Morocco ASSESSMENT OF THE QUALITY OF THE PPP LEGISLATION AND OF THE EFFECTIVENESS OF ITS IMPLEMENTATION 2011

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1 Morocco ASSESSMENT OF THE QUALITY OF THE PPP LEGISLATION AND OF THE EFFECTIVENESS OF ITS IMPLEMENTATION 2011 I- PPP Legislative Framework Assessment (LFA) Compliance of the PPP legal framework with PFI Guide recommendations 1 and Best Practice Core Area Rating Assessment 1- PPP Legal Framework Existence of specific PPP law or a comprehensive set of laws regulating 13/18 concessions and other forms of PPP and allowing a workable PPP legal framework 2-Definitions and Scope of the Law Existence of a clear definition of the boundaries and scope of application of the concession legal framework (e.g. definition of "PPP", sectors concerned, competent authorities, eligible Private party) limiting the risk of a challenge to the validity of PPP contracts, irrespective of whether 17/21 3-Selection of the Private Party 4-Project Agreement 5-Security and Support Issues the act is specifically targeted at PPP Mandatory application of a fair and transparent tender selection process. Limited exceptions allowing direct negotiations, competitive rules for unsolicited proposals and the possibility to challenge illegal awards. Flexibility with respect to the content of the provisions of the Project agreements which should allow a proper allocation of risks without unnecessary or unrealistic/not bankable/compulsory requirements/interferences from the Contracting Authority (obligations, tariff, termination, compensation). Availability of reliable security instruments to contractually secure the assets and cash-flow of the Private Party in favour of lenders, including "step in" rights and the possibility of government financial support, or guarantee of, the Contracting Authority s proper fulfilment of its obligations. 20/42 17/27 8/21 1 UNCITRAL Legislative Guide on Privately Financed Infrastructure Projects, 2001 (hereinafter the "PFI Guide")

2 6-Settlement of Disputes and Possibility to obtain proper remedy for breach under the applicable law 8/15 Applicable Laws through international arbitration and enforcement of arbitral awards. General LFA Rating 57,6% Medium Compliance II-Legal Indicators Survey Effectiveness Assessment : How the PPP law works in practice (LIS) Core Area Rating Legal Indicator Survey 7- Policy Framework Existence of a policy framework for public private partnerships 12/24 8 Institutional Framework Existence of an institutional framework for public private partnerships 12/27 9- PPP Law Enforcement Award and implementation of PPP projects in compliance with the Law 17/27 General LIS Rating 52,3% Medium Effectiveness OVERALL RATING 54,1% Medium Compliance/Effectiveness Local Expert 2 : Cabinet Figes - Mohamed El Mernissi; Saad El Mernissi Cabinet Gide Loyrette Nouel Casablanca - Julien David; Bruno de Cazalet 2. 2 The Local Experts in charge of each country have been consulted for the elaboration of the responses to the Checklist in their capacity of well recognized established law firm in the country but the Local Experts as well as EBRD are in no way responsible for the responses given to any question in this Checklist as the Consultant was free to use any other sources of information for its final determination. The Consultant has also referred to EIB report on dseveral occasion.the European Investment Bank (EIB) has commissioned a review of the Private Public Partnership Legal & Financial Frameworks in the Facility for Euro-Mediterranean Investment and Partnership (FEMIP) Region (the Study). The Study was carried out by Pinsent Masons LLP, Mazars LLP and Salans LLP and with UGGC & Associés Law Firm and Mazars Masnaoui as local experts for Morocco. The Study - Volume 2 Country Analysis- May is referred to in the Checklist as the "EIB Report ".

3 3. RATING: Key for assessment of Each Question Yes 3 points Yes, with reservations 2 points No, with Limited compliance / redeeming 1 point features No 0 point N/A Not applicable 0 point/ Not included in total Key for Assessment of Each Core Area and for Overall Assessment > 90% Very High Compliance/Effectiveness 70%-89% High Compliance/ Effectiveness 50%-69% Medium Compliance/ Effectiveness 30%-49% Low Compliance/ Effectiveness < 30% Very low Compliance/ Effectiveness TERMINOLOGY So as to keep answers consistent and avoid ambiguity, we set out below some brief definitions of the terminology used in this questionnaire. Any definition is provided solely to clarify some of the terminology used below. The reader should note that any such definition does not correspond with any given definition under best international practice (which does not provide for any standardised PPP legal definitions recognised worldwide) neither should it be interpreted that we recommend the adoption of such definitions under actual documentation, but they are included in the interests of clarity for the completion of this questionnaire, and we should be grateful if you could adopt such definitions for the purposes of completing the questionnaire.

