Public-Private Partnerships for the UN Sustainable Development Goals achievement

Eremin Viktor PhD in Law Junior researcher, Graduate school of management, SPbU 199034, Russia, Saint Petersburg, nab. University, 7-9 eremin.cisp@gmail.com

Introduction

Public-private partnership (PPP) – one of the most popular mechanisms for the creation, reconstruction and modernization of infrastructure in the world is at a new stage of transformation. At the present stage of PPP development, more and more countries, under the influence of globalization trends, are turning to the unification of legal norms to create favorable conditions for foreign investment. One of the basic drivers for the development of legal regulation, including in the field of project financing, is sustainable development, which today forms the agenda for the formation of a new level of infrastructure. Under the auspices of the United Nations Economic Commission for Europe (UNECE), a draft model law "PPP for the benefit of people" is under development and approval ^[13], which is not just aimed at improving this mechanism, but should transform it conceptually. This transformation is due not just to the urgent need to reform the project financing of infrastructure, but to the adaptation of the PPP mechanism for the implementation of the UN Sustainable Development Goals (UN SDGs). For practical actions, the UNECE has also developed a specialized system for ranking and evaluating PPP projects for achieving the SDGs – "UNECE PPP and Infrastructure Evaluation and Rating System (PIERS)" ^[19]. This article examines in detail the UNECE initiative on the implementation of PPP for the benefit of people, characterizes and defines public-private partnership for sustainable development goals, and also examines a new approach for transnational PPP projects - LEX PPPs, which should become a driver for the implementation of sustainable development goals in PPP contracts.

Sustainable Development Goals and PPPs

As noted in the literature, the Sustainable Development Goals "are a reflection of the dominant concept of sustainable development in the 21st century, have a transformative impact on all spheres of international and cross-border relations" ^[8]. The concept of sustainable development was formulated in 1987 in the report of the World Commission on Environment and Development, which defines sustainable development as development that meets the needs of the present, but which does not jeopardize the ability of future generations to meet their own needs ^[2]. The crystallization of the concept of sustainable development in the modern sense is reflected in the 17 Sustainable Development Goals formulated by the UN in 2015 ^[18]. For the purposes of this study, the most significant goal seems to be Goal 9. "Creating a stable infrastructure, promoting inclusive and sustainable industrialization and innovation" through which the need for humanity to create an infrastructure that would meet the criterion of sustainability is clearly traced. It is often pointed out that infrastructural growth is the key to the sustainable development of any state ^[15]. Currently, the UK and China are at the forefront of scientific understanding of infrastructure in relation to sustainable development ^[16]. There are also various branches of this concept: some authors call the concept of sustainable development a sustainable development strategy ^{[5, 6]}, or offer their own "model of sustainable and safe development - Honest development", which is somehow aimed at infrastructure development ^[11].

Achieving the Sustainable Development Goals (SDGs) is possible through the involvement of all interest groups (politicians, business, civil society and the population), which is one of the key factors of peace, social tranquility and stable growth ^[5]. Improving communication between all stakeholders, as well as improving communication and involvement of citizens and businesses are becoming the main challenges for sustainable development, and require an integrated and intersectoral approach ^[12]. As noted in the Resolution of the UN General Assembly of 25.09.2015 A/RES/70/1 "Transforming our world: the UN Agenda for Sustainable Development for the period up to 2030" and confirmed by a number of scientific papers ^{[7, 20]} – the key means of achieving the SDGs is the mechanism of public-private partnership or, if more precisely, the mechanism of public-private partnership ^[9]. In this context, we can talk not only about sustainable development or sustainable infrastructure, but also about sustainable public procurement and sustainable public-private partnership ^[14]. Based on the analysis of publications on public-private partnership for the SDGs, Wang and Ma determine that PPP for the SDGs is contributing to the achievement of one of the three dimensions of sustainable development: social, environmental and economic ^[16]. It seems to us that these measurements should be considered not separately, but in aggregate. We propose to define public-private partnership for sustainable development (or sustainable PPP) as the implementation of an investment infrastructure project based on a PPP agreement that meets the triad of components of sustainable development: social, environmental and economic.

