United Nations UN-Habitat Urban Development and

United Nations – UN-Habitat – Urban Development and the Law Urban 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 Page 2 © 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 www. blplaw. com Page 3 © Berwin Leighton Paisner

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 www. blplaw. com Page 4 © Berwin Leighton Paisner

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 www. blplaw. com Page 5 © Berwin Leighton Paisner

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 www. blplaw. com Page 6 © Berwin Leighton Paisner

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 www. blplaw. com Page 7 © Berwin Leighton Paisner

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 critical www. blplaw. com Page 8 © 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 www. blplaw. com Page 9 © Berwin Leighton Paisner

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 www. blplaw. com Page 10 © Berwin Leighton Paisner

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 www. blplaw. com Page 11 © Berwin Leighton Paisner

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 www. blplaw. com Page 12 © Berwin Leighton Paisner

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 www. blplaw. com Page 13 © Berwin Leighton Paisner

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 www. blplaw. com Page 14 © Berwin Leighton Paisner

A way forward • Economically Sustainable urbanism • Creation of investor confidence • Long term strategic plan • Project planning • Project management www. blplaw. com Page 15 © Berwin Leighton Paisner

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 www. blplaw. com Page 16 © Berwin Leighton Paisner

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 www. blplaw. com Page 17 © Berwin Leighton Paisner

THANK YOU www. blplaw. com Page 18 © Berwin Leighton Paisner

Tim Pugh and Mukhtiar Tanda 14 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.