4 4. "Public Private Partnership" -"PPP" or "PPP project" includes all types of long-term arrangements between public authorities and private institutions, including but not limited to; Concessions, BOT and derived forms, PFI and Institutional PPP. For the purposes of this questionnaire, PPP excludes the sale of public assets or of public company shares which are part of a privatisation process and also excludes public works, services or supply contracts which are subject to public procurement rules. The following types of Public - Private Partnership Agreements may be adopted by a Contracting Authority for undertaking infrastructure projects. These are solely indicative in nature and the Contracting Authority may seek to adopt a combination of the different contractual arrangements, which incorporate some of their elements or combine elements. "BOT" - (Build-Operate-and-Transfer)- and derived forms : a contractual arrangement whereby the Private Party undertakes to finance, design, construct under a turnkey risk basis, operate and maintain an Infrastructure project for a specified period after which period the project facilities are transferred to the Granting Authority usually without payment of any compensation. The Private Party has the right to collect contract or market based tariffs or fees from the users of the infrastructure project, as specified in the PPP agreement, to recover its investment and operating and maintenance expenses for the project. A BOT type of PPP arrangement may provide for all the implementation and operational efficiencies of the private sector, together with new sources of infrastructure capital. Derived forms of BOT contractual arrangements exist such as Build-Own-Operate-and-Transfer (BOOT) similar to the BOT agreement, except that the Private Party owns the Infrastructure project during the specified term before its transfer to the Contracting Authority or its designee, or such as Build-Own-and-Operate (BOO) which is a contractual arrangement similar to the BOT agreement, except that the Private Party owns the Infrastructure project and no transfer of the project to the Contracting Authority or its designee at the end of the fixed period is envisaged. Derived forms incorporating Lease right rather than Ownership or dealing with rehabilitation or extension rather than construction which extent the possible combination which for the purpose of this questionnaire will all be hereafter refferred to as BOT for simplification purpose exept where legal specificcity requires specific treatment. "Concession": is an act attributable to the State whereby a Contracting Authority entrusts to a third party the total or partial management of public services for which that authority would normally be responsible and for which the third party assumes all or part of the risk. "PFI" (Private Finance Initiative) : a form of cooperation and partnership between public authorities and Private Parties which aim to ensure the funding, construction, renovation, management or maintenance of an infrastructure or the provision of service to the infrastructure without the delegation of the public service itself. It is a contractual arrangement whereby the Private Party

5 5. undertakes the financing and the construction of an infrastructure project and after its completion transfer it to the Contracting Authority or its designee. This arrangement may be employed in the construction of a public service facility for which the public service must be operated directly by the contracting authority for whatever reason but the operation and maintenance of the facility remain the responsibility of the Private Party for the entire duration of the PPP agreement. The contracting authority will reimburse the total project investment on the basis of a rent based of an agreed schedule with the payment starting from the date of commencement of operation and pay for the services rendered to the facility on a performance basis. "IPPP"(Institutional PPP): a structural or corporate form of PPP which provide for the cooperation between public authorities and a Private Party through a joint venture or mix (publid- private shareholding) company in which case all reference to the slection process refers to the selection of the Private Party. Other definitions: The "Law" or "PPP Law": a law regulating any form of PPP including but not limited to Concession, BOT, PFI, IPPP and including, for the purpose of this questionnair, the set of rules applicable to any PPP in the absence of a specific PPP law. The Law for the purpose of this questionnaire also includes any implementing regulation and any form of governemental act regulating PPP. "BOT Law" : a law regulating a BOT type of PPP in their multiple forms. "Concession Law": a law regulating a Concession form of PPP. "Contracting Authority": a public authority empowered to award a PPP and enter into Project Agreements "PFI Law": a law regulating a PFI form of PPP. "PPP unit" : specialized institution/agency/ministerial department established to promote and take care of PPP. "Private Party" : Private Party or other entity in the form of a special purpose company to which a Project Agreement in general has been awarded. [The word Private party will be used for the sake of this study even in case the PPP regulation allows PPP business partner to be a mix company or even a public entity.] "Project Agreement": an agreement(s) between the Contracting Authority and the Private Party regulating their respective rights and obligations with respect to the PPP project.

6 6. REFERENCE TO BEST PRACTICE UNCITRAL Legislative Guide on Privately Financed Infrastructure Projects, 2001 (hereinafter the "PFI Guide") and UNCITRAL Model Legislative Provisions on Privately Financed Infrastructure Projects, 2003 (UNCITRAL Model Legislative Provisions). EC - Commission Interpretative Communication on Concessions Under Community Law dated 12 April 2000; together with additional EU major documents/decision /recommendation on concessions including Directives 2004/18/EC and 2004/17 EC of 31 March 2004; Green Paper on Public Private Partnerships and Community Law on Public Contracts and Concessions dated 30 April 2004; Report on the public consultation on the Green Paper (SEC(2005) 629- Communication from the Commission to the European Parliament, the Council, the European Economic and Social Committee and the Committee of the Regions on Public-Private Partnerships and Community Law on Public Procurement and Concessions (Brussels, COM(2005) 569) European Parliament resolution on public-private partnerships and Community law on public procurement and concessions (2006/2043(INI)); European Commission Guidelines for Successful Public-Private Partnerships (2003).Commission Interpretative Communication Brussels, C (2007)6661on the application of Community law on Public Procurement, and Concessions to Institutionalised Public-Private Partnerships (IPPP); EBRD Core Principles for a Modern Concessions Law selection and justification of principles Prepared by the EBRD Legal Transition Team.2005; UNIDO Guidelines for Infrastructure Development through Build Operate Transfer (BOT) Projects, 1996 (UNIDO BOT Guidelines); and OECD Basic Elements of a Law on Concession Agreements,

