Railway Public Legal Issues With Railway Public Private Partnerships In NigeriaPrivate Partnerships In Nigeria

CWCCWCNIGERIA INFRASTRUCTURE CONFERENCE NIGERIA INFRASTRUCTURE CONFERENCE

ABUJA, November 18, 2009ABUJA, November 18, 2009

Ayuli Jemide, Ayuli Jemide,

Lead Partner.Lead Partner.

04/21/23 AYULI JEMIDE, Lead Partner, 2

3 Major Issues

1.1. Relevant LegislationsRelevant Legislations

2.2. Issues arising from the NRC ActIssues arising from the NRC Act

3.3. Key Railway Assets Key Railway Assets


Relevant Legislations

1.1. The ConstitutionThe Constitution

2.2. Nigerian Railway Corporation Act 1955Nigerian Railway Corporation Act 1955

3.3. Infrastructure Concession Regulatory Infrastructure Concession Regulatory Commission Act 2005Commission Act 2005

4.4. Utilities Charges Commission Act, 1992Utilities Charges Commission Act, 1992

5.5. Railway Bill (Pending Legislation)Railway Bill (Pending Legislation)

4. National Transport Commission Bill 4. National Transport Commission Bill (Pending Legislation)(Pending Legislation)


Constitution

Exclusive ListExclusive List

Federal Roads

Maritime

Aviation

Mines & Minerals

Railways ?Railways ?

Nuclear Energy

Concurrent ListConcurrent List

Electric Power

Industrial, Commercial & Agric Dev.

Education

Residual ListResidual List

Urban planning

Transportation

State Roads

Water

Housing

Health


Nigerian Railway Corporation Act Nigerian Railway Corporation Act 19551955

Does the NRC Act provide a proper Does the NRC Act provide a proper framework for NRC to engage in a PPP framework for NRC to engage in a PPP with any private Sector proponent?with any private Sector proponent?



o Vests all Railway Infrastructure in Vests all Railway Infrastructure in NRC from a “Vesting Day”NRC from a “Vesting Day”



NRC has the following exclusive NRC has the following exclusive rights:rights:

1.1. Right to Sell, Lease or Dispose of Property.Right to Sell, Lease or Dispose of Property.

i.e “operating leases” of railway assets.

2.2. Right to Enter into Maintenance or Repair Right to Enter into Maintenance or Repair Contracts. Contracts.

3.3. To Enter into Agreements for any Service.To Enter into Agreements for any Service.



4.4. To Enter into Agreements for theTo Enter into Agreements for the

Payment, Collection or Apportionment of Rates, Payment, Collection or Apportionment of Rates, Fares or Charges. Fares or Charges.

5.5. Right to Set Fares. Right to Set Fares.

6.6. To Carry on Any Business necessary or To Carry on Any Business necessary or desirable for its purposes. desirable for its purposes.



• NRC has a general rights to delegate its NRC has a general rights to delegate its powers or duties under the NRC Act to powers or duties under the NRC Act to “any person” subject to the approval of “any person” subject to the approval of the Minister. S17the Minister. S17



• Is there a Framework for State or private Is there a Framework for State or private persons to construct and operate a persons to construct and operate a Railway in Nigeria? Railway in Nigeria?



• S29 – “Construction of Railways by S29 – “Construction of Railways by Persons other than the Persons other than the

Corporation”Corporation”

““It shall be unlawful for any person It shall be unlawful for any person without the consent of the Corporation to without the consent of the Corporation to constructconstruct or or operateoperate a Railway for public a Railway for public carriage of passengers or goods within carriage of passengers or goods within Nigeria”Nigeria”


This is currently the only window for States and private proponents to establish green-field railway infrastructure.

NOTE: Railway Bill would expand thiswindow considerably when passed into Law.


Some Issues With The Window

1.1. No framework for granting No framework for granting consent:consent:

- Tenure?Tenure?- Fees?Fees?- Who owns Railway at end of tenure?Who owns Railway at end of tenure?

– – Lagos Light Rail project may set Lagos Light Rail project may set some some precedents to go by in the precedents to go by in the months to months to come.come.



2.2. Does the NRC “consent” include the right to Does the NRC “consent” include the right to sub-delegate the railway operations? sub-delegate the railway operations?

It has been suggested that:It has been suggested that:

- NRC consent should contain a right to sub-NRC consent should contain a right to sub-delegatedelegate

oror

- NRC should co-sign any Concession NRC should co-sign any Concession agreement between a State and subsequent agreement between a State and subsequent Concessionaire?Concessionaire?


