We welcomed 250 guests at Tivoli Gardens in Copenhagen for our annual party, held to coincide with the Africa Energy Forum.  The annual Trinity party has become a great opportunity for senior members of developer, lender and government teams to discuss the development of the power sector in Africa in a relaxed and friendly environment.

We have recently advised the project company and sponsors of Mozambique’s first utility scale (40.5MW) solar PV power plant in Mocuba. On the signing of the finance documents, Raymond Carlsem CEO of Scatec Solar ASA noted: “Scatec Solar is committed to harnessing Mozambique’s solar potential and infusing grid stability. This is especially important for a country that relies on a long distance power transmission system that is vulnerable to interruptions. We will leverage IFC’s knowledge and support to ensure greater resilience for the country’s electricity sector…“.

In this edition of Focus, we take a look at what (if any) opportunities exist for Africa as a result of the Brexit vote and the UK leaving the European Union.

Trinity Paris recently advised on a new public-private partnership law in Guinea-Conakry.  We give a brief description of this law (here in English and in French).

One of the key commercial questions that comes up time and again in English law is the difference between “best endeavours“, “reasonable endeavours” and “all reasonable endeavours“.  We set out an article that summarises the latest position under English law.

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One continent that has the potential to benefit enormously from this seismic shift in Europe is Africa.  Rather than dwell on the negative consequences, this article seeks to explore the potential opportunities open to Africa in the wake of the Brexit vote.

Many see the UK as a primary trading partner for Africa, but the figures do not fully support this assumption.  True, the UK is one of the biggest buyers of Kenya’s US$1.1bn annual flower and horticulture exports to the EU, but according to the Office of National Statistics, the UK also comprises just 4.8% of total African exports.  So, whilst many have focussed on the negative impact of a possible UK recession following Brexit, it is also worth considering the potential benefits. Outside the EU, and without the bargaining power and economic stability that its membership previously provided, the UK will be keen to negotiate new bilateral trade deals to assure security of supply and export.  Given the UK’s historical ties with Africa, and its position within the Commonwealth, it is not hard to imagine that the UK’s policy makers will swiftly turn their attention to Africa, providing opportunities to boost trade.

Similarly, the role of Economic Partnership Agreements (EPAs) and the Common Agricultural Policy (CAP) (long considered a blight to the development of many African nations) could well be diminished by Brexit.  The EU has historically imposed numerous restrictions on trade deals with Africa, aimed at protecting the EU’s own industries.  Many analysts argue avidly that the strict and inflexible standards imposed, coupled with the subsidies afforded to EU farmers through the CAP, make it impossible for Africa to compete and leave producers with little room for manoeuvre.  With one of the CAP’s most notable critics set to take leave the EU, Africa may finally be afforded the opportunity to negotiate a more balanced trade package and to better exploit its own produce.  The first evidence of this may be beginning to show.  Both Tanzania and Uganda have delayed signing an EPA between the EU and the East African Community, hinting at the prospect of a better deal post-Brexit.  Perhaps, with a weakened EU and an isolated UK, the African trade blocs could finally find themselves with the power to negotiate on more equal terms.

Africa’s interaction with the UK financial sector should also be considered. With the UK’s internationally recognised legal and financial expertise, and financial institutions based on the African continent, able to use their ingenuity and innate understanding of local markets, existing links could be significantly strengthened post-Brexit.  With the pound depressed, UK services will be cheaper, and a strong relationship in this sector could cement the ongoing emergence of Africa’s growing middle class.

International investment in Africa is also expected to increase thanks to the appeal of high yields against a backdrop of sustained low interest rates in the developed markets.  Added to this is the rising price of gold – whilst other commodity prices have collapsed, the recognised stability of gold has helped the economies of South Africa, Tanzania and Ghana (the region’s biggest gold exporters) in particular.  Traded against the US dollar, sales will also increase the flow of this international currency into the region.

Consideration should finally be given to the sphere of aid and security. Much of the UK’s aid and development assistance is currently funnelled through the European Development Fund.  However, following Brexit, the UK is expected to disburse directly to recipient countries through organisations such as DfID and CDC Group plc (CDC), a change which experts predict will result in a more targeted focus with narrower geographical reach.  In fact, the UK government has recently lifted the cap previously imposed on aid funds spent through CDC, via a new strategic framework launched on 6th July 2017, allowing more UK aid to flow to developing countries in Africa and South Asia.   With the UK’s attention anticipated to be on the Commonwealth and other countries with which the UK has strong historical ties, many African nations stand to benefit.

It is therefore possible to paint a picture whereby Africa could benefit from Brexit.  Amidst concerns of a recession in the UK, and with both Sterling and the Euro unsteady against the US dollar, those economies with close ties to the EU and the UK (be that through trade and export, investment, remittances, tourism or currency pegs) certainly face an uphill struggle in this volatile period.  However, the rewards for those countries with the ambition to exploit the potential opportunities on offer could well be sufficient to enable Africa’s march forward to continue.