7 7. OVERALL ASSESSMENT 2011: MOROCCO. Morocco s has a long tradition of PPP projects in particular of delegation of Public Service and its legal framework based on the past experience was enacted in 2006 by the law n concerning the contract of delegated management of public services or infrastructure concluded by municipal authorities or public enterprises. The scope of the law is however very restricted and does not apply to concession by Ministries or other government entities. It does not apply also to companies fully own by the State which are no longer considered as public enterprise. The Law allows carrying out different form of PPP but major international institutions working on PPP development agree that the Moroccan legal framework for Concession and PPP would benefit from a number of improvements by adopting a new specific PPP law and by the putting into operation of the new PPP unit which has just been created within the Ministry of Economy and Finances last semptember 2011 and which is already in operation in close cooperation with some international institutions such as EIB and IFC for the development of pilot PPP projects. Morocco despite the absence of a specific PPP government policy is developing PPP in many different fields and is adopting institutional changes while moving ahead in the development of PPP by trying to draw lessons from international experience and the expertise of the DEPP and the DRSC.The enactment of specific PPP law which is presently at its final study stage would further contribute to the development of PPP in Morocco.

8 ASSESSMENT & LEGAL INDICATOR SURVEY LEGAL FRAMEWORK 1.1 Existence of different forms of PPP legal framework QUESTION ANSWER ARTICLE COMMENTARY 1. Does the country have a single act dealing specifically with Concessions or a generalised act incorporating the legal framework for PPP, including Concessions? Dahir n dated 15 moharrem 1427 (14 February 2006) ratifying the Law n concerning delegated management of public services or Infrastructure to municipalities or public enterprises. (not applicable to government central authorities nor to State own enterprises which have adopted a corporate form) Specific laws regulate different sectors (for example, specific laws relating to ports (Law Official Gazette n 5378, December 15 th, 2005), highways, railways et airports, water and electricity) also exist but no general PPP law

9 9. 2. Does the country have an act that allows BOT or derived forms such as BOOT, BOO or other forms either as part of a specific act or as part of a general PPP Law? Art 16 The main assets of the concession (return assets) shall compulsorily be returned to the granting authority at the end of the concession which excludes BOO form of PPP for instance. There is no clear legal basis for the procurement of broader categories of PPPs, such as direct availability based payment flows from the contracting authority to the project company (as opposed to user fees). 3. Does the country have an act that allows PFI, either as part of a specific act or as part of a general PPP Law? Art 2 2 The delegated management may also specifically concern the completion of operation of public facility participating to the delivery of public service without the delegation of the public service itself which is typical to PFI. 4. If the answer is No to any of the three first questions concerning a specific form of PPP does the Constitution or other general act (ex: the Civil Code, sectoral law) recognise the basic principles of the concerned PPP and regulate its granting? N/A The Civil Code and Administrative law regulate the granting of Concession and PPP by the central authorities. For our general information: Is a new PPP Law or an amendment to the existing Law being prepared, or considered, in the country? If so, at what stage of the legislative process is such new PPP Law or amendment to the existing Law? There is a bill in progress on PPP. At this stage, it is under discussion at the PPP unit of the Ministry of Finance.

10 Specificity and integration of PPP legal framework 5. If the country has a Public Procurement Law, is it clear to what extent does the Public Procurement Law apply or not to the granting of a PPP? Article 2 of Public Procurement Code (Procurement Decree ( ) of 2007 provides that the contract for delegated management of public services are outside the scope of the Public Procurement Decree. The Concessions Law is however intended to regulate the delegation of management of public services and infrastructures but to date the relevant implementing regulations have not been enacted for centrally procured PPP projects. The government should consider their early implementation since, in the absence of specific legal regulation, bidding procedures are designed on a project by project basis and are set out in the tender document. This provides bidders with information as to how the procurement will be run but does not provide certainty that similar procedures will apply to all major project procurements. PPPs that require availability payments from the public sector and that do not fall under the ambit of the Concessions Law will, it is expected, be procured under

11 11. the Procurement Decree ( ). However, this governs general public procurement and not PPPs specifically. The tender processes outlined in the Procurement Decree are not appropriate for complex procurements of long term PPP contracts. 6. If the country has sectoral laws regulating PPP in specific sectors, is it clear which law is applicable to the granting of PPP for each particular sector? Laws on ports, highways, railways and airports apply for each particular sector while the Law mostly apply to the delegation of management of Municipal utility services and not as general provisions to sectors regulated by special law. 7. Does the country have a Law allowing the Institutional form of PPP (IPPP) which regulates IPPP participation to PPP? The law allows the setting up of IPPP since it provides that the project company which must be established can be public or private but do not state any specific rule for the selection of the private partner for the awarding of concession.

