I was interested to read the comment by the minister for trade and investment, Lord Davies of Abersoch (see [2009] Gazette, 2 April, 8).

Lord Davies has identified international demand for legal services resulting from what he calls ‘building for better days’ – no doubt an optimistic euphemism created by government spin doctors who thought it sounded better than ‘throwing good money after bad’.

The substance of Lord Davies’ comment is that the UK experience of public private partnerships has given UK law firms an edge when it comes to advising governments and private parties internationally. This is based on two premises. The first is that local lawyers in the jurisdictions themselves are not capable of dealing with the legal issues involved, and the second is that the PPP-type structure is going to be increasingly popular for ‘building for better days’.

I have been around this scene for a good many years – my first UK PPP experience was in 1996 – and I have attempted to market services using this background in various foreign places.

I have had transitory successes, but the reality is that, except in the grimmest backwaters, most countries have a core of very competent local lawyers who are quite capable of doing this sort of work. UK or American lawyers may be brought in for the first few deals, but once the basic framework is established the good local lawyers step in. It’s different for the really massive deals where foreign banks are involved, but, at the moment, these are few and far between. They are normally based on sectors with prospects of high profitability – property, oil or energy – and we know what the state of the market for these is at the moment.

Where, after the first few deals, UK law firms are involved in the more run-of-the-mill PPPs, it tends to be through local offices which, while they trade under UK names, are largely made up of the good local lawyers I mentioned earlier.

Contracting method of choice?The other assumption is that PPPs are going to be one of the contracting methodologies of choice. I am afraid I do not see this. At its heart, a PPP involves the private sector raising money in the private market to build public facilities. The borrowing is paid back over a very long period out of service charges paid by the government or by a fee for use. If rates of interest for private borrowing are high, or money for private lending is short, there is no benefit for governments in using these mechanisms for providing infrastructure.

It is easier and cheaper simply to borrow on the public balance sheet (or print money – which Lord Davies might call ‘quantitative easing’) and procure the infrastructure directly. If you add to this that a lot of PPPs were only financeable because of clever financing deals – does obtaining insurance to give an investment grade rating to the bonds issued by a project company with a rather dodgy prospect of profits remind you of anything? – and that the whole market for such clever arrangements is sick or dying, I can’t see this going anywhere at the moment. There may be some extra infrastructure built, but it is probably going to be built using less lawyer-heavy methods.

Lord Davies may not be ready to admit this, but I would be surprised if, even in the UK, PPPs are not on a downward slide.

It is just possible that Lord Davies will be right in the long run, but I don’t see the international opportunities in advising on the creation of PPPs he sees for the UK legal profession.

Now, as for disputes arising out of failed or failing infrastructure projects launched in the heady days of the derivative-fuelled boom – this is where there may be some opportunities.

George Rosenberg is a consultant at construction firm Corbett & Co International in Teddington