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The PPP law covers the two major types of PPPs which are usually categorised as follows:

• PPPs with payment by the end-user: outsourcing of public utilities, including concessions (toll-roads, energy); and
• PPPs with public payments: partnership contracts (hospitals, prisons).

PPPs may be implemented through public procurement or by private contractual negotiations in accordance with specific terms to be established by decree. Spontaneous offers are also accepted provided that the proposed project is not included in the Contracting Authority’s provisional plan.

The law sets out the principles that apply to PPPs. Decrees implementing the law should be published in the coming weeks in order to provide more detailed rules on PPPs. This new law applies to any PPP project which is subject to a notice of a competitive public tender published after the effective date of the law.

By adopting this new law, Guinea joins neighbouring states like Mali, Burkina Faso, Niger, Senegal, Côte d’Ivoire and Togo that have adopted PPP laws in recent years. In addition, the WAEMU is currently working on a directive project specifically dedicated to PPPs.

Trinity is available to advise on all aspects of PPPs in both Francophone and Anglophone jurisdictions. Please contact Pierre Bernheim for further details.

[1]Law L/2012/020/CNT dated 11 October 2012 on the procurement, control and regulation of procurement contracts and public service delegations and Decree D/2012/128/PRG/SGG dated 3 December 2012 creating the Public Procurement and Public Service Delegation Code.

[2] Article 14.

[3] Directive No. 04/2005/CM/UEMOA establishing procedures for the award, implementation and payment of public contracts and public service delegations within the West African Economic and Monetary Union.

[4] Law L/97/012/AN authorising the financing, construction, operation, maintenance and transfer of development infrastructure by the private sector, also known as the BOT law.

The post New Law on Public-Private Partnerships in Guinea-Conakry appeared first on Trinity International LLP.

La loi PPP couvre les deux principales formes de PPP qui sont généralement distinguées :

• les PPP à paiement par l’usager : délégations de service public, notamment concessions (autoroute, énergie) ; et
• les PPP à paiement par la personne publique : contrat de partenariat (hôpitaux, prisons).

Les PPP pourront être passés par appel d’offres ou en gré à gré selon les modalités qui seront définies par décret. Les offres spontanées sont également autorisées sous réserve notamment que le projet ne soit pas inscrit dans le plan prévisionnel de l’Autorité Contractante.

La loi fixe les grands principes applicables aux PPP. Des décrets d’application seront publiés en principe dans les prochaines semaines pour établir toutes les modalités des PPP dans le détail. Cette loi est applicable à tous les projets de PPP dont l’avis d’appel public à la concurrence est publié postérieurement à la date d’entrée en vigueur de la loi.

La Guinée s’inscrit avec l’adoption de ce texte dans un mouvement partagé avec certains de ses voisins puisque le Mali, le Burkina Faso, le Niger, le Sénégal, la Côte d’Ivoire et le Togo ont adopté ces dernières années des lois PPP. En outre, l’UEMOA travaille en ce moment à l’élaboration d’une directive dédiée aux PPP.

Trinity peut conseiller sur tous les aspects des PPP en Afrique francophone et anglophone. Veuillez prendre contact avec Pierre Bernheim pour toute information complémentaire.

[1]Loi L/2012/020/CNT du 11 octobre 2012 régissant la passation, le contrôle et la régulation des marchés publics et délégations de services publics et Décret D/2012/128/PRG/SGG du 3 décembre 2012 portant Code des Marchés Publics et Délégations de Services Publics.

[2] Article 14.

[3] Directive n°04/2005/CM/UEMOA portant procédures de passation, d’exécution et de règlement des marchés publics et des délégations de service public dans l’Union Economique et Monétaire Ouest Africaine.

[4] Loi L/97/012/AN autorisant le financement, la construction, l’exploitation, l’entretien et le transfert d’infrastructures de développement par le secteur privé, dite loi BOT.

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Commercial agreements often contain “endeavours” clauses, through which a party’s obligations are qualified, therefore making its commitment less than absolute.  These clauses generally require a party to use its “best endeavours”, “reasonable endeavours” or “all reasonable endeavours” to comply with its obligations.  Yet despite the common usage of these expressions, their exact meaning is not clear, and it has frequently been left to the courts to interpret them.  This has led to the development of a large body of case law, some of which we have explored in previous editions of Focus.

The latest authority (Astor Management AG v Atalaya Mining Plc [2017] EWHC 425) provided some useful guidance, particularly in respect of the meaning of “all reasonable endeavours”, whilst another recent case (Jet2.com v Blackpool Airport Ltd [2012] EWCA Civ 417) revisited the meaning of “best endeavours” and considered the underlying principles of contractual interpretation which should be applied to all provisions in commercial contracts, including “endeavours” clauses.