12 DEFINITIONS AND SCOPE OF THE PPP LAW(S) 2.1 PPP definition 3 QUESTION ANSWER ARTICLE COMMENTARY 1. Does the Law define one or several term(s) (i.e. "PPP", "Concession", "BOT", "Partnership" etc. and/or respective agreements) for the Art 2 The delegation of management is a contract by which the public authority named "Grantor" delegate for a limited period of time the management of a public service which 3 PFI Guide, Consolidated Legislative Recommendations, Recommendation 3and Commission Interpretative Communication on Concessions Under Community Law dated 12 April 2000; together with additional EU major documents/decision /recommendation on concessions including Directives 2004/18/EC and 2004/17 EC of 31 March 2004; Green Paper on Public Private Partnerships and Community Law on Public Contracts and Concessions dated 30 April 2004; Report on the public consultation on the Green Paper (SEC(2005) 629- Communication from the Commission to the European Parliament, the Council, the European Economic and Social Committee and the Committee of the Regions on Public-Private Partnerships and Community Law on Public Procurement and Concessions (Brussels, COM(2005) 569) European Parliament resolution on public-private partnerships and Community law on public procurement and concessions (2006/2043(INI))

13 13. arrangements to be regulated by the Law which specify the limits of application of the Law? For our general information,: please provide the given definition(s), if any. is under its responsibility to a public or private legal entity called the "délégataire" (Concessionaire) granting him the right to collect remuneration from the users and/or to make profit on such management. 2. Does the Law apply to all contracts entered into that fall under the definition(s) given above, irrespective of the name given to such contract (concession, license, usufruct right, lease, etc.)? Not specified but conform to the principles of Moroccan law 3. Does the Law make a clear distinction between a PPP agreement (such as a Concession) and a license (i.e. an authorisation to operate by a public authority)? Art 27 : Authorizations: the granting of a right of delegated management does not waive the obligation from the concessionaire to obtain the legally required authorizations. 2.2 Contracting Authority QUESTION ANSWER ARTICLE COMMENTARY 4. Does the Law identify (or allow clear identification by reference to other laws or regulations) the public authorities ("Contracting Authorities") that are empowered to select projects, prepare for, and award PPPs and enter Art 1 The Law apply to the delegation of management contracts for public services and works to be awarded by local community or association of local community or public enterprises.

14 14. into Project Agreements? According to EIB report the Municipalities would however benefit from the removal of ambiguities and legal difficulties in their powers to approve the award of PPP contracts. For our general information: If yes, which of the following authorities are identified: National authorities (e.g.: the government, ministries, and independent agencies); Regional/state-level authorities; Local or municipal authorities; or State owned companies? 2.3 Private Party and Project Company QUESTION ANSWER ARTICLE COMMENTARY 5. Is it possible for a PPP to be awarded to a foreign company, a Private Party or to a domestic company with foreign participation in the share capital and/or management (without discrimination)? Art 25 All concessionaires shall incorporate a Moroccan legal entity. Shareholders can be public or private legal entity or individuals. Article 9 concerning litigation further refers to international conventions which implicitly confirm that the delegation management contracts are opened to foreigners as it is the case in practice today.

15 For our general information: can a PPP be awarded to public entities or to entities jointly owned by private and public entities (IPPP)? Are there restrictions imposed on such contracts? Yes and no restrictions Concerned sectors 4 QUESTION ANSWER ARTICLE COMMENTARY 6. Does the Law identify (or allow identification by reference to other laws or regulations) the sectors and/or types of infrastructure and/or services in respect of which a PPP may or may not be granted? The law does not identify but does not exclude any sector (except for direct negotiation) 7. Do the list of sectors eligible for PPP correspond to an open-ended one (as opposed to being exhaustive) allowing (or at least not preventing) PPP to be granted in numerous sectors? N/A 4 For further information on the concerned sectors please refer to:pfi Guide, Consolidated Legislative Recommendations, Recommendation 3 and 4.

16 Do the sectors eligible for PPP includes non commercial activities such as the provision of government services (such as schools, hospitals, prisons, defence and housing) in addition to the merchant sectors of the economy (energy, transport, water, oil and gas). The law does not exclude non merchant sectors For our general information: Please indicate the restrictions if any imposed by the Law on the sectors eligible for PPP: 3. SELECTION OF THE PRIVATE PARTY General Considerations QUESTION ANSWER ARTICLE COMMENTARY 1. Does the Law require, in principle, the Contracting Authority to select Private Parties through a competitive tender process? Arts 5/6 For the selection of the Concessionaire the Contracting Authority except for limited exceptions as provided under article 6 shall use a tender process to ensure equality for the candidates, objectivity of the selection criteria transparency of the process and impartiality of decisions. 5 For further information on the selection of the Private Party, please refer to:pfi Guide, Consolidated Legislative Recommendations, Recommendations 14 to 39 included.