UNECE's work in the field to promote PPPs for the benefit of people

The UNECE has been actively working over the past few years through various working groups to understand and promote PPP as a mechanism to achieve the SDGs. For example, a Methodology for evaluating public-private Partnerships for the Benefit of People in order to Achieve the Sustainable Development Goals has been prepared, which is intended for use by governments, the private sector, civil society organizations, academia and international organizations that work together to create PPPs for the benefit of people in order to achieve the SDGs ^{[3, 4According to S. V. Maslova, the evaluation of projects under this approach should be based on "criteria determined by the economic (Value for Money), social (Value for People) and environmental (Value for Planet) content of the SDGs" [8, 17]}.

In addition, it cannot be said that the UNECE sees the future use of PPPs to achieve the SDGs as cloudless and clear and notes that there is now some "pause" in the use of PPPs to achieve the SDGs, which is associated with a conditional bias in favor of achieving profit by a private investor rather than achieving a public good, and for the real implementation of PPPs to achieve SDGs need to implement PPP projects rationally and consistently, while really meeting the needs of the population ^[1].

A separate large layer of the UNECE's work in terms of PPP to achieve the SDGs is the development of a PPP Model Law for the benefit of People (Draft standard on People-first PPP/Concession Model law, hereinafter referred to as the Model Law) ^[13]. The latest available draft of the Model Law contains 41 articles that are aimed at regulating literally all the nuances related to PPP in general. Of course, it is not possible to characterize all the provisions within the framework of the article, therefore we will give only individual comments on the key provisions.

Thus, the preamble of the Model Law states that the purpose of the Law is to create a legal framework for PPPs in the interests of people and contracts ensuring their implementation in [the host country], including rules and procedures governing their selection, preparation, evaluation, procurement and implementation, contractual principles and institutional mechanisms applicable to them, and also promoting the orderly and coordinated implementation of PPPs. Paragraph 2 of Article 1 of the Model Law defines the scope of its application ("All PPPs. This law applies to all forms of PPP as defined in this law, including those that are called or described as projects; concessions; or user fees, those that are called or described as projects of the type of payment by the state or, other forms designated by other names or abbreviations, and those that involve the transfer of the risk of demand to the private partner, as well as those who do not. It also applies to all PPP projects implemented in [the host country] after the date of entry into force of this law, regardless of whether they are carried out at the national, federal, subnational, regional or municipal level (except in cases where the PPP rules specifically provide otherwise) [approx. my translation is VE]). The Model Law interprets PPP as a phenomenon quite broadly. This is rather a negative factor and does not create clarity for the implementation of this concept in various legal systems, including the Russian one. Various contractual forms of interaction between public and private parties adopted in Russia correspond to such a broad description: certain forms of public procurement, "offset" contracts, various forms of investment agreements.

Paragraph (xvii) of Article 2 of the Model Law provides one of the key definitions of the Model Law – the definition of the term PPP for the benefit of people. It is defined as "a type of public-private partnership developed for the implementation of the SDGs" (The full definition is as follows: PPP for the benefit of people - a public-private partnership focused on the interests of people; means a type of public-private partnership (PPP) developed for the implementation of Sustainable Development Goals and, thus, corresponding to the goal. It is defined as an improved approach to PPP that overcomes some of the shortcomings of the traditional PPP model. PPPs are contractual instruments for providing public infrastructure with initial private financing. They include two types: state-paid PPPs, which are mainly funded by taxpayers, and concessions, which are mainly funded by infrastructure users [approx. my translation is VE].), that is, as a separate type of PPP. At the same time, the Model Law does not distinguish between different forms of PPP, does not establish the distinctive features of PPP for the benefit of people as an independent form of PPP. On the other hand, further in the text of this paragraph, PPP for the benefit of people is defined as an improved approach to PPP, which allows overcoming some of the shortcomings of the traditional PPP model. PPPs are contractual instruments for providing public infrastructure with initial private financing. They include two types: "state-paid PPPs", which are mainly funded by taxpayers, and "concessions", which are mainly funded by infrastructure users." It can be stated that PPP for the benefit of people is defined simultaneously as an independent legal regime for investment by a private partner and as an add-on to the main PPP models used by states. This dichotomy creates an ambiguous interpretation, to eliminate which it is advisable to abandon the definition of PPP for the benefit of people as an independent type of PPP.  