Some Issues With The Window3. 3. What would be a PPP under the What would be a PPP under the

ICRC ICRC Act?Act?

a)a) NRC co-signs a subsequent Concession NRC co-signs a subsequent Concession Agreement between the State Agreement between the State entity/private entity and a entity/private entity and a subsequent concessionaire?subsequent concessionaire?

b)b) NRC gives consent to a private personNRC gives consent to a private person

c)c) NRC gives consent to a State GovernmentNRC gives consent to a State Government

d) d) NRC engages the private sector to NRC engages the private sector to provide a service provide a service



4.4. Who should regulate? States or NRC? Who should regulate? States or NRC?

- Are the current NRC regulations adequate for an Are the current NRC regulations adequate for an Urban Mass Transit Railway system in year Urban Mass Transit Railway system in year 2009?2009?

- Does NRC have the manpower to regulate Urban Does NRC have the manpower to regulate Urban Mass transit?Mass transit?

- Should NRC pass separate regulations for Urban Should NRC pass separate regulations for Urban Mass Transit or for each State transaction?Mass Transit or for each State transaction?



4.4. Can the “Primary Enforcer” Can the “Primary Enforcer” model model work in Nigeria?work in Nigeria?

Primary Enforcer means Primary Enforcer means delegation of the right to enforce delegation of the right to enforce as distinct from the right to as distinct from the right to regulateregulate

o Note that Section 58 entitles the Note that Section 58 entitles the Minister to make Bye-Laws for Minister to make Bye-Laws for regulation of railway operationsregulation of railway operations



5. 5. Would Lenders in their Would Lenders in their Security Security package not be very package not be very interested in interested in entering into “Direct entering into “Direct Agreements” with Agreements” with NRC rather NRC rather than the State entity?than the State entity?


Railway Assets

Asset structure of components of the Asset structure of components of the railway assets determine deal mechanics: railway assets determine deal mechanics:

-- Transaction structure Transaction structure -- FinancingFinancing-- Tenure of Concession Tenure of Concession -- Allocation of RisksAllocation of Risks-- Insurance mechanicsInsurance mechanics-- Handover and Buy back mechanicsHandover and Buy back mechanics


Railway Assets

BOTBOT - - Assets owned by Concessionaire for Assets owned by Concessionaire for a a Concession period Concession period

Management or Service ConcessionManagement or Service Concession – – Concessionaire owns no railway asset Concessionaire owns no railway asset

Lagos Light Rail Model -Lagos Light Rail Model - Govt owns the Govt owns the tracks & Stations, whilst concessionaire tracks & Stations, whilst concessionaire owns the rolling stockowns the rolling stock


Railway Assets

1.1. Tracks Tracks

- - Are they in place?Are they in place?-- Who owns them? Who owns them? - Is there a need for rehab or - Is there a need for rehab or expansion?expansion?


Railway Assets

2.2. Right of Way Right of Way

-- Commercialisation opportunities can Commercialisation opportunities can increaseincrease

PPP viabilityPPP viability

- Some countries have used their Railway - Some countries have used their Railway Right of as Tourism assetsRight of as Tourism assets


Railway Assets

3.3. StationsStations - -

-- Shall we treat them as real estate?Shall we treat them as real estate?

-- How can they be used as deal How can they be used as deal sweeteners?sweeteners?


Railway Assets

4.4. Rolling StockRolling Stock

– – Is Concessionaire providing some or Is Concessionaire providing some or all?all?- If they exist what value is placed on - If they exist what value is placed on them? them? - Serviceable condition?- Serviceable condition?- Shall we provide for Buy back?- Shall we provide for Buy back? - - Whole life costing is essentialWhole life costing is essential


Railway Assets 5.5. PersonnelPersonnel

– – Existing at the time concession commences?Existing at the time concession commences?- - Engaged by Concessionaire? Engaged by Concessionaire?

How are they transferred in both situations? How are they transferred in both situations? At the beginning and at end of concession period?At the beginning and at end of concession period?

-- What liabilities do they come with at each point.What liabilities do they come with at each point.

-- Should they be a contractual obligation to train Should they be a contractual obligation to train Nigerian personnel during the concession Nigerian personnel during the concession period?period?


Railway Assets

6.6. Operational Licences/ApprovalsOperational Licences/Approvals

– – What needs to be obtained?What needs to be obtained?

-- What is transferable at beginning What is transferable at beginning and end of and end of concession? concession?


Railway Assets

7.7. Intellectual PropertyIntellectual Property

- Patents, Trademarks, etc- Patents, Trademarks, etc

Are they transferred? When? How?Are they transferred? When? How?


Conclusion

Railway Concessions are not a one size fits all.Railway Concessions are not a one size fits all.

Every transaction is tailor made!Every transaction is tailor made!


THANK YOU FOR LISTENING!THANK YOU FOR LISTENING!

9/18/2015 1 Legal Issues With Railway Public Private Partnerships In Nigeria CWC NIGERIA...

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