17 17. However such obligation to proceed with competitive bidding is not applicable to the State for any delegated management of public service as the law theoretically is not applicable to it. "in practice for evident transparency and fairness reasons the State apply such competitive process for most of such contract award and a recommendation from the from the department of public enterprise with the Ministry of Finances requires such competition for all delegated management service contract signed by the State (Revue trimestrielle of the Ministry of finances and privatisation, n 38, June 2006 )" 2. Is there reference in the Law to the principles of transparency, equal treatment and proportionality? Art 5 See above 3. Is there a provision in the Law concerning the publication of information related to the competitive procedures in the country media and in the international media (for large projects)? Art 5 The selection process shall be subject to prior publicity 4. Are there provisions within the Law or any special manual or recommendations governing in detail the selection of the Private Party (i.e.: the pre-selection of bidders, the procedure for requesting proposals or other procedure such as competitive dialogue/two stage procedure)? Art 5 The terms and conditions of providing tender documentation and the phasing of the tender process is to be fixed by implementing regulation for local authorities and by their board or decision making institution for the Public Establishments.

18 18. Concerning local authorities, for the application of Law 54-05, the Government published Decree on the 9th of August 2006 relating to articles 5 and 12 of the Law. 5. Does the Law provide that if the Contracting Authority rejects an applicant at the time of preselection or disqualifies a bidder, it must make public the reasons for the decision (or inform the rejected bidder thereof explaining the reasons for rejection)? XXX 3.2 Award of PPP QUESTION ANSWER ARTICLE COMMENTARY 6. Does the Law provide that all proposals are ranked solely on the basis of a predefined evaluation criteria set forth in the pre-selection documents/ request for proposals? XXX 7. Does the Law provide for the publication of a notice of the award of the project, identifying Art 14 An extract of the Project agreement is to be published in specified Official gazette including the name of the

19 19. the Private Party and including a summary of the essential terms of the project agreement? contractors, the scope, duration and content and the provisions concerning users. 8. Does the Law provide that the Contracting Authority or any other public authority maintain records of key information pertaining to the selection and award proceedings? XXX 9. If the answer to the previous question is Yes, does the Law provide that such record is accessible to the public, or at least to interested parties? N/A 3.3 Final negotiations QUESTION ANSWER ARTICLE COMMENTARY 10. Does the Law contain provisions regulating final negotiations (i.e. post contract award) so that transparency, equal treatment and competition are preserved? XXX 11. Does the Law provide that the Contracting The law does not prohibit it either

20 20. Authority has the authority to terminate negotiations with the invited bidder if it becomes apparent that the bid will not result in an agreement and start negotiations with the second ranked candidate? XX 3.4 PPP Award without competitive procedure QUESTION ANSWER ARTICLE COMMENTARY 12. Does the Law provide that the Contracting Authority has the authority to award a PPP without a competitive process only in limited/ exceptional circumstances? Art 5 and 6 Art 33 Exceptional circumstances allowing direct negotiations includes among others usual cases (defence, sole provider ) the case of urgency to allow the continuity of the public service and the case where a first tender has been unsuccessful. The request of Municipalities where the concerned sector or activity (not including water, sewage, electricity, and waste management) do not justify or allow the application of the law is an other case of exoneration which is quite large like the urgency criteria and may allow the possibility to bypass the law. 13. Does the Law provide for a procedure, set of rules or principles to be respected when awarding a PPP without a competitive process? A special report is to be approved and some specific publicity is required in case of direct negotiation.

21 21. For our general information, please specify the conditions which would allow such direct negotiations?

22 Special case of unsolicited proposals QUESTION ANSWER ARTICLE COMMENTARY 14. Does the Law provide for an adequate framework for the Contracting Authority to manage unsolicited proposals/private initiatives (i.e. a proposal relating to the implementation of a PPP that is not submitted in response to a request or solicitation by the Contracting Authority) that ensures transparency and equal treatment and does not distort competition? Art 7 The law provides specifically for the treatment of unsolicited proposal in much detail 3.6 Review procedures QUESTION ANSWER ARTICLE COMMENTARY 15. Does the Law allow the bidders who claim to have suffered, or that may suffer loss or injury, to seek review of the Contracting Authority s actions or failure to act? XX Not specified, not excluded

23 PROJECT AGREEMENT Model or list of provisions QUESTION ANSWER ARTICLE COMMENTARY 1. Does the Law give flexibility to the negotiation of most terms of the Project agreement and if it contain (or refer to): (i) a model PPP agreement it is an optional template agreement for guidance only or (ii) a list of mandatory material provisions which must be included in the agreement, the content of such provisions is left for negotiation)? Art 12 Model contracts for the local community may be drafted by central government who fix as well the list of mandatory provisions and the conditions for approval. 4.2 Duration and extension of the Project Agreement QUESTION ANSWER ARTICLE COMMENTARY 6 For further information on the project agreement definition, please refer to:pfi Guide, Consolidated Legislative Recommendations, Recommendations 12 and 40 to 68 included.