It seems that the work of the UNECE on the implementation of PPP for the benefit of people is a time-consuming and very complex process, but the existing "stalling" on the implementation of PPP for the benefit of people as the main tool for achieving the SDGs is a contradictory understanding of this institution.  The SDGs should become the main reference point for PPP as a strategic goal, and subsequently an integral part of it. Further work should consist not just in adding the phrase "PPP for the benefit of people" or "SDGs", but in introducing methods for assessing the compliance of public-private partnership projects with the SDGs. From the point of view of developing a Model Law, it should be noted that there is no need to develop a separate type of PPP, which from the point of view of the basis (PPP agreement or concession agreement) is conceptually no different, it is only necessary to determine which PPPs will relate to PPP for the benefit of people. It also seems necessary to summarize the best legislative practices for PPPs in general and with a focus on achieving the SDGs in particular. An additional push to stimulate PPP lending at preferential rates, as well as additional tax, environmental and other benefits can stimulate private and public parties to achieve the SDGs.

lex PPPs

The practice of implementing PPP projects often outstrips the regulatory consolidation of turnover structures, and the cross-border nature betrays a certain inconsistency of individual contractual provisions. For example, the institution of special circumstances, which has actually become an integral part of PPP agreements, is new to the Russian law and order. The essence of this institution is the possibility of compensation for losses of a private or public partner in the event of certain events, that is, in essence, we are talking about risk allocation. When, as in domestic law, such an institution can only be conditionally qualified through losses, penalties and compensation for losses within the framework of the implementation of entrepreneurial activity (406.1 of the Civil Code of the Russian Federation).

When it comes to cross-border PPPs (for example, when a PPP facility is located on the territory of two states), the leading role is played by international organizations, in particular, the World Bank, which has developed model conditions and recommendations for PPP contracts. In this regard, it is impossible not to mention the term lex PPPs introduced by S. V. Maslova, which denotes a set of principles and rules aimed at streamlining individual cross-border relations arising in connection with the conclusion and execution of a PPP agreement and other project agreements ^[8].

It seems that it is lex PPPs that can currently become the main driver of the implementation of the sustainable development agenda in PPP agreements. In part, some recommendations of international organizations already contain references to sustainable development and the achievement of the SDGs, however, it is through "soft power" that the "greening" of the PPP agenda is most likely.

Conclusion

According to the results of the analysis, it can be concluded that a PPP for the benefit of people is more of a superstructure than a basis. The key remains PPP as a mechanism that requires reform in order to give it a more socially oriented agenda and implement compliance with the achievement of the SDGs as a KPI. The stimulation of new opportunities for private sector financing for the creation of public infrastructure should improve public access to this kind of infrastructure, not limit it. The key balances to achieve such parity should be legislative (Model Law) and contractual work (lex PPPs). This can make it possible to implement PPP projects for the benefit of people more likely and in cases where the state prioritizes the needs of nature and man.

In the course of the study, the Author analyzed the initiatives of the UNECE in the field of public-private partnership. The main results of the study include the fact that aspects that slow down the promotion of the sustainable development agenda in the field of public-private partnership were identified (contradiction of terms, lack of incentives for implementation for investors), a definition of public-private partnership for sustainable development goals was given, and it was also revealed that lex PPPs can become an effective tool to achieve the Sustainable Development Goals through their implementation in PPP agreements.