Construction

The court provided a helpful reminder in Jet2.com that all “endeavours” expressions are subject to the ordinary rules of contractual construction, meaning that “the meaning of the expression[s] remains a question of construction not of extrapolation from other cases…the expression[s] will not always mean the same thing”.  Nevertheless, the courts are mindful that, when including the expressions “best endeavours”, “reasonable endeavours” and “all reasonable endeavours” in commercial agreements, the parties and their advisors are relying upon certain widely held views as to their prima facie meaning, and this should not be ignored.  Agreeing exactly what that prima facie meaning is can, however, be more challenging.

Best endeavours

Historically, the courts have recognised “best endeavours” as the most onerous of the “endeavours” expressions, requiring the obligor to take all the steps that are in its power which are capable of producing the desired results, being the steps that a prudent, determined and reasonable obligor would take when acting in its own interests and desiring to achieve that result (IBM United Kingdom Limited v Rockware Glass [1980] FSR 335).  The obligor may even be required to sacrifice its own commercial interests, and sustain substantial losses, although the extent to which it is required to do so will depend upon the circumstances.

In Jet2.com, the Court of Appeal supported this view.  Having considered whether, when under an obligation to use “best endeavours”, to promote Jet2.com’s low-cost airline, Blackpool Airport had to continue to accept flights outside its normal opening hours, the court concluded that it must, even if it suffered a loss each time it did so.  In the court’s view, these out-of-hours flights were essential to Jet2.com’s business, and were therefore fundamental to the agreement.

The sacrifices and losses required are, however, not without limit, and the decision of the court in Terrell v Mabie Todd & Co Ltd, that a “best endeavours” obligation stops short of completely disregarding the obligor’s own commercial interests, continues to be widely accepted.

Reasonable endeavours

An obligation to use “reasonable endeavours” is generally agreed to be less onerous, and only requires an obligor to take one reasonable course of action, rather than all possible courses of action (Rhodia International Holdings Ltd v Huntsman International LLC [2007] EWHC 292).  An obligor is also permitted to balance its contractual obligations against all relevant commercial considerations, meaning that expenditure is not usually required unless the underlying contract includes specific steps that must be completed by the obligor to demonstrate its use of “reasonable endeavours”.

Recently, the courts have gone further and stated that, once an obligor can do nothing more in terms of reasonable steps to achieve the required objective, it is no longer obliged to try (Dany Lions v Bristol Cars [2014] EWHC 817).  Nonetheless, a “reasonable endeavours” obligation is not toothless and, provided that it is coupled with a clear objective to avoid any question of uncertainty, it will constitute an enforceable obligation that may not be easy for the obligor to satisfy.

All reasonable endeavours

The phrase “all reasonable endeavours” is perhaps the least common of the “endeavours” expressions, yet the courts have been called upon to interpret its meaning on a number of occasions.  It is generally accepted that “all reasonable endeavours” is a middle position between “best endeavours” and “reasonable endeavours” (UBH (Mechanical Services) Ltd v Standard Life Assurance Company, The Times, 13 November 1986), but which side of that middle line it falls is less clear.  In CPC Group Ltd v Qatari Diar Real Estate Investment Company [2010] EWHC 1535 the court stated that an obligation to use all reasonable endeavours does not always require the obligor to sacrifice its commercial interests however, in that case, the obligation in the underlying contract was to use “all reasonable but commercially prudent endeavours” and the value of this interpretation may therefore be limited.

The recent case of Astor Management does provide some useful guidance on this point.  In that case, the defendants purchased the claimants’ interest in a dormant copper mine. Payment of most of the consideration was deferred until the defendants secured senior debt finance for a sum sufficient for the restart of mining operations, which they were obliged to use “all reasonable endeavours” to obtain.  No senior debt finance was secured, and the question before the court was whether the “all reasonable endeavours” obligation had been breached.  The court held that there had been no breach of the “all reasonable endeavours” clause, since the clause did not require the defendant to obtain a senior debt facility at any cost, or at a cost that would make the project unviable.

Practical steps and drafting

It is clear that a degree of uncertainty remains in respect of the interpretation of the expressions “best endeavours”, “reasonable endeavours” and “all reasonable endeavours”.  Although the prima facie meaning of each can probably be summarised as shown in Figure 1 below, parties would be advised to focus on express requirements when drafting an “endeavours” provision, including the steps an obligor should take (and the costs an obligor should incur, if any) to achieve a desired result, how long an obligation should continue and the consequences of failing to achieve the desired result.

Figure 1:

The above is a guide only and is fact and context sensitive.  The characteristics listed above are only an indication of how they may be interpreted in practice.

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