united nations – un-habitat – urban development and the law urban development, private...

United Nations – UN-Habitat – Urban Development and the LawUrban development, private investment and regulation

14 March 2014

Urban development, private investment and regulation

• Overarching themes

• Context

• Significance

• Linkages

• Practicalities

• Challenges

• Example – Iraq

• A way forward

• Policy concerns

• Priorities

www.blplaw.com © Berwin Leighton Paisner

Overarching themes

• Look through prism of deliverability from an investor’s viewpoint

• Vision

• Due diligence

• Holistic project planning

• Holistic project management

• Law as a hygiene factor and facilitator

• Not about creating legal systems


Context

• Urban development does not pay for itself

• It is rare for urban development to be paid for by public funds alone

• Even if paid for by sovereign funds external private sector finance will usually be needed

• In any event the private sector may well be needed as occupiers or operators

• Especially where mobile, international institutional private sector interests are to be attracted, private sector drivers, sensitivities and expectations must be addressed


Significance

• If investors will not invest, things will not happen, or cannot happen beyond funding based on sovereign wealth running out

• So for urban development to be economically sustainable in the long term, it is essential to create the right environment for investment


Linkages

• Close links between urban development, private investment, law and regulation

• Regulation is at the heart of creating and conserving and enhancing investor willingness and investor values

• Regulation can take many forms: restrictions on rights to develop and build; creation of state sanctioned monopolies for providers of public utilities and services; limitations on rights to use services to permit holders

• Regulation, applied rightly, can therefore be both a driver of and a catalyst for investment in urban development

• Regulation and the rule of law go hand in hand – regulation without even-handed, proportionate enforcement is meaningless


Practicalities (1)• Forms of private sector investment:

• Collaboration with public sector to introduce innovation and best practice as well as capital

• Public procurement of specific assets/ public goods

• Confidence to invest in wider urban space

• Investor expectations:• Political and applicable law stability for duration of

investment

• Property rights clearly identifiable, transferable recognised and enforceable

• Contract rights recognised and enforceable against counterparty

• Ability to repatriate returns


Practicalities (2)Promoting investor confidence:

• Effective legislation supported by proportionate, transparent regulatory, licensing and enforcement regimes

• Credible urbanisation strategies and objectives which are supported by credible budget strategies and programme for delivery

• Robust strategic planning and civic governance procedures are necessary pivot points for investor engagement and delivery

• Democratic legitimacy - Key stakeholder support and engagement criticalwww.blplaw.com © Berwin Leighton Paisner

Practicalities (3)

Requirement for an holistic approach:

• legislative and regulatory processes - underlying and anticipated

• development of policy and strategy

• implementation by public stakeholders

• Due diligence, anticipation and project management are inter-related and critical


Challenges

• Foresight

• Focussing on delivery

• Proportionality versus perfectionism

• Legal Clarity versus legal straightjacket – need for frameworks first

• The squeezed balloon problem

• One size doesn’t fit all

• Portability of concepts

• Clarity of vision comes first. Quality of governance, machinery of regulation and project management are every bit as important as quality and clarity of legislation and policy


Example - Iraq

• Direct investment into land based urban infrastructure and housing development (65,000 units)

• High level issues encountered symptomatic of those more generally encountered


Iraq – High level issues (1)

• Counterparty risk – lack of legal representative status and enforceable substance of National Investment Commission and inability to bind/ commit all relevant permitting authorities

• Lack of clarity on enforceability – Riyadh/ ICC convention

• NIC/ One Stop Shop concept not work

• Political risk


Iraq – High Level Issues (2)

• Lack of clarity on landownership rights: rights in rem and musataha – inability to grant security or subdivide and lack of efficient and certain land registration capability

• External infrastructure interfaces – lack of certainty will be delivered/ sufficient capacity/ risk of interruption

• Inability to sub-grant rights to third party developers

• Repatriation of profits and inability to pass FDI incentives to third party developers and supply chain


Iraq conclusions

Challenges:• Levels of expertise/ desire to address investor

expectations

• Flexibility - positions adopted in contractual negotiations

• Legislative structure and wider regulations

• Underlying financial models to be developed in greater detail

• Confidence in public stakeholders/ procuring authorities


A way forward

• Economically Sustainable urbanism

• Creation of investor confidence

• Long term strategic plan

• Project planning

• Project management


Policy Concerns

• Law for law’s sake and regulation for regulation’s sake are counter-productive

• Vision, strategic planning, law, regulation and policy sit side by side

• How to energise delivery at local level without being bogged down by national political debate?

• How to avoid over-prescription

• How to balance


Priorities

• Focus on and work back from a selection of real life priority projects

• Develop some real world template frameworks, recognising that one size doesn’t fit all

• Recognising local granularity

• Recognise the inherent linkage between regulation, investment and urban development and use that recognition to frame plans of action

• Identify examples of workable best practice

• Engage with the investor community early when planning and developing


THANK

YOU


Tim Pugh and Mukhtiar Tanda14 March 2014

This document provides a general summary only and is not intended to be comprehensive. Specific legal advice should always be sought in relation to the particular facts of a given situation.

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