24 Does the Law provide that the duration of the Project Agreement should depend on the length of time taken for the amortisation of the Private Party's investment and an appropriate return on the capital? Art 13 The duration shall take account of the nature of the concerned services and investment made and should not exceed the normal duration of depreciation if the works are to be financed by the concessionaire. 3. Does the Law provide that the renewal or extension of the Project Agreement should be limited and depend on exceptional circumstances (such as Contracting Authority default or an event of force majeure)? XX Art 13 No extension of the contract duration except as may be justified by the proper performance of public services or in case of geographical extension of the area to be covered or in case of additional works required by the Contracting authority. All such possible case of extension are too large and vague even if the law specify that such extension should be strictly limited to the duration necessary to allow the continuation of the public service and to recover the financial balance of the concession For our general information, please provide the given minimum and maximum duration (if any) 4.3 Termination of the Project Agreement QUESTION ANSWER ARTICLE COMMENTARY

25 Does the Law leave open to the Project Agreement negotiations the list of possible ground for termination and the content of to the termination provision? Art 10 Some ground for termination are listed which cover usual cases of PPP termination in a non exhaustive way. 5. If the answer to the previous question is No does the Law provide for a list of grounds of termination which does not affect the balance between the parties rights and obligations (one sided provisions) or the stability of the contractual relation under the Project Agreement (e.g.: too large or non exhaustive list)? N/A 6. Does the Law provide for (or at least does not prevent) compensation of the Private Party for losses incurred as a result for termination on the grounds of public interest for losses incurred as a result of public authority acts? Not specified but result from the principles of Moroccan administrative law

26 Does the Law provide for (or at least does not prevent) compensation of the Private Party for all cases of early termination (including in case of serious breach or failure by the Private Party), for fair value after depreciation of the assets financed by the Private Party? Not specified but result from the principles of Moroccan administrative law 4.4 Tariff setting, service standards QUESTION ANSWER ARTICLE COMMENTARY 8. Does the Law provide clear guidance on all aspects of interaction between the bodies that have the power to award PPP and the bodies that regulate tariffs and service standards? XXX Not specified 4.5 Financial responsibilities of the Private Party and Contracting Authority QUESTION ANSWER ARTICLE COMMENTARY 9. Does the Law provide that the Private Party can collect tariffs or fees for the use of the facility or its services? Art 29 The contract should fix the financial aspects and tariff structure of the delegation of service including the adjustment or revision methods taking into accounts the

27 27. required financial balance but also productivity gains and saving resulting from the improvement of the management. 10. Does the Law provide for the possibility of fixed and/or consumption-based payments to the Private Party by the Granting Authority or other public authorities (i.e. in the case of Power Purchase Agreement, shadow tool or PFI)? XX Art 2 Not specified and apparently not adapted to payment by user as provided in the definition of the delegation of services

28 SECURITY AND SUPPORT ISSUES Security Interests QUESTION ANSWER ARTICLE COMMENTARY 1. Does the Law provide for (or does not specifically prevent) a Private Party to create security interests over the project assets, rights and proceeds or other valuable guarantees related to the project? Art 8 The Concessions Law allows pledges in relation to assets held by public enterprises but not by local community. 2. If the answer to the previous question is Yes, does the Law clearly state which types of security can be provided and include some of the most common type of guarantees in project financing (such as those listed in the request for general information below)? Lenders can receive a full range of securities in line with those which are commonly seen on the international market. The exception is that assets in the public domain that are owned by the public authority cannot be pledged as collateral. "Moroccan law does not allow lenders to secure against publicly owned property (that is owned directly by the public authority). The government should consider ways in which the pledge over public assets could be extended. This has happened with the creation of two exceptions to this rule (i) applicable to certain public bodies and (ii) under Law to harbor projects. Further exceptions to the general rule could be 7 For further information on support and financial securities, please refer to: PFI Guide, Consolidated Legislative Recommendations, and Recommendations 13, 49, 57 and 60.

29 considered."(eib Report) For our general information, please can you confirm whether a Private Party may pledge or assign by way of security: the proceeds and receivables arising out of the PPP; yes the assets for which it has rights of use under a project agreement; Reversible assets its property; yes shares of the Project Company; yes the project agreement; or obtain other valuable guarantees (please specify)? Government support QUESTION ANSWER ARTICLE COMMENTARY 3. Does the Law provide for (or does not specifically prevent) the public authority to provide support to the Contracting Authority and a guarantee for the proper implementation of the PPP by the Contracting Authority? XX Not specified 4. Does the Law provide for (or does not specifically prevent) the Public Authority to provide financial or economic support for the implementation of PPP? Art 29

30 If the answer to the previous question is Yes, does the Law clearly state which public authorities may provide such support and which types of support can be provided? (i.e. tax and customs benefits; foreign exchange protection (convertibility and transfer guarantees; subsidies; equity or loan participation)? XX 5.3 Lenders rights QUESTION ANSWER ARTICLE COMMENTARY 6. Does the Law provide for the Parties to arrange the financing with reasonable flexibility under the Project Agreement without strict time constraints or other constraints (except with respect to security package and government support)? XXX: 7. Does the Law provide, in the event of default of the Private Party for the lenders to step-in or XXX

31 31. substitute the Private Party with a qualified new Private Party without initiating a new tender process?

