Private Investment in Infrastructure and Public-Private Partnerships

Governments around the world are turning to public-private partnerships (PPPs) in efforts to achieve a number of objectives, including the construction, operation and management of public infrastructure, management and use of natural resources, and provision of public services. Experience to date shows, however, that not all such PPPs produce their anticipated benefits. Investment is often lower than anticipated and complications arise during implementation where, for example, the costs and benefits of projects are not adequately assessed or allocated, risks among parties are sub-optimally divided, and the procedures for addressing and resolving disputes have not been designed in a sufficiently transparent and effective manner.

Recognizing these challenges, CCSI worked to deepen and broaden understanding regarding the appropriate legal frameworks that can better ensure that PPPs result in high quality, accountable, and sustainable infrastructure and related services. Its work focused on two main areas. First, we conducted comparative research and analysis on governments’ domestic PPP frameworks and the types of approaches that can and have been used to produce successful PPPs in different sectors and activities. Second, we reviewed and evaluated how international legal frameworks governing foreign investment might affect the use and outcomes of PPPs.

This paper discusses the circumstances affecting when an investment treaty will apply to an infrastructure project, and also highlights some of the ways that investment treaties can impact governance of infrastructure development and operation. While focusing on the relationship between investment treaties and investments in infrastructure, this paper is also relevant for the connections between investment treaties and other activities involving investor-state contracts (or quasi-contractual relationships) such as investments in the extractive industries. This blog briefly raises similar issues.

In 2018, CCSI submitted comments to UNCITRAL regarding its Revision of Legislative Guide on Privately Financed Infrastructure Projects, in support of more widespread transparency, participation, and accountability of PPPs, oriented toward sustainable development.