By: Dr. Haytham Ereifej
Managing Partner
Ereifej and Partners International Law Firm
Jordan Daily - When governments enter into agreements with private investors to develop infrastructure projects, they undertake legal and financial commitments that may extend over several decades. The central question is therefore not merely how a project will be financed, but who has the authority to contract, who is responsible for implementation, how risks are allocated, and what happens when contractual obligations are not fulfilled. Legal certainty requires more than a signed agreement. It demands a contractual framework that protects investors while safeguarding public funds and ensuring the continuity of essential services.
In Jordan, public–private partnerships (PPPs) are principally governed by the Public-Private Partnership Projects Law No. 19 of 2023 and the Public-Private Partnership Projects Regulation No. 9 of 2024. However, determining the applicable legal framework is the first step in assessing any project.
Article 21 of the 2023 Law excludes projects whose contracts were signed, received final approval for signature, or entered the tendering process before the Law came into force. Consequently, projects cannot automatically be subjected to the same legal requirements merely because they became operational after the new legislation was enacted.
Under Article 9, the Ministry of Investment serves as the principal authority responsible for project preparation, tendering, and coordination with the relevant public entity until the PPP contract is signed.
From a legal perspective, this requires careful verification of the contracting authority's powers, the necessary approvals and authorizations, and the consistency of the final agreement with the tender documents and accepted bid. The execution of a contract does not, by itself, establish that all preceding procedures were legally valid.
Effective legal structuring must begin well before a project is offered to investors. Land ownership and usage rights, licensing requirements, environmental obligations, and sector-specific restrictions should be thoroughly examined and clearly addressed in the project documentation.
For example, where the commencement of construction depends on the government delivering a project site, the contract should identify the responsible authority, establish a clear deadline, and determine the consequences of any delay, including its impact on project costs and completion schedules. Leaving such matters unresolved creates uncertainty that may ultimately develop into costly disputes.
Risk allocation lies at the heart of every successful PPP arrangement. It transforms technical, operational, and economic uncertainties into clearly defined and enforceable contractual obligations.
A well-structured agreement must determine which party bears the risks associated with design defects, construction cost overruns, operational delays, insufficient demand, and supply disruptions. General contractual language is insufficient. Each risk should be linked to a defined event, evidentiary requirements, notification procedures, mitigation obligations, and the resulting financial or contractual consequences.
The guiding principle should be that risks are allocated to the party best positioned to manage them.
If a private partner assumes operational risks, it must also possess sufficient contractual authority to manage the relevant activities. Conversely, when performance depends on decisions or actions by a public authority, the contract must clearly establish the responsibility for securing those actions, without suggesting that the project is exempt from applicable legal requirements.
Transferring risks to a party that cannot reasonably control them may increase project costs, undermine bankability, or generate disputes over compensation.
Financial commitments require equally careful legal scrutiny.
A clear distinction must be maintained between payments made by service users, financial obligations undertaken by the contracting public authority, and any separately issued government guarantees.
Government participation in a PPP project should never be interpreted as an unlimited guarantee of the project's debts or revenues. Every financial undertaking must be examined according to its legal basis, scope, conditions, and enforceability.
Equally important, potential compensation arising from project default or early termination should be assessed from the outset as part of the project's overall fiscal exposure. This is essential to preventing contractual commitments from becoming unexpected burdens on public finances.
Where PPP agreements concern essential public services, the public interest must be translated into measurable contractual standards.
These should include service quality, continuity of operations, maintenance obligations, inspection mechanisms, and accessible procedures for receiving and addressing public complaints.
Performance deductions or contractual penalties may be established in accordance with applicable law and the agreement, while distinguishing between failures attributable to the private operator and disruptions caused by circumstances for which the public authority is responsible.
Financial compensation should correspond to clearly defined and verifiable performance obligations rather than vague expectations.
Another area requiring particular attention is the treatment of changes in legislation and exceptional circumstances.
Changes in law, extraordinary events, and disruptions beyond the parties' control should be distinguished from ordinary market fluctuations or managerial failures.
Contracts should specify the conditions under which relief may be requested, the evidence required to establish a causal link between the event and the alleged loss, the obligation to mitigate damages, and the available remedies, whether extensions of time, financial adjustments, or termination.
Such provisions must also respect the State's legitimate regulatory authority and should not be drafted as though public authorities could permanently surrender their power to regulate in the public interest.
Contract amendments present an additional legal challenge.
Article 19 of the Public-Private Partnership Projects Law No. 19 of 2023 requires the prior written approval of the Council of Ministers for amendments or changes concerning project outputs, price, duration, or waivers of contractual rights that affect the agreed allocation of risks.
Accordingly, a commercial settlement between the contracting parties cannot replace a legally required governmental approval.
Any proposed amendment should also be examined in light of its potential impact on the competitive conditions under which the original contract was awarded. Otherwise, significant contractual changes may undermine the principles of transparency and fair competition that should govern public procurement.
The legal consequences of termination deserve similar attention.
Contracts should distinguish between default by the private partner, breach by the public authority, and other legally or contractually recognized termination events.
They should establish clear procedures for notices, opportunities to remedy breaches, compensation, and the transfer or return of project assets.
The rights of project lenders should also be carefully structured. Financing agreements may provide mechanisms allowing lenders to address defaults or propose replacement operators, subject to applicable legal requirements and necessary approvals. Such arrangements should not be interpreted as granting lenders an automatic right to assume control of the project.
Effective dispute resolution is another essential component of legal certainty.
PPP contracts should identify the types of disputes covered, the procedures and deadlines for resolving them, and the competent judicial or arbitral forum.
Where arbitration is contemplated, particular attention must be given to the validity of the arbitration agreement, the legal authority to enter into it, and the enforceability of any resulting award.
Transparency and integrity are equally fundamental. Article 20 of the 2023 Law establishes rules addressing conflicts of interest, disclosure obligations, and confidentiality in relation to PPP projects. These safeguards are not merely procedural requirements; they are essential to preserving public confidence in investment decisions involving national assets and public resources.
To strengthen Jordan's PPP framework in practice, tender documentation should be accompanied by a comprehensive risk-allocation matrix, a legal due diligence assessment covering land rights and regulatory approvals, a clear evaluation of fiscal commitments, and a structured contract-management plan.
Legal oversight should not end when the agreement is signed. Public authorities must maintain the institutional capacity to monitor performance, document contractual claims, assess proposed amendments, and enforce obligations throughout the project's life.
Ultimately, the success of public–private partnerships should not be measured solely by the amount of private capital attracted or the number of projects launched.
A successful partnership is one that provides investors with predictable and enforceable rights, protects public resources, delivers reliable and affordable services to citizens, and ensures that the State undertakes only those obligations it can realistically fulfill.
For Jordan, the real challenge is not simply to attract private financing, but to establish a contractual and institutional framework in which investment opportunities, legal certainty, and public accountability reinforce one another.