32 SETTLEMENT OF DISPUTES AND APPLICABLE LAWS8 6.1 Settlement of disputes QUESTION ANSWER ARTICLE COMMENTARY 1. Does the Law permit the Contracting Authority to enter into a Project Agreement that is subject to international arbitration? Art 9 The use of arbitration as a mean of dispute resolution in PPP projects is specifically mentioned in Law However International arbitration is not unquestionably accepted due to the fact that the project company is a Moroccan one.and it would be preferable for the avoidance of risk to provide for an ICSID arbitration provision. Some existing concession agreement refer both to international arbitration where the investment itself is concerned and to local administrative forum for day to day operation disputes. 2. Has the government of the country ratified the Washington Convention on the Settlement of Investment Disputes (ICSID) (1965)? 8 For further information on the settlement of disputes, please refer to: PFI Guide, Consolidated legislative Recommendations, Recommendations 57, 69 and 71.

33 Has the government of the country ratified the New York Convention on recognition and enforcement of foreign arbitral awards (1958)?

34 Applicable laws QUESTION ANSWER ARTICLE COMMENTARY 4. Does the Law permit (or does not prevent) the Contracting Authority) to enter into side agreements to the Project Agreement (such as a direct agreement with the lenders to the project or a support and guarantee agreement in respect of the Project Agreement) that is governed by foreign law. 5. Has the country ratified any international convention for the protection of foreign investments? Numerous conventions

35 II- EFECTIVENESS ASSESSMENT: HOW THE LAW WORKS IN PRACTICE: (Please comment based on the previous 2006 effectiveness general assessment) POLICY FRAMEWORK 7.1 Existence of PPP Policy Framework QUESTION ANSWER ARTICLE COMMENTARY 1. Is there a general/national policy framework (explicit or implicit) for PPPs for infrastructure or public services? There is no properly speaking a specific PPP policy paper in Morocco but the PPP policy is very much enshrined in the general economical policy of Morocco since a long time starting for the first delegations of public services of distribution of water and electricity as well as sanitation of the great Casablanca and following the initiation of the Jorf Lasfar BOT project and confirmed in by the Declaration of the government of 2007 as part of the liberalisation and opening trend of the Moroccan economic policy. Such policy has been reaffirmed by the action program adopted by the Parliament in January 2012 for the period This action program reaffirms the necessity to develop Public Private Partnership to reinforce the offer of services and social and economical infrastructure to respond to to the wish of the people and of the business community, to improve

36 36. the economical efficiency,to reinforce the attractiveness of investments and consequently the Governmet has taken the decision to put in place a specific PPP law. PPP policy is part of the privatisation process and of the withdrawal from the State from productive services (PERL I and II Program). PPP in addition to water and energy sector has been developed at the initiative of the government in numerous sector including housing, telecommunication, urban transport (Salé traways), agriculture (Guerdane irrigation project) with reference to PPP in the "Morocco Green" development program. The National Development Plan has stated that the government can significantly benefit from a well designed PPP initiative to help close Morocco s substantial infrastructure gap The Joint Statement which was signed namely by the Minister of Finances of Morocco and Tunisia at the conclusions of the 9th FEMIP Conference, 30 May 2011, in Casablanca, Morocco refer to the same PPP development policy at the Regional level : "Mindful of the potential for regional initiatives to promote PPPs in the Mediterranean region, the participants recognized: 1. The importance of access to high quality infrastructure services to improve citizens 'quality of life and regional competitiveness of Mediterranean Partner Countries; 2. The mutual benefit for the public and private sectors in bringing together their financial, management and technical resources to improve the supply, provision and maintenance of infrastructure facilities and services, in particular in those sectors where continuing government oversight and ownership is desirable.

37 The progress made by Mediterranean Partner Countries in improving their legal and financial readiness in order to facilitate the successful implementation of current and planned PPP programmes. 4. The benefits of sharing successful experiences and lessons learned in the development of PPP among countries in the region, both to improve the efficiency of public services and deliver the expected economic and social returns. They invited Mediterranean Partner Countries to: 5. Assess and review their PPP legal and financial readiness and enhance, as appropriate, the legislative, regulatory and institutional frameworks as well as the financial environment required to meet the funding needs of PPP projects; 6. Strengthen expertise on the processes and procedures for implementing PPP programmes and projects. 7. Reinforce, especially with the engagement of existing PPP units, regional cooperation and knowledge sharing on PPP issues.the European Investment Bank and its partners expressed their commitment to: 8. Increase their support to Partner Mediterranean Countries, in meeting infrastructure development challenges through financial and technical support, particularly for the implementation of pilot projects, and for the EIB and other EU partners with particular attention to the European Commission and European External Action Service Communication entitled A new response to a changing Neighbourhood. 9. Continue providing technical support to help increase the PPP legal and financial readiness of the Partner Mediterranean Countries including PPP policy framework formulation, legal reform, institutional strengthening, and increased capital availability for infrastructure development. 10. Assist Mediterranean Partner Countries, on a mutually agreed basis, in their capacity building programmes; and 11. Strengthen regional and interregional cooperation in the development of PPP through network arrangements aimed at promoting the exchange of experiences.

