Concession Agreement Ppp

From the still nascent concessions to the PPPs that sweep the country today, there are two main sets of rules to follow: one is the concession regulation led by the National Development and Reform Commission (“NDRC”), and the other is the set of regulations for PPPs led by the Ministry of Finance (“MoF”). To date, however, there is not a single law that explicitly defines the relationship between the two, which in practice leads to a lot of confusion and many obstacles. The relationship between concessions and PPPs is an issue that needs to be clarified urgently at the moment. Example 6: Peru – Contrato de Concesión de los Ferrocarriles del Sur Sur Oriente (Spanish) – Concession contract between the Peruvian State and a private entity (Ferrocaril Transandino S.A.) which operates the concession for the southern (Matarani/Mollendo to Cusco) and south-eastern (Cusco to Machu Pichu) railway lines. The duration of the concession is 30 years (renewable). The licensing authority grants the concessionaire the right to use tangible assets and vehicles for the carriage of passengers and goods. The main tasks of the concessionaire include the modernisation and rehabilitation of railway infrastructure (including signalling and telecommunications systems), the repair of rolling stock and the improvement of operational performance. The concessionaire shall be required to grant free access to other railway undertakings on a non-discriminatory basis and against payment of an infrastructure charge. Lane access fees must be approved by the regulatory body. More information on the track access agreement developed for this rail network can be found on this website. In this form of PPP, the government defines and grants a company (usually a private company) specific rights to build and operate a facility for a certain period of time. The government may retain final ownership of the facility and/or the right to provide the services.

In the case of concessions, payments can be made in both directions: the concessionaire pays the concession fees to the government, and the government can also pay the concessionaire it provides under the agreement to meet certain specific conditions. As a general rule, these payments by the government may be necessary to make projects economically viable and/or to reduce the commercial risk taken by the private sector, especially in the early years of a PPP programme in a country where the private sector may not have sufficient confidence in the implementation of such a commercial enterprise. Typical concession periods are between 5 and 50 years. In the case of a PPP project worked on by the authors, the government side has explicitly stated in the tender documents that “if the investor of the concession project selected under a tender can carry out the construction, production or supply himself in accordance with the law”, no further tendering will be made. In addition, the documents establish the investor`s qualification requirements for construction based on the size of the project and establish the investor`s construction balance sheet and the company`s qualifications as factors in evaluating the project. Example 5: Brazil – Railway concession related to mining (Portuguese with summary in English) – Concession contract between the Brazilian State and a consortium of several mining companies. The concession contract grants the concessionaire a 30-year concession for the development and operation of a 1,674 km railway line that serves as a freight link to the main ports in the region. The concession contract requires access to a certain volume of intercity passenger transport (9.1 XX). The concessionaire is also required to engage in “reciprocal transport” (i.e.

to grant access rights to other railway undertakings on a reciprocal basis). If the concessionaire cannot engage in “reciprocal traffic”, it must enter into track access agreements with third-party users. These contracts must be submitted to the licensing authority in order to prevent abuses of economic power (9.1 XXII). A leasing contract is similar to a concession, but the government generally remains responsible for capital expenditures. Leasing, in particular, may have some meaning in some jurisdictions. The World Bank`s Explanations of Water Regulation (Groom et al. 2006, 36-42) describe leases and concessions. These contracts may or may not fall within the definition of PPPs, depending on the duration of the contract. Franchising is sometimes used to describe a contract that resembles a concession or a lease or service agreement, as described in Yescombe (Yescombe 2007). The lack of demarcation of the relationship between PPP and concessions has, in practice, led to a great deal of confusion and many dilemmas in PPP projects.

Dilemmas in practice Dilemma 3: civil law relationship or administrative relationship? One of the notable changes to the recently amended Law on Administrative Procedures is the inclusion of the execution, amendment and termination of concession contracts in cases acceptable to administrative procedures. This was illustrated by the judicial interpretations of the Supreme People`s Court, which entered into force on 1 May 2015, which also stipulate that concession contracts are administrative agreements. Concession (or franchise) agreements may also be relevant to the broader issue of “access to tracks” if they require the concessionaire to grant access to other operators against payment of an access fee. The authors argue that PPP is the general term for a cooperative relationship between a government and private investors, that a concession is a public-private collaboration in which users pay the royalties, and that BT (build-transfer) existed in large numbers in the past and involves necessary public procurement of services. In addition, whether it is PPP, concession or BT, it is essentially the establishment of a cooperative relationship between a government and private investors, in which the government transfers an infrastructure or public utility project, in which traditionally would have been invested and built with taxpayers` money, through a license to private investors for investment and construction. The scope of PPPs is wider and offers a wider variety of forms; and concessions and BT are specific forms in which PPPs manifest themselves (see figure). As a general rule, the user pays – in some countries, the private party may pay a fee to the government or receive a subsidy depending on the financial viability of the concession Example 7: Sub-Saharan Africa: Ifrikya Railway Concession – a case study by Karim-Jacques Budin, SSATP Working Paper No. 64, World Bank, 2003 (English and French) – The case study includes a model railway concession agreement (section 3), designed for a sub-Saharan African state. That model contract provides that the use of the railway infrastructure operated by the concessionaire may be open to other railway undertakings in the circumstances referred to in Article 6 of the concession contract. Use by third parties is based on access agreements to specific lanes between the concessionaire and the operator concerned, for which an infrastructure charge is charged.

If basic concepts such as PPPs and concessions are not clarified (given the lack of laws on PPPs and concessions at the level), the smooth creation and implementation of PPP and concession projects will certainly be affected. Example 1: Armenia – Concession contract for the transfer of the Armenian railway system to the “South Caucasus Railway” Closed joint-stock company Established by “Russian Railways” Closed open joint-stock company – Concession contract between the Republic of Armenia (“Konzeduktive”), the South Caucasus Railway (“Concessionaire”) and the Russian Railway (“Guarantor”) for the modernization and operation of the Armenian Railway. The concession contract stipulates that the concessionaire must grant access to the railway network to other operators in accordance with the laws of Armenia. In this course, participants will learn best practices in creating, negotiating and implementing strong PPP and concession contracts. Through presentations, case reviews and simulation exercises, participants deepen their understanding of the key elements of successful PPP and concession contracts, effective risk allocation and the development of negotiation skills. The course also describes the main financing modalities typically required by lenders in project finance transactions and includes discussions on risk and mitigation techniques, as well as how to deal with contractual disputes. Dilemma 1: Does Article 9(3) of the Implementing Regulations to the Tendering Act apply to PPP projects? This provision stipulates that if the investor of a concession project selected by tender may carry out the construction, production or supply himself in accordance with the law, no further tendering is required. However, opinions differ as to whether this provision applies to PPP projects […].