by Oana Strătulă (Partner)
Given that, during the three years since the entrance into force of the Law 178/2010 on the public private partnership, there has been not even a single PPP contract, the Department of Infrastructure Projects and Foreign Investments sent for approval to the Parliament a new law on public-private partnership1.
As stated in the explanatory memorandum, the new normative act was developed in a working group coordinated by professors of the Faculty of Law, University of Bucharest, which has had the aim to transform the public private partnership into a viable tool, designed to assure the cooperation between the public and the private sector for the realization of public projects.
We mention that, in the following, we will refer to the revised form of the new law, as it was sent by the Government for Parliament approval, and not the initial form sent to the European Commission for consultation which contained a number of “questionable” provisions and that were dropped in the version sent to Parliament, this being a sign that the initiators of the law took into account the “pieces of advice” from the European Commission.
What projects can be done in public private partnership
Under the new law, public-private partnership aims to achieve or, where appropriate, to rehabilitate and/or to expand a good or some goods intended to provide and/or use a public service. In order to be the subject of a public private partnership, the project proposed by the public partner must demonstrate, in the pre feasibility study, that the revenues which are going to be obtained from the use of the good / goods or of the public service that makes the object the project will be generated, totally or in majority, through payments made by the public partner or by other public entities for the benefit of the public partner.
Continuing the same idea, the new law states that projects in which all or most of the revenues are obtained from the cashing of fees collected from the users of the good / goods or of the public service that makes the object of the project can not be done in public private partnership.
The stages of concluding a public private partnership contract
The conclusion of a public private partnership contract will include the following stages:
a) the preparation of the feasibility study by the public partner;
b) the analyzing of the project by the Department of Infrastructure Projects and Foreign Investments, which, as the initiator, has undertaken an important role in the new law, given that it is the only authority that can decide whether a project meets or not the conditions for its accomplishment in a public private partnership regime.
Thus, only if, following the analysis, the Department of Infrastructure Projects and Foreign Investments decides that the project meets the conditions provided by the law for its accomplishment in a public private partnership regime, solely in this situation the Department will initiate the approval steps of the memorandum;
c) the Government adoption of the memorandum concerning the decision of the respective project realization in a public private partnership regime;
d) the undergoing of the award procedure of the public-private partnership contract, with the observance of the provisions and principles of the Government Emergency Ordinance no. 34/2006 regarding the award of public procurement contracts, public work concession contracts and service concession contracts.
Regarding this aspect, it should be noted that, unlike the initial form, sent to be consulted to the European Commission, which provided that the award of the contract should be made only through the competitive dialogue procedure, the revised form of the new law, sent to Parliament for approval, provides that the award of contracts can be made through any of the procedures covered by GEO 34/2006, i.e. open auction, limited auction, competitive dialogue, negotiation and call for tenders;
e) the signing of the public-private partnership contract.
Which are the sensitive points of the new law?
Although, as noticed above, following the consultations with the European Commission, the form of the new law, which was sent to the Parliament for approval, has been improved compared to the initial version, it still contains a number of provisions that could lead to abuses from the public partner.
Thus, according to the provisions of Article 38 of the new law, for exceptional reasons related to national or local interest, as applicable, the public partner may unilaterally modify certain provisions of the public-private partnership contract, if this possibility was included in the award documentation in a clear, precise and unequivocal manner and without altering the generic nature of the initial contract or in other any situation of unilateral modification of the contract provided by the Government Emergency Ordinance no. 34/2006.
This article is susceptible to criticism, at least under the following aspects:
– there is no definition and no criterion for determining the exceptional reasons related to national or local interest, thus remaining at the discretion of the public partner the qualification of some situations having exceptional character;
– the establishment of the two conditions of unilateral modification – respectively the possibility to modify should have been included in the award documentation in a clear, precise and unequivocal manner and that the modifications do not alter the generic nature of the initial contract – represents, only apparently, a tool to remove the arbitrary.
In reality we are dealing with formal requirements, considering that the first condition refers to the provision in the award documentation only of the possibility to amend the contract, and not the cases or circumstances in which it may occur, while not altering the generic nature of the contract is a vague legal concept and highly interpretable.
– Government Emergency Ordinance 34/2006 does not provide cases of unilateral modification of the contracts.
Also, considering the same exceptional reasons which are undefined and difficult to control, the public partner may unilaterally terminate the contract, which means that although the private partner has fulfilled its contractual obligations precisely and on time, the public partner may decide to terminate the contract before the completion of the project.
Finally, another sore point of the new law which, as well as the ones above, may be a reason to discourage private investors to participate in PPP projects, it is given by the possibility that the public partner can replace the private partner in case the latter does not fulfill its obligations, but without undergoing a selection procedure of the new private partner.
Of course, the legislative initiative is, in itself, commendable and shows a concern which must be appreciated, however, in our view, we consider that the new public-private partnership law, at least in its current form, does not serve the purpose of “unlocking” the private-public partnership projects and of making them attractive to private investors.
1. This is a translation of the article published on October 17, 2013, in Business24.ro. For the Romanian original text, please visit this link: http://www.business24.ro/legislatie/parlament/editorial-oana-stratula-avocat-motivele-pentru-care-investitorii-vor-refuza-parteneriatul-public-privat-1536586
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