38 Is there any administrative guidance or printed information edited by the government or the PPP Unit concerning the legal framework for PPP projects in the country? Not for the time being but it is certainly one of the objectives of the new just formed PPP Unit. 3. Is there a municipal/regional policy framework (explicit or implicit) for PPPs in infrastructure or public services? Here also despite the absence of an explicit policy framework at the regional or municipal level it is clear that the law on delegation of Public Service N 54 specifically address local communities and not the central government which show that the development of PPP at the local regional level is central to the government PPP policy. 7.2 PPP Awareness and Sustainability 4. Is there a national and/or municipal /regional long term programme for PPP promotion and awareness? XXX 5. Are there PPP training programmes on a national and/or municipal/regional level for public servants and other PPP concerned people? Numerous seminars and the involvement of IFC and of IUK as well as of the EIB in order to address capacity constraints and to develop PPP in the country and at the regional level.

39 Are there PPP courses as part of university curriculum or specialist departments and faculties in universities teaching PPP? XXX

40 Obstacle to implementation of PPP Policy 7. Are you of the opinion that there are no social/political obstacles to implementing PPP in the country (e.g. grass roots opposition, policy measures against private sector participation in public infrastructure/services, etc.)? Concession and PPP are still a very sensitive political and social matter and the periodic adjustment of the delegated management contracts for the water and electricity distribution services and sewage is always a source of public expression of its rejection of the private management of Public services which is said to me much more expensive. Nevertheless the international institutions maintain their confidence on the success of PPP in Morocco. 8. Are you of the opinion that there are no legal obstacles to implementing PPP in the country (e.g. non-publication of a decree provided under the Law and necessary for such law to become effective, etc.)? No legal obstacle which would prevent the implementation of PPP but there is ground for improvement through the enactment of a specific new PPP law in particular. Although a legal framework exists to support concessions, broader PPP procurement in Morocco, such as projects where payments are directly related to performance, requires the implementation of comprehensive legal and regulatory reforms coupled with institutional capacity building. PPPs to date have been ad hoc in nature due to the absence of a single policy or procurement channel. Public bodies such as the National Office of Electricity and some state-owned entities have been active in entering into partnership contracts with the private sector in a number of sectors, including energy, water supply, and ports. These projects demonstrate that Morocco can attract high quality domestic and international bidders. (EIB 2011Report)

41 41.

42 For our general information, please describe the existing impediment and obstacles if any with respect to the two previous questions 8. INSTITUTIONAL FRAMEWORK Existence and role of PPP Central Units/Agency QUESTION ANSWER ARTICLE COMMENTARY 1. Is there a specialised institution/agency/ministerial department established to promote PPP and to serve as Central PPP Unit? A new PPP unit has just been created within the Office of Public Enterprise and Privatization (DEPP) of the Ministry of Economy and Finances in September 2011 without the need for any specific law as it is part of the administrative organization which can be settled through regulations or Ministerial circular. in order to promote and assist in the development of PPP project. "Capacity building and policy coordination within the Moroccan government needs to be further prioritized. In order to address capacity constraints and ensure coherence across the government, the Ministry of Economy and Finance is creating a new PPP unit with the assistance of the International Finance Corporation (IFC) and Infrastructure UK (IUK). The role of this unit will be to develop policy, to support the identification, structuring and implementation of projects (particularly in key service sectors such as health or education) as well as to provide guidance, oversee procurement processes, and monitor projects in the implementation and operational phases, contribute to knowledge

43 43. sharing, draw up operational manuals, etc.. This new unit will need to build on the experience of the DEPP ( Direction des Etablissements et Enterprises Publiques et de la Privatisation ) and the DRSC ( Direction des Regies et des Services Concedes ) to ensure that existing PPP knowledge is mobilised and enhanced. At the same time, the new PPP unit will contribute to enhancing the capacity of both the DEPP and the DRSC in PPPs. Close partnership between the DEPP and the European Unionsponsored capacity building programme has provided a platform for the creation of a central PPP unit. Morocco s challenge will be to develop sufficient number and quality of PPP projects and to provide the PPP unit with sufficient expertise and financial means to be able to carry out its functions." (EIB 2011Report) 2. Is such Central PPP Unit composed mainly of specialists recruited from the business community and not exclusively composed of civil servants coming from different public ministries? XXX Composed mainly of young public servant to be specifically formed on PPP and concession projects 3. Is the role of such Central PPP Unit comparable to a "task force" assisting in the development of projects in general and not limited to promotion of PPP? 4. Is the consent or recommendation of such Central PPP Unit necessary for the development and granting of most PPP projects (except small or local PPP)? Assistance to the granting authority for pending project should be one of the future role of the Unit at the request of any public entity. Consent not officially required but result from any involvement required from the Ministry of Finances