PPP: ready for lift off in Oman

Public private partnership in Oman

A framework for carrying out Public private partnership deals in Oman was promulgated through Royal Decree 52 of 2019, the law on partnerships between the public and private sectors (“PPP law”).  The PPP law came into force on 1 July 2019 and is still in the initial stages of practical application. It should also be read together with the Executive Regulations of the law on partnerships between the public and private sectors, which came into force on 22 April 2020 (“Regulations”).  The PPP law enables Government bodies to enter into arrangements with the private sector in relation to infrastructure and public utility projects.  The law applies only to those projects that have an economic or social importance in line with the Sultanate’s strategy.

Qualifying for PPP projects

Qualifying investors and operators (including consortia bids) will need to prepare an initial feasibility study in relation to the proposed project. If approved, the next stage will be to prepare an integrated feasibility study and obtain Ministry of Finance approval to proceed.

Once the Ministry has received bids for a specific project, negotiations then take place with the successful bidder.  The PPP law requires that negotiations involve obtaining clarification on the technical and financial elements contained in bids following which a final evaluation is then made.

Project company and foreign ownership

The PPP law then requires the successful bidder to incorporate a vehicle to implement the project.  The Law states that this vehicle can be foreign owned and any change to the corporate form, shareholding pattern and capital of that vehicle requires approval from the Ministry of Finance.  The Regulations require that the project company takes the form of a joint stock company unless exceptional circumstances exist, in which case a limited liability company can be used.  Exceptional circumstances include the fact that financing is not required for the project.

Project documents

The partnership contract is expressed by the PPP law as the main arrangement between the Government and the project company in relation to the PPP project.  The PPP law states that this contract will need to contain a number of legal provisions, the key being that the term may not exceed 50 years.

In circumstances of a serious breach of the project documents, the contracting Government entity has the legal right to replace the project company or assign a third party to complete the works. This applies in circumstances where the serious breach has affected the operation of the project or there is a fundamental violation of the PPP law.

The PPP law imposes various other obligations on the nature of the project relationship, as follows:

1. The partnership contract must be governed by Omani law (although it is permissible for the dispute resolution procedure to be governed by arbitration).
2. If the partnership contract is terminated before its term, it is automatically transferred to the state without any payment of consideration or compensation for the assets.
3. The project company is not permitted to sell or pledge the real estate on which the project is based unless the pledge is for the purpose of financing or otherwise, with the consent of the Ministry of Finance.
4. The project company must transfer expertise, technology and knowledge to the Government and train and qualify the employees to manage and operate the project.

Continuous reporting and supervision

The Government retains the ability to supervise the PPP project to ensure overall compliance with the contractual documents.   The PPP law requires the project company to submit all “information, data, documents and other papers” related to the project for the purpose of the Government adopting a supervisory and control purpose.  It is worth noting that the Government is permitted under the PPP law to issue instructions to the project company to implement regulations “that it deems necessary and obligatory for the proper functioning and efficiency” of the project as a whole.

Al Tamimi & Company’s market leading projects team advises lenders, sponsors and project companies on projects across the GCC, including Oman.  Please contact us if you would like to understand more about this law and how it is being implemented across projects in Oman.